Challenges
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.
While
many renowned companies in the retail, food & beverage, consumer goods, and
3PL segments of the market have successfully implemented LMS
(Labor Management Systems) and achieved these benefits, a greater number of
these have yet to do so. Given the economic and operational potential benefits
of LMS, the failure to implement advanced labor management appears to be attributable
to a number of misconceptions surrounding LMS process, technology and impact.
Also, not many WMS products yet provide the depth of functionality of advanced
LMSs in such areas as support for discrete standards, labor planning, robust
labor reporting and the ability to determine "cost to serve" specific customers.
Therefore, LMS presents an opportunity and a challenge for RedPrairie to debunk the above myths. To that end, the company should emphasize such elements as management/supervisor engagement in operator's work to ensure safety and remove the barriers to productivity, detailed training on the best method to perform a job, and consistent feedback and counseling to employees to ensure their success. RedPrairie will have to convey the message that the most successful approach to LMS is to also actively involve shop floor operators in the development of processes and standards.
Well-designed and implemented LMS result in a more positive work environment that will be the model for tomorrow's high performance distribution companies rather than relics of worker exploitation in the past. Moreover, all employees, including DC operators, like to understand how they are performing in their jobs, and to have feedback based on fair and objective standards. They also want to understand the right way to perform specific tasks, and LMS should address both these employee issues, and thereby also provide the foundation for implementation of fair and accurate incentive programs, which should in turn increase employee satisfaction and retention.
Pushing the envelope beyond a comprehensive SCE offering, and beyond its strong, recently bolstered management and professional service team with an extensive relevant industrial experience, in a time when information technology (IT) managers demand hard ROI rationale, RedPrairie is also taking the above-mentioned value-based approach to the delivery of its logistics applications.
This
is Part Four of a four-part article on RedPrairie.
Part
One detailed recent events.
Parts
Two and Three discussed the Market Impact.
The RedPrairie Approach
As vendors and customers often lose focus of the business goals and results of IT deployments and become bogged down in coerced sales and implementations, RedPrairie is seeking to retain that focus through its value delivery system (named RedPrairie Approach) aimed to ensure results achievement by linking presales value assessment tools with the company's analytics offering. There are five key principles underlying this results-focused approach:
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Clearly link supply chain strategies to corporate objectives.
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Quantify logistics value
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Clearly define and measure expected results.
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Maintain results-focused technology deployment.
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Continuously Audit Results.
To
guarantee customers' ROI, the company is willing to enter into a shared risk-reward
financial program with its customers based on pre-determined metrics and analytic
tools. Central to the model is results measurement system supported by new analytical
tools and methods the company calls RedPrairie Metrics (RPM),
which is based upon Supply Chain Operations Reference (SCOR) model, and which
zooms in onto three areas: 1) operating cost, 2) time/velocity and 3) quality/differentiation.
In the quality/differentiation area, for example, the goal is to provide better
customer satisfaction and enable users to differentiate themselves from other
supply chain/logistics providers measured in e.g., on-time delivery, fill rate,
order accuracy, invoice accuracy or so.
RedPrairie pledges to work with each customer company to understand its business objectives and how logistics and SCE products can help achieve those objectives. RedPrairie will then develop a pertinent set of metrics to measure how well the results are being achieved throughout the entire project lifecycle (e.g., from opportunity engagement, value quantification, results definition, solutions deployment, to value realization phase), while it is the customer's discretion to decide whether to enter a gain-sharing agreement with the vendor, which seems to be ready to put its money where its mouth is. Customers that choose to enter such an agreement would pay a fixed price for hardware and some services, possibly upfront as a sort of down payment. Customers will then make further payments upon meeting pre-determined performance milestones. If a customer does not meet its agreed-upon objectives, as documented by RedPrairie's DLx Scorecard, it will not be liable for the software license fee in full.
RedPrairie will set and measure objectives and conduct technology audits with every customer, even those that do not opt for the gain-sharing program. While prospects can opt for traditional licensing rather than paying a percentage of benefits under RedPrairie's value-based model, prospects nevertheless must commit to measuring results. How serious the company is about this model might indicate the fact is that all its employees have dropped conventional titles, with CEO now being called "company results leader".
Customer Reticence
Despite tempting value proposition, one should expect the prospects' reticence in gain-sharing participation. The likely reasons would be the perception that gain-sharing will add complexity to implementations, the lack of precise enforcement mechanisms (i.e., how less should the customer pay in case of results' shortcomings) despite RPM's impressive realm of relevant metrics, and the fact that some companies would rather pay a flat, upfront fee so they can keep all the possibly immense future savings for themselves. Further, RedPrairie's RPM analytic tools and its value assessments still largely focus on the individual distribution facility or enterprise, which might not provide the most compelling value of the metrics for the most aggressive enterprises, which try to manage complex multi-enterprise, multi-national supply chains, with multi-modal transportation needs. Also, the perceived value and simplicity of fixed-price implementations offered by many competitors could perplex the benefits of gain-sharing contracts. RedPrairie may also face restructuring arrangements and somewhat strained relationships with its consulting partners that may find this approach less beneficial to them.
Furthermore,
RedPrairie's expertise remains mainly within the North American market and within
the trucking mode of transportation, and the company's solution footprint needs
improvements in terms of multi-national capabilities, International Trade Logistics
(ITL) compliance, contract management and payment processes. Therefore, the
company might still need to make acquisitions or partnerships to quickly provide
a complete multimode transportation product that complies with global trading.
The company has also long delivered different WMS products for process and discrete
industries (e.g., DLx/P and DLx/D versions),
which, although recently unified, still have different customer reference bases
and product maturity (i.e., DLx/P for process industries being much more prominent
than its discrete counterpart).
Competition
RedPrairie
also has a work cut out for itself to improve the perception of its amenability
to the mid-market, and to increase its brand recognition within the TMS market
the company might still be omitted in many TMS selections despite having long
delivered the capabilities. The competition is not exactly negligible either
given a slew of WMS vendors delivering sophisticated collaboration, visibility
and SCEM functionality, and many of them being consistently profitable and having
better international presence at the same time. In addition to Manhattan
Associates and Yantra, the list of these would contain
Swisslog, Highjump, Provia,
EXE, and Catalyst, to name only some.
One
should never discount the competition coming from ERP gorillas like SAP,
J.D. Edwards, Oracle, PeopleSoft
and Baan, which, although still with fledgling WMS/TMS products,
are becoming more aggressive within their large customer bases due to their
ERP integration mantra. The likes of Lilly Software, which
has also espoused a strong WMS product in addition to its traditional VISUAL
Enterprise product, could prevent RedPrairie from penetrating the ERP mid-market.
Nevertheless, the above announcements represent a strong statement of RedPrairie's confidence in its offering, and should keep every competitor on its toes to come up with an equivalent counteractive value proposition.
User Recommendations
Users with outdated warehouse management systems (WMS) who want the latest technology available and the next generation of transportation and logistics software should place RedPrairie on a shortlist of SCE vendors. RedPrairie delivers measurable results for customers in many markets, including high tech and electronics, consumer goods, food and beverage, third party logistics, retail and wholesale, service parts, and make-to-order (MTO) manufacturing. Still, prospective clients should bear in mind that some modules in the suite have been integrated not so far in the past, as labor management had long been available as a standalone product only, but was only recently fully integrated to the rest of DLx suite.
Those companies with existing ERP or SCP vendors in-house should evaluate RedPrairie in addition to their incumbent vendors due to its success in co-existing situation where customers have found that RedPrairie often complements and improves upon the solutions offered by the existing vendors. Existing RedPrairie customers should evaluate the remaining portions of their product suite in search for additional value.
Users that need automation and visibility across multiple transportation modes, including sea and air, might want to consider marrying DLx with third-party software for managing international transport lanes. Though its suite is currently best suited for North American logistics, the company plans native support for all transportation modes in the not-too-distant future.
Potential and existing users should consider utilizing the analytic and value assessment capabilities of RedPrairie's new approach, at least to raise bar for other contesting vendors, both in the case of brand new installations, major upgrades, and implementations of complementary products. Those opting for the brave approach, proceed cautiously by:
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Stipulating unambiguously how measurements will be done, and the gain-sharing
enforced
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Doing a pilot project proof of concept by having only a small part of the
contract scope subject to gain-sharing
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Determining the maximum value of the payment to the vendor, in case of tremendous
benefits to you
On
a more general note, there might be some definite benefits to purchasing SCEM
from a WMS vendor, due to the domain expertise these vendors bring to management
of materials in outbound and inbound supply chains. In other words, the WMS
vendor that is adding SCEM functionality will likely have the business logic
and expertise, as well as the data - the receipts, transactions, and shipping
information - already in place, and will know how to best use its application.
Still, often a WMS vendor will show a proficiency within its own system, or
the type of third-party application that it is used to, whereas a stand-alone
SCEM system is often broad and open by default.