Clouds change shape all the time, both those in the sky and the kind that contain software to run warehouses. The cloud-based software model is making logistics execution systems more affordable for smaller and mid-size companies that made-do with home-made warehouse management remedies. The WMS challenges they feared—licensing fees and customization-cost-creep—are gradually being addressed as service providers enter the market with new offerings.
Your Warehouse Needs
One of the newer offerings in this space is from International Business Systems (IBS), a provider of integrated ERP and supply chain software and services. Their in-cloud and on-premise options take the form of a subscription service from $99 per user per month. They promise their service comes with no lock-in period or long-term commitments.
"Why should a customer continue to invest in their own internal infrastructure and support?” asks Scott Brown, executive vice president of global cloud and support services at IBS. "A lot of models out there are multi-tenant, where you sit and enter a single code base, but there's very little opportunity for customization as the business changes. In this model it's a dedicated application and if two years from now the user buys a company or moves to a different site, the functionality can move with them. And if for some reason they can't stay with our base code, we can customize that through services using their code.”
Steve Banker, service director for supply chain management at ARC Advisory Group, says the risks of this kind of arrangement are lower than with a traditional WMS licensing arrangement.
"If you're not happy with this it is easier to walk away at a much lower cost point,” he says.
At the same time, though, the kind of company attracted to this arrangement would be one with relatively minor customization requirements to begin with.
"In general when people have entered these kinds of agreements they've made a conscious decision that there will be much less customization,” he continues. "One of their decisions up front is going with a standard product.”
One of the advantages of a hosted model is shared services and freeing up IT staff. But idiosyncratic feature requirements cancel out most of the efficiencies of the hosted shared services approach.
Some software vendors would push back if you wanted customization, Banker says. "They'll say fine, we can do that, but that should be an instance on your site that you manage and maintain.
Brown tells of a customer in Europe with whom his company collaborated, taking them from a highly customized WMS to one where they were able to reduce the number of modifications down to four or five. "The rest they either didn't need anymore, and didn't realize it, or it was in our product,” he says. "So now that customer is well positioned so that when we come up with Business Suite 2015 later this year they can update quickly to that.”
That's part of the monthly subscription fee.
Your Enterprise Needs
When considering a cloud-based supply chain execution scenario, consider accessibility and visibility along the chain, not just in your node, suggests Greg Kefer, vice president of corporate communications for GT Nexus (www.gtnexus.com). Some companies run their warehouses off an ERP system, and GT Nexus offers a cloud-based networked platform designed to work between a number of companies in an enterprise. Kefer says there's often confusion among supply chain partners about how to implement cloud in their chain.
"When you ask, ‘Are you connected to your value chain?,' they say yes we have EDI and XML feeds from our partners,'” Kefer observes. "That's been going on for 30 years. But that alone is not enough. When you get into the data, the fuel that makes the software go, a problem with an ERP installed software system can be that all of the data processing, normalization and linking is at the nodes of the network, not in the center. You can feed it with data but the problem is you have one version of the truth and your partners have a different one. This requires a paradigm shift.”
That requires shifting the information you use to run your supply chain to the middle of the network, not at the nodes. That's the concept behind social networks. Before LinkedIn, Kefer points out, when you got a new job you had to e-mail everybody your new coordinates. And everybody had to go into their Outlook address book and change it.
"If you were lucky half your network stayed in touch and the other half lost you,” he concludes.
"Today, on LinkedIn you go to your profile page and change it and everybody gets the news instantly. That's a quantum technological shift that couldn't happen until cloud came along.
LinkedIn would never have worked if everybody had installed their own version of LinkedIn on their laptops.”
As easy as it is to use LinkedIn and all the other social networks, however, you can bet a lot of midnight oil was burned making them work seamlessly. That's particularly true of logistics networks. IBS's Scott Brown says his customers play an important role in their cloud implementation.
"We won't know your business up front, and your standard practices will remain with this model. You'll still need to do your due diligence in making your people more productive.”
At the enterprise level, the cloud has to be like an on-tap utility for supply chain, Kefer says. His company's approach is to interact with existing WMSs, each of which may be designed for a single warehouse.
"We'll feed the WMS with upstream information so when it needs to know what kind of containers are coming in, in cubic volume, what needs to go on a shelf, what needs to be cross-docked, that data is being collected as part of our visibility. I have clients that want to know how much space they'll need on shelves based on what's coming in five days out.”
The cloud-based enterprise is meant to reduce the complexity that happens over time, through network enhancements and corporate acquisitions. Kefer says the average customer comes to his company with six versions of SAP—but sometimes 20 or 30.
"They may all be SAP, but they're different versions of SAP and they've all been customized,” Kefer says. "That's within one company, but when you go outside it can become quantum leaps harder to gain visibility. You need to turn the lights on across all your partners because what you think is the root cause of a problem may in fact be something totally different. Until you have that visibility it will be hard to guess.”