LES Is More (Important)

April 1, 2004
On time, every time, is a big order — and it’s the thing everyone is asking for. How do you achieve this cornerstone of customer service? You give the customer more by giving yourself LES — a logistics execution system.

Logistics execution systems (LES) are finally getting the kind of attention they deserve. Also known as supply chain execution systems, these software-based tools are finally being talked about in board rooms. Senior management is getting the idea that if you don’t have a good strong supply chain you don’t get the product to the customer. You have to invest in the supply chain to make it more efficient and effective. Smart companies understand that it’s the supply chain that gives them a competitive advantage. Enter LES.

If you want your order-delivery process to run smoothly, you must have the right warehouse management system (WMS). Logistic execution systems, however, covering more than just the warehouse, are now viewed as the key to winning customer service.

LES is the umbrella term that includes warehouse management systems — the traditional way to achieve accurate order fulfillment — and most other aspects of supply chain activity. Crowding in under the LES umbrella are software offerings that manage warehouse space, material handling equipment, transportation services and reverse logistics needs. The umbrella is expanding to include event management software and radio frequency identification (RFID).

In 1995, the Material Handling Industry of America (MHIA) formed a product group called the Logistics Execution Systems Association (LESA) to bring together the leading providers of software, products and services in the material handling industry. MHIA is probably the best starting point when you’re looking for general information on new systems or upgrading your current program. If you think WMS or LES are too expensive, you might be pleasantly surprised.

What matters most?

In our conversations with product developers, equipment makers and end users, several subjects recurred as supply chain execution challenges in the near future. "The thing that is changing the whole LES picture," says John Hill, an industry pioneer and principal with ESYNC, "and the best thing that has happened to that [LES] sector, is the fast-moving application of RFID."

Hill says RFID applications will put a great amount of pressure on software providers to dig in and learn about what makes the supply chain function.

"Clearly, everyone in the top tier of LES and supply chain execution software suppliers is doing something about RFID," says Hill.

That something is the development of middleware to enable communication among the data collection readers and the readers’ software, a different process than when data are collected with bar coding. With bar coding, as cases are unloaded from the pallet, the code is scanned and the data collected. The good and bad news, says Hill, is that with RFID the object of the exercise is to read the entire palletload simultaneously.

"That can create some bandwidth issues," adds Hill. "What if the reader collects data from only 98 of the 100 cases on the pallet? The leading suppliers of LES software recognize this kind of challenge and are putting a lot of energy into finding solutions to these potential challenges."

Importance of visibility

Susan Rider, well-known conference speaker and former customer development leader at RedPrairie, says RFID is going to give us the overall visibility we need to manage the supply chain. She describes RFID as data collection on steroids. "We’re all doing data collection," she says, "but what RFID brings is human-less data collection. It’s uninterruptible. There are so many aspects of RFID from asset management, to mobile resource management, all the way through the supply chain."

Is this just collecting more data we’ll never use? Rider thinks not. "Often people don’t use the data they’ve collected because they can’t get to it," she says. "Or it’s too cumbersome to get to, or it’s not manipulated in a way that adds value. RFID will make the data accessible and valuable."

Joe Dunlap, supply chain solutions lead at Siemens-Dematic, agrees that RFID has the potential to change the supply chain execution picture from top to bottom. He has written several white papers on the subject (see source box at the end of this article) and notes that RFID has the ability to alleviate problems that bar code scanning might create.

Adding intelligence

"In a WMS that directs order pickup or delivery by scanning bar codes," explains Dunlap, "there’s the possibility of the operator putting the load in the wrong place, but scanning the correct location bar code label, thus producing an out-of-stock situation." The use of RFID will eliminate that potential for error as readers automatically collect the data. "Potentially we can reduce all those issues and correct the errors in cycle counting,"

Dunlap says this is simply a matter of doing what is already being done with bar codes, yet adding the intelligence and logic necessary for supply chain execution systems that does not exist today. "The complexities of these systems require time to re-code and revise programming that is not available until the next update or release."

He adds that even if the software vendor made the revision today, customers could not take advantage of the update for probably a year or whenever they made the next upgrade. This situation makes it tough for the customer to specify what it needs today and get an immediate response — unless the customer has a legacy code and the talent to make changes rapidly.

Real benefits

RFID seems to be at the top of everyone’s list when you ask what’s pushing the drive for new or expanded LES. Should it be? An equally important part of the equation, according to Scott Elliff, president, Capital Consulting & Management Inc., is how you go about achieving the levels of supply chain performance you want. "LES and RFID are tools that enable performance," says Elliff. "Improvements in the economy and reductions of inventories have been lagging, in spite of all the pundits saying information would replace inventories."

Elliff says that excess inventory in the supply chain will remain one of the big issues. How to use data and how to get smart about using information are management questions that LES and other data collection processes support or influence. "How you use the information to optimize the deployment of the inventory is the real key in any supply chain execution process," adds Elliff.

For Chris Heim, president, HighJump Software, a 3M Co., the subject of RFID is kind of like the weather — a lot of people are talking about it. "There are a lot of people worrying about how they’ll comply [to mandated requirements]," says Heim. "I think RFID is definitely occupying a good portion of people’s minds within the supply chain and, in the short-term, it might be negative. People feel they have to totally focus on RFID to protect their business. So it might have a negative impact on LES as people turn from other, more important, aspects of supply chain management to deal with RFID."

Web-based LES

Another trend of LES software systems is the creation of programs that use Internet browsers for collected-data exchange. In the past, data on shipping, etc., were collected by the WMS, and an advance shipping notice (ASN) prepared and sent to the company receiving the goods. Everyone, however, did not want to invest in an electronic data interchange (EDI) program, thus other ways of handling shipments had to be found. In today’s world, virtually every company has Internet access. Using Web-based browsers that can quickly receive shipping information makes the need for accuracy and LES programs imperative.

Derick Salkowitz, software engineer, Schaefer Systems International (SSI), says Web-based browsers offer users higher performance at lower cost. "The Web-based interfaces give users the opportunity to look into the system," he says. "It’s taken away the ‘black box’ and users really appreciate that."

"Another use of browsers," says Hill, "is to obtain order-status updates. These are good things from the customers’ perspective."

While the browser interfaces might be good for the customer, the concept is adding some challenges for third-party equipment providers, says Randy Nelson of Quantronics, a manufacturer of weighing and measuring equipment. "With our products, as we send cube and weight information to the WMS, it has to be a seamless, transparent data transfer directly to the host system. We were able to do it through the PC or warehouse terminals of earlier systems. Now we’re having to go back to provide a solution that speaks to the browser, which we are doing."

Heim says using a Web-based, or browser-based, interface to the LES has numerous advantages. "The managers can access the information anytime anyplace," says Heim. "It also extends the reach of systems to places where you might not have been able to put a system — like a satellite warehouse. You can extend or expand your zone of control."

There’s also the benefit of what Heim terms "partner enablement." "You can include your trading partners [with proper security] and view what inventory they have so you don’t have to carry that inventory."

One of the terms you’ll hear vendors use is the "dashboard" concept. It describes how you can quickly look at just the things required to keep the warehouse or logistics system running and healthy. Web-based browsers make this a reality. Real information, real-time.

Changing players

Consolidation in the LES space is the proverbial good-news, bad-news story. Hill describes the consolidation trend as the wave beginning to head for the shore. Big players are buying small players and everyone is looking at the niche markets small companies used to focus on. As with any other industry, providers of LES products are trying to establish a presence in markets, such as Europe, or in product categories, such as pharmacy.

RedPraire wanted international presence, for example, so it recently purchased LIS. 3M Co. purchased HighJump Software. "HighJump Software brings to 3M tremendous market knowledge and experience, strong industry and channel relationships and proven business practices," says John Pohl, division vice president of 3M’s Industrial Services and Solutions Division.

Heim says, "There’s an increased interest on the part of the customers for vendor viability. So what we’ve seen, of late, is several leaders [in LES] emerge and the balance [of software providers] is relegated to taking care of existing customers and adding some small pieces of business."

The fact that there has been a great deal of consolidation within the LES space is not news. The question is why. LES, in its various forms, used to be a niche market for small players. Now, primarily driven by the customers’ desire for vendor responsibility, vendors are offering larger suites of products or are merging with other companies that can offer greater varieties.

"We don’t see the current wave of consolidation as detrimental," says Jim Stollberg, vice president and general manager of Irista. "It’s a natural progression of the maturity of the market."

Single-source suppliers are becoming more prevalent in all aspects of material handling. "Our customers are looking for that single-source supplier," says Salkowitz. "And often they are looking for a full solution with a piecemeal budget."

Another factor is that maybe size does matter. Not being able to invest enough in product development is often a reason small companies remain small. And, conversely, consolidation is a way for large companies to add immediate product offerings that might not be worth diverting assets to develop.

The path to success for some of the smaller WMS companies had been the niche markets, says Heim; however, now the definition of WMS has expanded into LES. "The smaller guys can’t afford to build out that LES suite, and [smaller companies] are being out-invested by the big guys," he says.

Stollberg notes that the first wave of logistics execution systems involved bringing together warehouse management and transportation management systems. "We’ve gone beyond making the applications talk," he says. "There is actually a whole different layer of value that supports a much more complex flow of information. No longer does it [the data] go in a smooth progression from order to delivery. Now, after order capture, transportation might be consulted before picking to find the fastest or least expensive shipping method, for example."

As Hill says, realization of benefits of supply chain integration is not so much technology constrained as it is stymied by the inability of the organization to logically and cost-effectively implement them. "Clearly," he says, "success with supply chain systems is not for want of technology. In order to maximize their potential, however, you need a solid plan and a broad commitment to areas such as global thinking, analyzing before designing, clear specifications and realistic performance expectations, to name a few." MHM

Some Good Advice

Salkowitz says today’s buyers are knowledgeable in the functions of LES. "Clients are coming to us well educated and that’s good for both sides," he says.

And while warehouse management systems are maturing, there are still some new opportunities for LES providers, particularly in the growing area of complex shipping. "There is still a lot of segmentation in the market for transportation services," Stollberg says, "in particular, a need for companies that might be shipping by parcel, truckload or less-than-truckload units. All these shipments have to be done at high volume and done with a single transportation piece of the LES."

If you are considering deployment of a logistics execution system, in any of its many configurations, here are some tips from the experts on how to get started. (Also see the sources listed at the end of this article.)

• Establish a baseline

For Elliff, at the top of the list is to get a comprehensive snapshot of where you are. "You need to view your current performance and you need to know your soft spots — where you need the most help," he says.

• Root-cause analysis

Dig to where the problem really starts. Ask if it’s a systems problem, communications problem or even a management problem. If your current WMS is sending products to the wrong slot or you’re not hitting the outbound shipping schedule, then you solve the problem with a new WMS or transportation management system.

• If you don’t have time ...

Doing a complete assessment, internally, is a challenge for many companies. Most managers are too busy to do an objective assessment of their current situation. To get the proper breadth of experience outside your own four walls, you’re often better off to bring in a third party.

The providers of LES all offer these kinds of services; however, proceed with the usual caveats. Third parties can bring the added (and needed) perspective and they can also bring their own agendas, warns Rider. "Cheaper does not always mean better," she says. "When your company makes a selection [for an LES], you’re betting your business — and your career — on that selection."

Elliff says getting someone from outside your industry to do the assessment is critical because "leaders in other industries give you a better perspective than people within your industry who are probably looking at the same problems."

If this sounds like "benchmarking," it is, only at a higher, more sophisticated level. And while trade shows and industry publications offer useful information, a full analysis by an objective party can bring the answers you need much faster.

• Install a window

Heim says the concept of partner visibility is certainly a major factor a new buyer should look for. "Trading-partner enablement, or visibility, allows your suppliers to do more things for you. If they [trading partners] don’t require large software installations; if they only need to log on to a browser, they’re more likely to sign up with your program."

• Find solid partners

One of the more important things to look for in a potential LES provider is financial viability. Rider says, "You want someone in the business who is there for the long term. You should make sure LES is the provider’s primary business, not something it does as a sideline."

• Fit your functions

Functionality is often the thing that separates one company from another. You have to be sure to drill down into the vendor’s program to get the right answers. The more complex your business the more you need to drill down into the functionality of the program. Ask questions specific to your business. If you get a generic answer to a specific question, beware.

• Get references

And talk to the potential vendor’s references, only not the ones the vendor gives you. Choose other companies on its client list and talk peer-to-peer, not to just the vice president of distribution.

For More Information

The current edition of the Council of Logistics Management’s annual Logistics Software Survey lists more than 375 vendors of various forms of logistics execution software. Contact any of the following organizations, most of whom were sources for this article, for more information on logistics execution systems.

• Capital Consulting & Management Inc., www.ccmiservices.com

• Catalyst International, www.catalystinternational.com

• Council of Logistics Management, www.clm1.org

• Epicor Software, www.epicor.com

• ESYNC, www.esync.com

• EXE Technologies, www.exetechnologies.com

• FKI Logistex, www.fkilogistex.com

• HighJump Software, a 3M Co., www.highjumpsoftware.com

• HKSystems, www.hksystems.com

• Irista, www.irista.com

• LXE Inc., www.lxe.com

• Manhattan Associates, www.manhattanassociates.com

• MHIA, www.mhia.org

• Provia Software Inc., www.provia.com

• Quantronix, www.cubiscan.com

• Radio Beacon, www.radiobeacon.com

• RedPrairie, www.redprairie.com

• Schaefer Systems International, ssi.schaefer-us.com

• Sedlak Management Consultants, www.jasedlak.com

• Siemens-Dematic, www.usa.siemens-dematic.com/ma

• Swisslog, www.swisslog.com

• TrenStar, www.trenstar.com

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