Supply Chain and Logistics Technology: Convergence gaining momentum

We define the meaning of “supply chain software convergence,” show how it’s being put to work in logistics operations, and share how vendors are stepping up to offer platforms that work seamlessly with one another in an effort to solve today’s complex challenges.

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If there’s one trend that has unveiled the absolute need for synchronization among warehousing, transportation, order management, and even procurement software platforms, it’s omni-channel fulfillment.

Defined as a complex sales strategy centered on providing customers “seamless” shopping experiences whether they’re using a mobile device, ordering via phone, or visiting a brick-and-mortar store, omni-channel is transforming the way logistics professionals set up and orchestrate their supply chain software platforms.

“In the past, there was enough latency in the processes to be able to handle the ‘transactional rugby’ with different systems,” says Dwight Klappich, research vice president for Gartner. In comparing the supply chain to the rugby field, Klappich says that many shippers are running around blindfolded, unsure of where and when to throw the ball—or even to whom to throw it.

When there are four or five days to figure out the situation, the issue isn’t so pressing, but with omni-channel whittling that time frame down to hours or even minutes, the situation becomes much more challenging. “Shipping options like same-day delivery don’t offer much of a buffer to be able to pull it off,” says Klappich. “In these instances, your warehouse operations, transportation management, and other components have to be synchronized.”

By that, Klappich means shippers have to be able to take an order, identify inventory locations (DC, store, supplier’s warehouse), commit that inventory to the order, and produce the transaction that indicates that this store now needs to ship a single red sweater, size medium, from the supplier in California to a DC in Atlanta and then to a customer’s residence. That’s omni-channel in action, says Klappich, and it plays into the increasing need for supply chain software convergence.

Over the next few pages we’ll better define the meaning of supply chain convergence, show how it’s being put to work, and then share how vendors are stepping up to the plate to offer platforms that work seamlessly with one another to support omni-channel and other logistics management trends.

More integration, please
Every year, Gartner conducts a Supply Chain Technology User Wants and Needs Study to determine what logistics professionals desire on the technology front and benchmark them against past results. For 2015, Gartner’s eighth year of conducting the study, the research firm identified the “difficulty or inability to coordinate and synchronize end-to-end supply chain processes” as the top gripe for shippers across the board.

In total, 42 percent of respondents say that they’re grappling with this challenge, which was followed by “forecast accuracy,” “demand variability,” and “lack of cross-functional collaboration” on the list of the top challenges that logistics professionals are facing this year.

According to Klappich, supply chain convergence gives shippers a way to break through the “difficulty or inability to coordinate and synchronize end-to-end supply chain processes barrier and better synchronize their processes across different functions.” By eliminating the functional silos that existed among warehousing, transportation, procurement, yard management, and global shipping activities, for example, shippers can optimize activities across previously siloed functions that didn’t communicate or work with one another.

While some of the push for supply chain convergence is coming from the shippers themselves, the vendors who develop the solutions in question are also helping to drive the charge. According to Klappich, Manhattan Associates is particularly “strong in omni-channel” and is benefitting from the fact that its platform is well suited to supply chain convergence.

“Other vendors are also getting close,” Klappich says, “with the collaboration between JDA and IBM being one indicator of how companies are looking at new ways to support certain processes across the warehouse, transportation, and other aspects of the supply chain.”

No longer “limping along”
With more supply chain software vendors looking at supply chain convergence as a business imperative, a growing number of shippers are warming up to the notion of a more streamlined, synchronized approach that fully supports functions like omni-channel.

“We’re absolutely seeing that customers now ‘get it,’” says Klappich, who adds that he got a lukewarm response to the idea of convergence when he initially presented in 2009. “It was too early at that time. Companies still needed to get to convergence, but they weren’t ready for it,” says Klappich. “In many cases, shippers weren’t even using transportation management systems (TMS) yet, so they had to get that component up and running before they could worry about some of the other related issues.” 

The economic conditions in 2009 didn’t help Klappich’s case for supply chain convergence either. “Shippers weren’t in the position to try anything called ‘bleeding edge’ at that time,” he notes. Fast forward to 2015 and the landscape has changed dramatically, with omni-channel almost singlehandedly leading the charge. “Omni-channel commerce has blown the top off the whole concept of supply chain software convergence,” Klappich asserts. “Without it, the concept would still be limping along.”

For the most part, shippers that are delving into convergence tend to be the early adopters, or roughly 18 percent of all shippers, according to Klappich. Such firms tend to have more risk-tolerant cultures, he says, and realize that while a new concept may not yet be perfected, there’s still value to be had from that concept. “These shippers are willing to take a bit of informed risk,” says Klappich, “realizing that even though they’re trying something for the first time (i.e., investing in a piece of technology that may be somewhat untested or unproven within their specific industries), they are doing it for the right reasons.”

Clint Reiser, research analyst with Boston-based ARC Advisory Group, says the warehouse is one segment of the supply chain that’s ripe for convergence. He points to Intelligrated’s acquisition of Knighted Software as a move in this direction, noting that a number of warehouse control system (WCS) vendors are “incorporating greater functionality into their systems” via such acquisitions.

“There are situations where a WCS takes over control of inventory from a warehouse management system [WMS],” says Reiser, “but Knighted offers both a WCS and a WMS. The integrations are already there, so that’s a benefit that it goes to market with.” Put simply, the shipper doesn’t have to worry about integrating its WMS and WCS because it’s all on a single platform.

In general, Reiser says that the concept of integrating applications, and breaking down the silos between functional solutions, are becoming more important for logistics operations and vendors. “Vendors are always looking for a way to compete among themselves, add value, and keep themselves relevant,” says Reiser. “They have a lot of the intelligence built into their software, and they look at different ways of offering additional value.”

Like Klappich, Reiser points to the omni-channel paradigm as one driver of the need for better distributed order management and inventory visibility across multiple channels—not just internally. “Much of this need is, and will continue to be, driven by the ongoing need for improved cross-channel inventory visibility and demand planning,” Reiser says.

Learning as they go
Even with vendors like Manhattan, Intelligrated, JDA, IBM, and others jumping into the supply chain convergence fray, the progress toward a completely integrated suite of supply chain software applications has been “slow going,” according to Klappich.

Retailers are on the forefront of the charge due to the omni-channel requirements that they’re dealing with, he says, and the fact that this strategic business shift is still fairly new and untested. With this in mind, he says IT projects that support omni-channel tend to be welcomed more readily. “No retailer wants to be seen as the company that can’t support omni-channel,” says Klappich, “and no one really has any best practices at this point in time—they’re all learning as they go.”

These various factors create a positive environment for supply chain software vendors that can provide systems that converge with one another to form completely integrated and streamlined platforms. “Shippers have seen the need, but up until now it’s been hard for them to see the recurring value in the investment of supply chain software convergence,” says Klappich. “I think they’ll soon see that there’s going to be a recurring need and that there is value behind it.”

Competition among supply chain software vendors could also help drive the convergence trend over the next year or so, says Klappich, who sees the traction being made by Manhattan and the collaboration between JDA and IBM as two positive signs in that direction. These early moves could pave the way for more vendors that want to add value in the area, and that turn to those early examples for proof of concept and value. 

“Vendors know that if they don’t do something they’ll lose ground to their competitors,” says Klappich. “This is yet another trend that will help drive traction and momentum around supply chain software convergence over the next several years.”

About the Author

Bridget McCrea, Editor
Bridget McCrea is a Contributing Editor for Logistics Management based in Clearwater, Fla. She has covered the transportation and supply chain space since 1996 and has covered all aspects of the industry for Logistics Management and Supply Chain Management Review. She can be reached at [email protected], or on Twitter @BridgetMcCrea

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