ERP Software

No this blog entry is not going to be a behavioral reminder from your pre-school teachers…rather this is about how the supply chain software market continues to change, specifically for DSD users. Long gone are the days where features and functionality were the key factors to any software purchase decision. It is true that without solid functionality and key market features software will quickly drop off the desirable list, but these two points are merely the first gauntlet to pass towards a positive decision regarding software selection.

Today, being able to provide “out of the box” integration options, tool kits and breadth of product solutions are more important than ever in the DSD world. A next generation RAS is great, but what else comes with it? Does it provide a flexible mobile sales solution? What about your inventory and truck loading solutions? Traditional (aka Green Screen style) RAS solutions have been able to provide batch data entry for inventory, and load sheets for your picking team but does this technology really cut it in today’s world? That covers some of the basic points of entry of data into your system…but what are you going to do with it once you have it there? Do you have a robust report generation solution? Even better than that, how about a data mining tool with not only canned reports, but also an easy interface where users can define their own “custom” queries to identify the exact data elements you want and need for executive dashboards?

Beyond what I would consider fairly “standard” offerings listed above, many operations are running back end ERP software solutions as well. Being able to provide reproducible integrations to these solutions is quickly becoming as important as the software solution itself. Software users today have existing structure and systems that are not going away, and any future solutions must integrate easily and seamlessly in order to maximize benefit of your DSD solution. This is one area where most companies want to avoid being on the “bleeding edge” of technology, and would really prefer to see an offering that can reference others.

Another reason to consider integration options is as simply as taking advantage of the strength of other solutions. Leveraging the functionality of other solutions not only provides the users benefit, but can do so in a more cost effective manner (if done properly) than building additional modules outside of your core competencies. This may be a difficult decision for some to make, but I think that this is an area that can definitely be used to your advantage if properly evaluated.

I will end this post with the following question…can you really only consider one component to your DSD solution in isolation, or will you look at the end to end integration of all components?
 

I spent some time last week with a HighJump Software customer who is considering further expansion of HighJump WMS solutions in their distribution centers. The customer is undertaking a massive ERP program that will allow the ERP system to be the IT backbone of their worldwide operations. They are also evaluating WMS solutions from this ERP provider.

In a meeting with senior IT leaders of this organization, I explained that I was highly confident the outcome of their pending due diligence regarding total cost of ownership (TCO). I contend that a best of breed solution will result in lower long term costs for this IT organization. Here are a few things that make me confident in my position:

Best in Class Functionality

While ERP-based WMS solutions have advanced significantly, they are limited to the “classical” warehouse operations including receiving, put-away, inventory control, picking and loading. Supply chain best practices such a labor management, slotting management, advanced wave planning, and last mile delivery are not traditionally supported with ERP WMS solutions. This means that when supply chain operations teams demand these capabilities, IT organizations are forced to address them with expensive customizations or bolt-on solutions with multiple integration touch points.

Upgrades

A WMS solution typically has a 10 year lifespan. In this lifespan a WMS could be upgraded five times. ERP upgrades are generally more expensive to upgrade because of the interdependencies between modules and re-application of source code customizations. Additionally, corporate IT governance and change management processes often make it difficult to upgrade a single module. Therefore the business users may be forced to wait for new features because of dependencies on modules that have nothing to do with distribution and logistics. View this video to learn more about HighJump’s approach to simplified upgrades.

Adaptability Tools

If your organization views distribution as a source of competitive advantage, then ERP-based WMS could be problematic. By definition, a competitive advantage must be unique to the organization. Business processes available in commercial off-the-shelf software packages (like ERP) therefore cannot contain business processes that are sources of competitive advantage.

To really ensure you have the flexibility to maintain and create further sources of advantage in your distribution operations, your supply chain logistics software must have the ability to create processes that are unique to your business.

HighJump has a unique approach that allows customers to define unique workflows that does does not involve any source code modifications. I am not aware of any ERP based WMS solutions with a similar architecture.

Without this architecture it can be very expensive for IT organization to deliver these workflow changes.

I recently received a direct mail marketing piece from a HighJump Software competitor. The mailer included a press release announcing that this company had “enhanced direct store delivery integration” and a one page datasheet which described a direct store delivery value chain as manufacturing + regional warehouse + mobile resources + retail shelf.

HighJump Software is the North American market leader for direct store delivery software solutions. If our primary competitor in the warehouse management systems market had encroached on our market position I needed to know. Perhaps they had acquired a route accounting solutions provider or acquired a provider of mobility solutions for mobile selling and delivery at the retail location. I consulted a trusted industry analyst who confirmed my suspicions… this was marketing hype and this company’s approach to direct store delivery still had significant “holes.”

Anyone familiar with the value chain of direct store delivery companies knows there are some specific complexities that must be addressed in order to have “comprehensive coverage across the extended supply chain.” Here are some things companies should consider when search for direct store delivery software solutions:

Certified Route Accounting Systems

Route Account Systems are unique software systems to manage the complexities of route-based sales and delivery. They typically manage the entire order-to-cash cycle and are geared toward the world where sales, inventory, and business metrics are all tied to a “route.” Although traditional ERP systems can be used for route accounting systems, they typically require customization to deal with complex pricing/promotion, cash settlement, truck inventory, and supplier e-commerce integration. To further understand the complexities in the beverage value chain read It is Hard for Anheuser-Busch to be Procter and Gamble.

Mobile Sales and Delivery Applications

Success or failure in a direct store delivery business is determined at the store shelf. Direct store delivery companies have large workforces of mobile sales and delivery professionals who need to be equipped with mobility technology for them to effectively accomplish their objectives. HighJump Software provides a comprehensive suite of mobility products which support industry best practices for order capture, goal-based selling, delivery tracking and cash settlement. For more details on these solutions read about our latest mobility suite product release HighJump Software Enhances Mobility Solutions With New Release of Mobile Route Sales and Delivery Software Suite.

Load Optimization

Optimized loading of side bay beverage trucks can be complex. While there are numerous packages for creating optimized load plans of traditional van trailers or flatbed trailers, optimizing for side bay beverage trucks is another animal. Additionally, this business problem becomes even more complex when you have a “peddle” environment (driver selling off truck without pre-sold orders) and driver preferences must be taken into account at the load and pallet level.

I think the moral of the story is “don’t believe the hype.” Direct store delivery software solutions are specialized for the unique needs of this industry. Direct store delivery software solutions deal with complexities of supplier integration, cash settlement and truck inventory. A WMS, TMS and retail workforce solution will not meet the needs of most food and beverage distributors in their direct store delivery operations.

Today HighJump announced that our latest route accounting system (RAS) has received certification with Anheuser-Busch InBev for use by their wholesalers. The result of this certification is that HighJump RouteCenter receives the highest level of compliance, Level 1 ISV – Strategic Partner. The news release: HighJump Software Named Strategic Partner by Anheuser-Busch InBev.

The role of route accounting systems in Anhueser-Busch InBev’s value chain is critical. In order to fully understand the importance of this software, it is important to contrast the value chain of the large four beverage suppliers from a traditional CPG value chain. Let’s explore the differences …

Traditional CPG Value Chain

The traditional CPG value chain is largely vertical. A vertical value chain is one where each component of the chain including source, make, deliver and sell is controlled by the same company – in this case the brand owner. This allows retailers and brand owners to collaborate about every aspect of the product including quality, new product introduction, price, promotions, and electronic commerce. With today’s sophisticated supply chain software it is possible for most CPG companies and retailers to know exactly what was sold (and at what price) at every retail location every day.

Additionally, most traditional CPG companies have the following inventory flow: manufacturing/production -> regional distribution center -> retailer’s distribution center -> retailer. In this scenario the retailer is primarily responsible for managing the inventory that is shipped from the manufacturer to the retail distribution center (ordering) and the flow from retail distribution center to store (although there are certainly evolving collaboration techniques to share this responsibility across the manufacture and retailer).

Big Beverage Value Chain

The value chain of the big 4 US beverage suppliers (AB InBev, MillerCoors, PepsiCo and Coca-Cola) are more fragmented than the traditional CPG companies. In the case of the beer suppliers, they manage the manufacturing/production process and then resell their beer to independent wholesalers/distributors that distribute and sell to the retail location. In the case of the large soft drink suppliers, they do not even manage the production process but leave make, deliver, and sell to independent bottlers.

Additionally, in most situations beer and soft drink products are delivered directly to the retail location and by-pass retail distribution. This approach benefits the retailer because they are not forced to handle and transport beverage products which are significantly heavier than most food products. The beverage companies benefit from the ability to merchandise themselves and manage promotions at a local level.

Why Retailer Collaboration is More Challenging in the Beverage Value Chain

Retailer collaboration through e-commerce initiatives is more complex in the beverage value chain. This is because unlike the traditional CPG chain which has full visibility to transactions with the retailer, the big 4 beverage suppliers are reliant on their independent distributors who transact with retailers. AB InBev needs to have the same level of visibility over their independent wholesalers as Proctor and Gamble has over its distribution centers….no easy task.

How the Route Accounting System Helps

The route accounting system is the core back office system for independent beverage distributors (think ERP for beverage distributors). Best-of-breed route accounting systems have certified integration back to the large beverage supplier organizations. Through this integration, the large beverage suppliers are able to have transaction visibility throughout their distributed value chain. This collaboration allows product, pricing, and promotional information to flow from the supplier to the independent distributor. It also allows sales transactions to flow from the independent distributor back to the supplier so that the supplier can provide this information to the large (and demanding) retailers. Therefore, it is really the route accounting systems which allow the large beverage supplier organization to provide retailers the e-commerce supply chain collaboration they demand.

Recently I have had some events that again have me wondering why companies continually trust their complex, high volume distribution operations to ERP-based WMS Warehouse Management Systems. Allow me to describe these events…

1. I spoke with a large HighJump Software customer who told me the CIO had been pushing for a global deployment of an ERP system across all functions including distribution operations, but had been stalled by business owners who were concerned about the distraction and cost relative to the value.
2. I spoke with a prospective HighJump customer who has spent millions of dollars and multiple years attempting to implement an ERP based inventory WMS system. They have finally conceded that their distribution operations are too complex for an ERP solution and are turning to a best of breed solution.
3. I attended a panel discussion of users of an ERP based WMS Warehouse Management System. Presumably, these were the “flagship” customers because the panel was chosen by the ERP vendor. Customers openly complained about the performance of the system which they attributed to an inventory model that was not suited for distribution operations and a transactional model that was financially-focused rather than distribution-focused.

I would urge anyone considering the implementation of an ERP based WMS Warehouse Management System to consider these factors before finalizing their strategy to move forward with an ERP based WMS Warehouse Management System provider.

The Integration Myth

It is commonly perceived that integration between a WMS Warehouse Management System and other business systems will be easier if both systems are packaged as a suite. The truth is that most ERP WMS solutions have an API-based interface between the WMS Warehouse Management System and the rest of the business applications. In many cases best of breed WMS Warehouse Management Systems have packaged integrations that utilize the same API-based interface as the ERP WMS. While many of the ERP interfaces are “hard coded,” a best of breed WMS Warehouse Management System often provides integration tools (like HighJump Software’s Advantage Link module) which allow data mappings to change based on specific business requirements. It is important to understand the details of the interface approach before assuming that cost will be less and functionality will be greater with a “suite” solution.

The Transaction Models Are Different

During my time as a consultant, I implemented ERP systems and best of breed supply chain systems. There is a fundamental difference in how these systems are architected. Supply chain systems start with a practitioner’s view of the business problem. Screens and workflows are suited toward the needs of people who are supply chain professionals. ERP systems have an accountant’s view of the business problem. Nearly all transactions that occur in an ERP solution tie to a general ledger transaction. Often this accounting-centric view results in business processes that are not optimized for the supply chain.  

For more information on Best of Breed vs. ERP WMS, please read HighJump Software's Special Report on the topic.

About 24 months ago at our midyear sales meeting I unveiled HighJump’s strategy to more aggressively target logistics service providers with our supply chain management software solutions.  The reaction from the sales team was mixed.  Logistics service providers are notoriously highly variable sales processes because the system purchase is typically tied to the acquisition of a new client for the logistics service provider.  The market data supported our strategy.  Use of logistics service providers is increasing worldwide as more companies outsource all or a portion of their logistics capabilities.

Times have changed.  The sales team now loves this strategy as logistics service providers are turning to HighJump Software for their supply chain logistics software.  The most recent logistics service provider to select HighJump is Cresent, a leading logistics outsourcing partner for a number of consumer goods companies.  Read the HighJump news release regarding Cresent.

HighJump WMS Warehouse Management System will automate many of Crescent’s previously manual warehouse processes and optimize the movement of goods throughout Crescent’s distribution centers, boosting productivity and inventory accuracy. The system will also enable the company to meet customer traceability requirements for batch and lot code tracking. Crescent will also be able to interface to customer ERP systems, a requirement that often previously hindered new business wins. The company will utilize HighJump’s Manufacturing Execution System Software in its co-packing operations, where it assembles product multipacks and builds product displays.

Why are so many logistics service providers turning to HighJump Software for their supply chain logistics software?  Here are few of the contributing factors.

Billing Management
HighJump Billing Management helps ensure maximum revenue and minimal billing cycle time by enabling activity-based billing of each client according to their distinct attributes. Appropriate charges are automatically generated for storage of goods and any other services you perform as a logistics services provider.
HighJump Billing Management’s capabilities extend far beyond billing and reporting. This comprehensive solution can also help make your business more attractive to current and potential clients by enabling you to offer more value-added services, superior inventory control and overall cost reduction—making you stand out in a commoditized logistics marketplace.

Dynamic Inventory Attribute Tracking
Logistics Service Providers have complexities of handling a variety of products with complex tracking requirements.  The same facility may manage perishable products that require best before date tracking, apparel that requires style color size tracking, and electronic products that require serial tracking.  With HighJump WMS Solutions all these attributes can be tracked in the same inventory model.  In fact, as the logistics service provider encounters uncommon data tracking requirements they can configure the solution to track these inventory item attributes.  Additionally any of these attributes can be shared with end clients through inventory visibility portals.

Integrated Transportation Management
Many logistics service providers in traditional public warehousing or in contract warehousing are branching into managed transportation services.  HighJump Software provides a transportation management solution used by many logistics service providers and is fully integrated with WMS warehouse management system.  The TMS support management of buy-side and sell-side contract rates allowing a logistics service provider to manage rates for contract carriers and separate rates for the price they sell the transportation service to their end client.

Flexibility to Meet the Changing Needs of Clients
The most important business differentiator for a logistics service provider is flexibility.  Existing clients frequently have new requirements and winning new business often requires changes to the operations and supporting systems.  HighJump has developed an out-of-the-box rules based architecture to allow logistics service providers to create unique rules that influence how a process works in the warehouse.  The rules can then be assigned to a client, an item, a vendor, or any attribute within the WMS warehouse management system.  Additionally if a standard rule cannot meet the specified requirement, a new rule may be created using Advantage Architect, HighJump’s workflow management adaptability tool.