Hello. This is Dylan Persaud, senior [enterprise resource planning] (ERP) - distribution analyst at Technology Evaluation Centers. Today I am joined by Rodney Winger, senior director of product marketing for manufacturing and supply chain [for] Epicor. Rodney has over twenty years' experience in both of these sectors, and is offering his insights on the state of distribution. Today we will discuss several market factors that have influenced distribution software. Drastic changes have occurred within the last ten years, and [such] factors as globalization, collaboration, [and] inventory visibility have forced organizations to examine additional software to accommodate their changing business practices.
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Dylan Persaud: Today I'm here with Rodney Winger from Epicor. How are you today, Rod?
Rodney Winger: I'm doing great, Dylan.
DP: Excellent, good to hear. What impact do you think globalization has had on the development of ERP - distribution systems?
RW: That's a very good one, Dylan, and we are addressing that head-on, or have been addressing that—actually, have been involved in that for a number of years. Global trade is a reality; it is the way it is today. Where you source your materials can be halfway around the world, or it could be down the street. ERP, it being the initial backbone that everybody has, [is the basis to] widen it into the supply chain. And just to be clear, I don't separate the enterprise from the supply chain. I don't separate the ERP from the supply chain. They are one [and] the same. They have to be one [and] the same because they have to roll all the way back through the system. The ERP distribution system today should be a supply chain system that does ERP.
DP: What exactly do you mean by that?
RW: What I mean is that ERPthat enterprise systemmeets the capabilitythe higher level capabilitiesthat you would have conventionally found maybe five, six, [or] seven years ago, solely over in specialty applications from [a] warehouse management perspective or a [transportation management systems] TMS perspective. Those need to be part of the enterprise. They need to be part of that overall supply chain systemthe ability to orchestrate those business processes both internally or [to] externalize that, [because] you're going to be interfacing with other suppliers. Most companies are back to their core business processor, their core business focus, and they've outsourced anything that doesn't fit in their core business strategy. Therefore, there has been a huge increase in the use of outsourcingrelative to outsourcingor importing, or bringing it in from somewhere else, allowing someone else who does a particular operation very, very well, to do that very well. And then they become part of your supply chain. So what used to be a supply chain, potentiallythat I refer to as monolithicwhich was all owned by you, may be multiple plants, multiple facilities all owned by you, doing very different things, all aiming towards supplying a final outbound product to be distributed. That [it's] now coming from a half a dozen different companies, and you're really quarterbacking it as final point of either assembly or redistribution of it. So your systems really have to be a supply chain system at heart that does the balance of the enterprise, that's an expectation of it with the ability to do business orchestration, and what I call business synchronization, be that with the external systems.
DP: It's good that you mentioned that. I've noticed [this] even within the supply chain for [radio frequency identification] RFID systems, where many companiesmainly the hardware, software, and even integratorsare all partnering to give one solution. So that plays into the next question of how do you see big-box retailers actually [affecting] the distribution industry?
RW: I think they've had huge, huge impact on distribution or supply chain management, and I think part of that is by example. The larger retailersthe larger big-box retailers, which have their own distribution networks in placethey've gone to the point of automation well beyond that next level down, the supply side, to them. They were well ahead of the game; they're the guys that almost dictate compliance. They're like Wal-Mart, being the sort of front-runner with the [Department of Defense] DoD on RFID technology. If it wasn't for those types of larger distributorsthe big-box retailers forcing or pushing that level of automation or that level of technologiesyou wouldn't have gotten that same groundswell from the bottom up. It's really coming from the top down. The good side of that is compliance, and compliance in the sense thatmaybe compliance isn't the greatest wordcollaboration, where there's consensus in some of the standardizationsthose types of things, they have forced the compliance. Using Wal-Mart as another example, either you do or you don't supply to us. What that's done, though, for the next level down, is really force them to look at the automation tools that are available to them. It's forced them to be real-time, which in a lot of the cases, wasn't the case before. To be able to be inside of the supplier network, to do automated [electronic data interchange] EDI and advanced ship notifications, and to do the RFID compliance and provide that into the networks, you have to be real-time. So it's really affectedit's really very much a trickle down effect or a ripple effect, where they've come out and said, "This is what we're doing, and for you to be a part of our network, both from a supply side and from a technology perspective, you must do this." And it sort of pulled the rest of the next level down, or a couple levels down for that matter. It's pulled them up into the technology, which they may not have adopted quite as quickly.
DP: From our research, we've identified that Epicor delivers very strong SRM functionality. Being that SRM is on an increase again, what type of competitive advantage [does] SRM provide for distributors?
RW: It really comes back—and this is cost containment—[to] you can only be so efficient. You can only take efficiency to a [certain] level, and then it sort of plateaus. Then your only other option there is to look at cost—be that base cost or purchased cost. And SRM—supplier relationship management—has a tool [that] allows you to broker, for lack of a better term, goods and services which, again, especially if you're in the fulfillment, third party logistics side, virtually everything has a cost. Anything that isn't absolutely touching product, or touching the process, I should [say], because the product you don't own. In most cases, you're supplying the packaging and the associated items around the packaging. You're also, in a lot of cases, you're supplying—maybe on a contract basis or on a subcontract basis—the actual manpower. Not so much on the SRM side would you get into the manpower side, but absolutely on the supplier and the supplies inventory side to support the fulfillment processing, to support that postponement processing from a kitting or an assembly side being part of that buying network, brokering that out or bidding that out, and having that capability as part of the application, which you would put the bid process out there. By the time you get finished, it's very automated—percolates to the top pretty quickly. Those vendors—those suppliers that have aligned themselves with your business process, and obviously, you're driving costs out of your operation again—those types of costs. If I can take two cents off the cost of a case or a box, if I can shave a half a penny off of every label I have to put on the product or on the shipping container that's going out the door—those are dollars that go directly to the bottom line.
DP: Thank you very much for joining us today, Rodney.
RW: I appreciate it, Dylan. I appreciate the opportunity to speak with you today.
DP: Thank you for joining today's podcast for ERP - distribution and [its] influencing factors. If you would like more information on leading vendors within the ERP - distribution space, please feel free to check out our website at http://www.technologyevaluation.com/, and if you're looking specifically for an Epicor solution, check http://www.epicor.com/.