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RedPrairie - New Name For A Brave New Value Proposition Paradigm Part Two: Market Impact

Written By: Predrag Jakovljevic
Published On: January 8 2003

Market Impact

On November 8, RedPrairie Corporation (www.redprairie.com, formerly McHugh Software International), a provider of comprehensive supply chain execution (SCE) solutions including transportation, labor productivity and warehouse management, as well as supply chain visibility and collaboration solutions, released a new version of its warehouse management system (WMS), DLx Warehouse, containing the specific processing requirements food & beverage companies require running on supposedly the cost effective Microsoft Windows 2000 platform.

RedPrairie, together with its also bullish nemeses, Manhattan Associates, G-Log, Provia Software, HK Systems and Yantra, has been thriving in part because it provides many part and parcel' components of supply chain execution (SCE), which has apparently lately been growing faster than its supply chain planning (SCP) counterpart, given back-to-basic logic driven projects nowadays have been aiming at low-hanging fruit that provide hard benefits within quick deployments. To that end, warehouse and transportation management have emerged as the two of a few rare remaining fertile areas where companies still have an ample opportunity to redesign and optimize, while they are at the same time less time-consuming and more oriented towards return on investment (ROI). Particularly during these calamitous times, manufacturing and distribution companies continue their effort to meet high customer expectations for on-time delivery by achieving general responsiveness, speed and agility.

While core back-office ERP and not any less-cumbersome SCP systems might have traditionally excelled at planning, conceptual optimization and financial integration functions, they have not, however, addressed warehousing, distribution network planning, or transportation/logistics management. SCE is therefore gaining increasing awareness among companies that realize that planning can do only so much without the ability to make the right and timely decisions and execute on the shop floor, in the warehouses and/or within the entire distribution chain. Bringing down costs directly attributable to production has long been a matter of course for companies regardless of the economic environment.

This is Part Two of a four-part article on RedPrairie.

Part One outlined recent events.

Part Three will continue the discussion of the Market Impact.

Part Four will cover Challenges and make User Recommendations.

The Value of Logistics

Yet, while it has also been long known that the behind-the-scenes activities like kitting, serialization, packing and shipping carry significant costs and customer (dis)satisfaction provision, only very recently has senior management begun to take a closer look at logistics, not only in terms of its costs, but also as a healthy contributor to their companies' bottom-line improvement. Therefore, logistics is increasingly becoming a boardroom-level decision, which is small wonder given it costs an average company about 7 15 cents out of every dollar it earns, and given it can become so cumbersome and so spread out, that even small improvements in logistics processes (and subsequent cost trimming) can drive major increases in revenue and profits.

The market has increasingly become aware of both traditional sources of logistics value (i.e., operating cost reduction (including transportation expenditures, distribution/fulfillment labor costs, administrative costs, inventory carrying costs, and total distribution network expense), working capital reduction (through increased inventory turns, reduced safety stocks and total supply chain inventory levels, accelerated invoice payments, etc.) and improved return on assets (ROA)), as well as emerging sources of value (i.e., market share growth, flexibility and velocity). Also, while companies might have made some progress lately in decreasing warehousing and inventory carrying costs, the physical transportation area still shows much room for improvement and often accounts for almost half of total logistics costs. Many improvements can still be deployed in transportation, and it mainly comes down to better coordination, rather than to bludgeoning' carriers to obtain lower rates from them, but instead doing a better job on corporate-wide spending with ideally a sole carrier.

In today's depressed market, the message of quick and proven ROI and its direct impact on customer satisfaction (i.e., top and bottom line) echoes loudly enough to nonetheless keep customers deploying these kinds of software products. Despite the overly touted potential of Web storefronts and virtual inventory at the end of 1990s, and the Internet's ability to speed data transmission without physical boundaries, there will always be a need to store actual goods to meet the actual demand. Products will always have to be handled physically, requiring warehouse space and people for putting away, picking, packing, sorting, and shipping, and means for transportation.

In addition to attributing to this recently emerged market-wide pragmatic buying approach, these seemingly unappealing applications during the market infatuation with e-strategies of fancy web storefronts and exchanges of the late 1990s, have lately also benefited from breaking away from formerly insulated spheres of a mundane four-walls nitty-gritty, and consequently expanding into collaboration. The importance of order fulfillment regardless of the channel cannot be underestimated because there is not much room for error. Disgruntled customers that do not receive orders at the promised date will likely go elsewhere for better service the next time. In that regard, seamless integration of transactional and decision-support applications are important, and, consequently, modern SCE systems provide the tactical, transactional backbone for order fulfillment with their core functionality of order management, warehousing, transportation, and inventory management.

Real-time Supply Chain Event Management

To be able to react to fluctuating demand, respond to customer specifications, and coordinate real-time event messages from multiple disparate systems, these systems are being further enhanced with decision support capabilities and planning engines aimed at order fulfillment and inventory and order status visibility. Therefore, while many original WMS suppliers have lately added transportation and order management to their core products, and others have developed optimization or value-added service options, the most regular and justifiable enhancement has been Web-based order-fulfillment modules, which typically include real-time supply chain event management (SCEM), alert messaging, order tracking, and complicated workflow management. Harnessing this technology should lead to the so-called "self-healing" or adaptive supply chain -- when a software engine monitors all the numerous events taking place supply-chain-wide, identifies and escalates exceptions, sends notification, and reacts appropriately to those exceptions, ideally without human intervention.

One could discern three ways that SCEM functionality can be used to assist order fulfillment.

  1. SCEM should enable the necessary supply chain-wide visibility to compare ordered quantities against both available quantities and expected quantities, which should allow enterprises to see when they are likely to experience inventory problems that could impact customer orders, and alerts them early on so they can alter production or delivery schedules to rectify the shortage.

  2. SCEM should provide multi-site inventory visibility, so that a distribution center (DC) clerk can assess if there is a shortage in the warehouse, and then look across the network, possibly find that inventory available at another location, and deploy it to fulfill a customer order.

  3. SCEM should assist with actual delivery, since many events can occur that might impact meeting the committed delivery date and/or quantity. If there is a problem with, e.g., picking the order, shipping the order due to a backlog, or trouble with the carrier, SCEM should allow visibility into those execution activities and alert the appropriate people, while there is still enough time to take action to rectify the problem.

As a proof of concept, the other vendors still doing well in the segment are those that enable companies to efficiently manage trading relations and fulfillment processes. Companies such as Prescient Systems, Escalate, SoftChain, webplan, PipeChain, VCommerce, Ortems, SeeCommerce, and Teadec in supply chain event management (SCEM), visibility, and performance monitoring are able to connect disparate systems to provide all the parties with near-real-time information on current movements and trends.

This concludes Part Two of a four-part article on RedPrairie.

Part One outlined recent events.

Part Three will continue the discussion of the Market Impact.

Part Four will cover Challenges and make User Recommendations.

 
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