Companies are increasingly taking a strategic approach to supply chain execution systems – but there are still those that are missing out because they have failed to invest. Malory Davies investigates.
Demand for supply chain management and procurement software has been outstripping demand in most other software markets, rising 10.8 per cent to £6.4 billion ($9.9bn) globally last year, according to figures from Gartner.
Gartner argues that supply chain remains a key source of competitive advantage in driving business growth objectives, such as improved customer satisfaction, greater business agility and operational improvements.
“Organisations modernising supply chains drove opportunity for both large-suite and specialised providers to become more agile and drive innovation within their businesses during 2014,” says Chad Eschinger, research vice president at Gartner.
“SCM offerings delivered as cloud showed above-market growth of 17 per cent, while new on-premises licences also grew significantly at nine per cent, as organisation sought to modernise their supply chain portfolio through a variety of delivery models.”
SAP grew 19.9 per cent to hold onto the top spot, and extended its lead within the SCM market, with 25.8 per cent market share (see Table 1). It continues to innovate and introduce new and acquired SCM products to the market, and has been able to up-sell solutions within its large and established ERP installed base. While Oracle retained its position as the second-largest provider of supply chain technologies and the largest within supply chain execution (SCE), its software revenue momentum has waned, and market share has declined to 14.6 per cent, from 16 per cent in 2013.
In generating revenue of $438 million in 2014, JDA Software sustained its market share ranking of third globally, with 4.4 per cent of the global market, and remains the largest pure-play, supply chain-focused vendor despite a decline of 1.7 per cent since 2013.
Craig Sears-Black, UK managing director of Manhattan Associates, highlights the fact that companies are assigning a more strategic importance to their supply chain and evolving their system’s infrastructures accordingly.
“The pace of market change and timescales of system deployment means that this is one of the constant challenges for retailers. Agile development programmes and phasing features are commonplace to accelerate system deployment.”
Manufacturing efficiency is a key challenge for companies, according to Ian Roper, divisional director for supply chain solutions, at Access, who points out that many admit that their supporting IT isn’t up to the task. “For example, recent Access research suggested that 44 per cent of companies ranked achieving manufacturing efficiency among their most critical challenges yet 52 per cent believed themselves to be lagging in this area of IT infrastructure.
“When it comes to WMS where firms are receiving a majority of orders online, they also tend to be advanced in their adoption of other technologies. They tend to be extensive users of mobile and hand-held devices in the warehouse, adoption of barcoding and/or voice technology is commonplace, RF communications and headsets are popular, and such firms will probably employ a dedicated WMS,” says Roper.
Nevertheless, there are many companies that are missing out because they have failed to invest in supply chain execution systems in the first place.
Eric Carter, managing consultant at Indigo Software, points out that these companies are typically artisan producers, small suppliers of fine foods to major retailers, or specialist manufacturers.
But they are not all SMEs, says Carter. “There are also a lot of larger suppliers in the UK whom you would think are using the latest SCE technology, but are running entirely paper based systems. So these two profile company types are missing out on the benefits of SCE.
“One of the major issues facing companies that are not using SCE systems is the inefficiency created and associated cost of having to maintaining a paper audit trail for customers. Manufacturers are typically required to provide a full audit trail of their entire production process and without an SCE system to capture and store the relevant information, paper records have to be stored and managed. This results in masses of paperwork, which needs to be archived and readily retrievable in the event of an inspection. Customers – especially the supermarkets – are notorious for making unexpected inspection visits into their OEM suppliers premises to spot check audit records and monitor H&S levels.
“Outside of the food industry, the same issues relating to managing an audit trail apply for component manufacturers. For example, during computer assembly, hard disks have a unique identifier, the MAC address. In the event of a problem arising, if this information is stored centrally, it is very easy to fix and capture. Pharma manufacturers also need have to have access to information concerning unique identifiers as a legislative requirement; so again, they need to have fast access to audit data using SCE systems,” says Carter.
The tradition barrier for SMEs has diminished because many key supply chain management systems are being provided on the cloud and in a software-as-a-service (SaaS) model. Evan Puzey of Kewill says the acquisition and implementation costs have been significantly reduced and most of the resource constraints eliminated.
“As a result, these businesses are now able to make use of these new delivery options to reduce upfront costs without the need for large cap-ex investments. It also means that they can move to a more operational expenditure environment and use enterprise level technologies to their competitive advantage against larger players.”
The growth of multi-channel and omni-channel retailing is also creating new challenges for IT systems. Sears-Black points out that deploying an enterprise Order Management Solution is becoming a pre-requisite to developing wide ranging scalable omni-channel retail capabilities.
“By creating a single inventory pool, evaluating availability and sourcing options form the basis of optimised fulfilment capability. This allows companies the flexibility to optimise the source of the product to fulfil orders, and ultimately, keep up and exceed customers’ growing demands.”
If an online order can be fulfilled using store inventory from a shop located near to a customer’s home, he says, then why ship from the warehouse when the order can be home delivered or collected from the store in half the time it would take from the warehouse?
“The warehouse is no longer the sole fulfilment option. What’s more, fulfilling from the local store means more profit for the retailer on that transaction. An enterprise OMS application finds stock within the supply chain network and delivers it to the customer. As a result, customers are receiving their goods more quickly and profitability is becoming a bigger factor in how orders are fulfilled.”
Gavin Clark, chief commercial officer at Snapfulfil, says: “The continued growth of e-commerce and omni-channel retailing, with the ever higher levels of customer service they demand, are driving continuous improvement across item picking and replenishment across warehouses of all sizes.
“WMS vendors are helping their clients to ensure that order dwell times are minimised and all orders are fulfilled in the most effective manner by making use of advanced picking techniques such as dynamic wave picking and pick and pass, along with order fill strategies like task combination to shorten walk sequences and order prioritisation for next day shipments.
“At Snapfulfil, we are combining these approaches with innovations like our pick to light trolley and picking wall to make the best use of the technology available, with more to come in 2016. Every warehouse operation is unique, so flexibility on the approach taken for each client is important and helps to drive improvement for all clients across the WMS space.”
The is also development work going on to streamline the inbound side. “Through seamless integration with a broader ‘meta system’, future warehouse systems will ‘know’ the location, condition and time of arrival of goods inward,” says Roper.
“It will plan their disposal, and when and to what extent bulk is to be broken. It will create and implement picking, packing and dispatch activities based on sales and order data, which itself is being updated in real time as customers refine their requirements. That will involve integrating directly with whatever appropriate levels of automation have been installed and also with the human workforce through a variety of technologies.
In addition, he says: “The warehouse system will work with transport management systems to allocate jobs to the appropriate delivery channels. In parallel, the warehouse system will be managing packaging materials, as effectively another product range, and manage the returns of both goods and packaging.
“All of this is in near real time, so a large part of the system’s work will run entirely automatically, with requirements for human ‘management by exception’ flagged up. A good warehousing system will be, as far as possible, device independent,” says Roper.
Puzey points out that in an omni-channel world companies are recognising that transporting goods is the single connector between every stage of the supply chain. “TMS systems provide an excellent central view to the end-to-end order fulfilment process and take ownership of the visibility process in an organisation, linking the silos to interoperate more effectively and efficiently.”
He argues that the big change in supply chain execution will not be in the technology itself but in the convergence of the multiple systems and teams that enable it. Many companies are now looking at new ways to maximise their investment and optimise resources within their organisations. The emphasis is to break down the barriers that isolate departmental silos and create a converged supply chain across manufacturing, procurement, warehousing and transport.”
There are some technologies that have been the next big thing for some time – notably RFID. Deployment of RFID has been slower than many anticipated. Nevertheless, Carter point out that the adoption of technology is now moving fast.
Carter also highlights the fact that voice technology is becoming mainstream, saying the rise in adoption is partly fuelled by the increase in e-commerce sales because voice allows for flexible picking and managing different order profile types.
Carter also sees new interest in the integration of advance ship notice tracking (ASN) with the SCE system. “Food manufacturers have been providing ASNs and SSCCs (serial shipment container codes) for many years. This means that when a pallet made in Germany for instance goes to a supermarket in the UK, they can use the same pallet label to identify the shipment and the pick instruction will reference the SSCC number. Then, when the store receives the picked items, each product unit can be traced straight back to the SSCC label. The ASN concept allows disparate systems within different supply chain stakeholders to be easily integrated. So, the manufacturer, who is using one type of ERP system, can send stock to a distributor using a different ERP system. And because all the information is linked within a standard ASN or SSCC, the information can be shared across multiple SCE systems,” he says.
“At the other end of the supply chain, integration with TMS systems allows the visibility and optimisation of the vehicle fleet to be manipulated to best suit the needs of the business. Using SSCCs and ASNs, this data can be seamlessly transmitted between the two systems” says Carter.
Roper highlights the importance of returns. “Managing returns was identified as a critical priority and challenge for companies in the Access Warehouse Management Software research. To deal with this kind of complexity, companies will need to link their Warehouse Management Software to ERP and financial systems so that returns can be matched to original orders, and also to financial systems,” he says.
WMS: Time to pick your own
Rocket Consulting, an specialist SAP consultancy, has created an online survey, ‘Which WMS’, to enable customers to select the WMS solution that best fits their individual needs.
Efficiency, customer focus and operational benefits are the key requirements, it says highlighting specific functionalities such as workload management, multiple pallet put-away, customised picking, exception management, stock write off, expiry date controls, and multiple inventory counting methods.
“What WMS is a useful tool in enabling customers to evaluate their warehouse management needs against available SAP platforms,” says Lewis Marston, CEO of Rocket Consulting. “It also offers valuable insight into the supply chain landscape, such as the emphasis currently being placed on labour management tools and the need to understand workforce costs. Insight of this scale informs the WMS of the future.”
Survey: Optimising SAP landscape a challenge
The majority of SAP users (93 per cent) find optimising their SAP landscape a challenge, according to research released by the UK & Ireland SAP User Group.
Barriers to optimisation include: lack of budget (60 per cent), lack of time (53 per cent) and lack of knowledge/skills (47 per cent).
Nearly two-thirds (63 per cent) of organisations had moved or planned to move to SAP HANA; half of which said they would do so in the next three years.
A further two out of three organisations said that their underlying infrastructure would be hybrid (on-premise and cloud) in three years’ time.
Paul Cooper, vice chairman of the UK & Ireland SAP User Group, says: “It is clear that many users are looking to move to SAP HANA and run SAP on a hybrid infrastructure. However, to ensure a smooth transition and fully realise the benefits, users need to optimise their existing SAP landscape.
“The findings of our survey show that optimisation remains a challenge for the majority of users, both from a resources and technological perspective. Nearly half of our respondents (47 per cent) stated that customisations to their existing landscape had hindered the speed at which they could implement enhancement packs and/or adopt newer platforms from SAP, such as cloud and HANA.”
Managing growing data volumes is one area where many SAP users face a challenge. Nearly two-thirds of respondents said their organisation’s data volumes have increased by more than 40 per cent over the past three years.
At the same time, as the cost of storage has come down, the majority of organisations (57 per cent) admitted to storing and archiving more of their data.
This has led to many organisations facing challenges around data accuracy/consistency (53 per cent) and governance (53 per cent), as a result of data being spread across multiple platforms.
Cormac Watters, managing director of SAP UK & Ireland, says: “In today’s fast moving and complex business environment, we know that it is not always easy to make confident decisions about intricate IT infrastructures.
“We are working closely with the User Group to provide details of the SAP Service and Support portfolio in a way that it is accessible and easy to use, and are focused on simplifying our offering to further aid the customer journey.”
Case study: BT Supply Chain picks HighJump
BT has selected the HighJump warehouse management system to help drive operational efficiency across the end-to-end supply chain operations that support BT Group businesses.
In February, BT Supply Chain opened its doors to external clients. Managing director Nicholas Hale said: “Across each area of supply chain operations we support between 40,000 – 50,000 individual orders a day. We are responsible for the planning, logistics, critical spares management and inventory performance among many other value-added integrated services such as staging and configuration, cable management and testing and repair.
“In essence we can provide a bespoke end to end service to meet yours and your customers’ needs and we are ready and have the capabilities and infrastructure to extend our services to the external market”
The roll-out of the HighJump solution is planned to take 14 months overall. It is expected to have a number of benefits, including: quicker delivery and response times at an effective cost; and improved real-time visibility of inventory availability across the network, reducing physical movement of products across the network.
Hale said: “We selected HighJump because of their modular approach of building a set of best practice processes that are tailored to reflect a mix of their end customer’s requirements and an industry standard approach. We also felt a tremendous amount of confidence in this solution due to the depth of experience within the HighJump implementation team. The additional learning and understanding they were able to bring has proved hugely valuable during the early stages of design and deployment.”
SaaS: Is cloud computing right for you?
Many SCE functions can be delivered through cloud computing. “Cloud-based SCE adoption has matured over the years,” says Puzy. “These days, users have the option to build on private, public and hybrid cloud platforms. As long as the systems are cloud-enabled, there is no reason why SCE functions cannot be delivered through cloud computing.
“In some cases, however, there may be operational reasons why cloud is not the ideal option. For example, in situations where sub-second response times are needed to rate and label a parcel as it flies down a conveyer belt, or if there are specific security requirements – although security concerns are becoming less of a barrier today.”
Eric Carter agrees: “The vast majority of SCE functions can, of course, be delivered in the cloud as it is just a variation of a hosted solution.”
However, he says: “I cannot think of a big company that has migrated its SCE systems into the true cloud. Larger companies tend to prefer on-premise software, or private cloud, whereas SMEs are more likely to be interested in a true cloud based system, because it enables them to outsource responsibility for managing their SCE infrastructure.”