Get more BANG for your IT buck [Page 5]
-- Logistics Management, 4/1/2006
Page 5 of 7 -- Let’s take a look at the evolution of the on-demand software model. How does it work and what are the biggest benefits for shippers?
On-demand is a fairly simple concept that has been around since the advent of the mainframe computer. Rather than have many companies implement the same application individually, the on-demand model provides one application that can be shared by many different companies.
Benefits include fast implementation with minimal involvement by information technology departments. Companies can get access to sophisticated technology without having to go through the rigors of justifying a capital expenditure. It’s really a natural model for supply chain and logistics. Because the application is shared, carriers, suppliers, shippers, and customers can all work together using a standard business process and have a common view of supply chain activity.
A recent Aberdeen report found that 40 percent of the respondents who were considering making a TMS purchase within the next 18 months are considering an on-demand solution. What advice do you have for that 40 percent?
Most companies prefer to use service providers that specialize in on-demand applications for transportation. Since most of these providers tend to specialize by transportation mode, industry, and geography, be sure that their expertise fits your requirements and that they have on their network partners you already work with. Vendor viability isn’t a great concern, as there has been a great deal of consolidation in the past few years and the strong have remained standing.
Are there any limitations to on-demand?
Some companies differentiate themselves with their logistics services, and economically it wouldn’t be feasible for on-demand vendors to develop the functionality required. Others don’t like the idea of having a third party manage the technology supporting critical operations. In instances like these, many will imitate the on-demand model by implementing a shared transportation application across the company.
Is there an ideal user in terms of company size?
Economics don’t change that much for on-demand transportation services when compared to licensed software. With very few exceptions, companies should have transportation spending of at least $7 million before exploring on-demand options.
On visibility, realizing value, and beyond
Logistics Management: The idea that the supply chain and logistics technology can offer shippers “total visibility” is a concept that continues to be bandied about in the business press and conferences sessions. Is this “total visibility” really achievable? And if so, how can it be achieved?
Greg Aimi: The technologies discussed above generally offer visibility to orders, shipments, and inventory with varied coverage across the supply network. As far as visibility to standing and in-transit inventory and movements initiated by the ordering process, these systems can provide visibility. Total visibility is an entirely different thing.
I think we’d agree that if you asked 10 people what they meant by visibility, you’d get close to 10 different answers, especially if they were from 10 different roles within the company or better yet, across other companies in the trading network. Visibility is like a foundation to a building, it’s absolutely essential but you don’t live in it. It’s visibility that is the enabler for the things of value to be performed.
Adrian Gonzalez: Actually, I don’t think companies want “total” visibility. What they want is the “right” visibility. In this case, “right” means information that companies can actually use to improve business processes and generate financial benefit. Getting timely, accurate, and complete information is still a challenge, especially in global supply chains that involve so many different parties, many with limited or no electronic communication capabilities.
But the bigger problem is that even if companies can get the information they want, they don’t know how to benefit from it; or they can’t overcome the change management issues involved to make a difference. Continued...
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