"Supply chains and moving boxes around on a forklift in a warehouse are just not sexy, cool things, so they haven't had the attention of cool new technologies," says Jim Burleigh, CEO of SmartTurn, Inc., a provider of on-demand inventory and warehouse management solutions. "Companies are still struggling with the fundamentals of optimizing the supply chain and enabling visibility across the chain, and knowing what trading partners in a supply chain have in their inventory."
He recalls his shock years ago when dealing with a leading international retailer that needed data about incoming products. The company had 9,000 suppliers; 3,000-4,000 had good systems, but the remaining suppliers had small or medium-sized warehouses, lacked good systems, and could not provide the data.
Many manufacturers outsource their logistics to 3PL providers, including warehousing and inventory processes. "There are hundreds of thousands of warehouses in the United States in the small- and medium-sized category, and many of the owners or 3PLs are trying to run those businesses off of Excel, QuickBooks, or something similar. Others are running sophisticated businesses through legacy systems or pumping data into Web applications of one of their big vendors. So when a company with a big supply chain tries to get data from them, it just doesn't work," explains Burleigh.
These businesses have another problem: lack of flexibility to make changes to their cumbersome supply-chain technology if they get a better deal from another supplier and make supply-chain changes. Many make changes manually.
In addition, most of the companies with small to medium warehouses deal with multiple suppliers and cannot manage visibility across the entire supply chain.
A good warehouse management system (WMS) is prohibitive for these businesses. It would cost $40,000-$50,000 in license fees and another $40,000 for implementation and infrastructure. "So they have locked in their mind that the entry-level price to solve their problem is $50,000-$150,000," Burleigh says. "They don't know that they can solve their problems for $500 a month."
The $500/month solution
Burleigh, who was formerly employee number six at Salesforce.com, explains that SmartTurn applied "the world of software-as-a-service (SaaS) and the concepts of social-networking technologies to supply-chain technology for inventory management, warehouse management, and overall supply chain visibility.
Employing the SaaS model in the SmartTurn Warehouse Management System enables the ultimate in flexibility. Instead of not being able to make system changes quickly if a new supplier comes into the supply chain (or making manual changes), the SaaS model just sets a new security permission for the new supplier coming on board.
Best of all, the SmartTurn WMS is available for $500 per site, per month, with unlimited users and unlimited transactions.
Argent Associates is a 3PL supply-chain management company providing managed services and warehousing assistance, and is also a distributor of various products. It counts Fortune 100 companies and government agencies among its customers. Argent outsourced to SmartTurn about nine months ago to manage a distribution center in North Carolina and for warehouse management in Arizona.
Ray Moya, COO and vice president of technology at Argent Associates, says he considered many other products available at the time, but it was "a no-brainer" to choose SmartTurn. He says the time to implementation was "compelling" (30 days versus six months) and was the major driver; the second driver was cost.
At that time, a client had awarded a contract to Argent and expected Argent to implement a solution in three weeks. Argent's typical timeframe for developing applications in house was three to six months. They didn't have that much time.
"We also needed to integrate with EDI and with QuickBooks without hiring a bunch of consultants," says Moya. "Our accounting system is QuickBooks, and our employees and accountants are extremely familiar with it. I didn't want to migrate to a warehouse-management system that would force us into a new accounting system; that was going to be problematic from a budget and process perspective."
Migrating to other systems, including the cost of customization, would have cost between $40,000-$50,000 versus the SmartTurn solution for only $500 a month. He adds that SmartTurn was able to complete the implementation for Argent's client in about 30 days instead of six months.
Moya adds that there are plenty of off-the-shelf warehouse and inventory management products, but they are not quick to implement. Other products for asset management and control lack necessary functionalities for warehouse management. And some applications are too complicated to use. "Most are very ERP centric, which makes them not very user friendly. None of the alternatives to SmartTurn were anything that I could live with. I made the right decision with SmartTurn," he states.
The SmartTurn solution also allowed Argent to make all its processes electronic, thus saving time, money, and errors. "We wanted to eliminate paper," says Moya. "Seven years ago, we did a study and found that paper transactions cost us $73 per transaction at that time, but electronic transactions cost 34 cents."
Security layers in a SaaS WMS
The situation Argent encountered with needing to integrate with QuickBooks is not unusual. "It's almost a guarantee that a warehouse management system will need to integrate with something in every implementation," says Burleigh.
A supply chain has at least a manufacturer or a warehouse business that is trading with someone else upstream or downstream for the flow of goods, and they need to share information with each other. "The standard way of doing that through technology is EDI. But that's an archaic way of doing things," Burleigh states. "It's a pretty cumbersome, painful process to have to integrate the software with different nodes, facilities, processes, barcode scanners, and other physical devices in a warehouse, etc." The challenge multiplies with the size and complexity of the supply chain. Obviously this amount of complex communication functionality requires building significant security into the system.
Burleigh says the complex security model that companies need to put in place to manage across a supply chain is one reason why developers did not apply the SaaS model to supply-chain technology sooner. He explains that supply-chain technology differs from the Salesforce SaaS model, which was built with the concept of visibility and security applying to the support, sales staff, and sales manager of one "tenant."
A supply chain, however, usually has multiple tenants, each with distinct warehouses. Each tenant could also have a 3PL operating a warehouse on an outsourced basis and also a 4PL (a provider arranging services across multiple logistics operations and transportation modes with multiple 3PLs). Each of these is a separate security role and layer. Adding to the complexity, a 3PL could be operating multiple warehouses, and in each warehouse there might be multiple customers.
"Each customer only needs to see their own goods, so that's another layer of security," says Burleigh. "And then there are agents and truckers in a security layer that might be over multiple customers and multiple 3PLs. A trucker may need to see the status of orders that are ready for pick-up, for instance. And some customers would need to see what's in some warehouses but not see into other warehouses."
SmartTurn's SaaS model WMS solution allows information sharing to happen securely between trading partners with just a click of a button - almost like allowing someone to share information with others in the popular social networking sites LinkedIn or Facebook.
SmartTurn was spun out of Navis, the world's largest supplier of container terminal management software. "In addition to our insights from Salesforce.com and the expertise of our chief technology officer, Miguel Pinilla, we learned a lot from the highly specialized, extremely complex inventory management software of Navis," Burleigh says.
Other financial benefits
SmartTurn's WMS provides complete real-time visibility across the supply chain, connecting islands of information on the quantity, location, and status of inventory flowing in and out of multiple warehouses. This helps companies decrease order lead time, reduce physical inventory counts, and minimize overstocks and costly stock-outs. The visibility also helps manufacturers know when shipped materials are actually consumed for manufacturing a product, thus enabling them to know when to pay a materials vendor in time to get a discount. These discounts can amount to thousands of dollars each month.
The solution helps 3PLs consolidate and manage all inbound purchase orders through a centralized system, thus streamlining the procure-to-pay process. It also helps eliminate duplicate data entry and improves productivity.
In addition, SmartTurn's WMS solution is a "green" solution. Carbon reduction in the warehouses results in cost savings. The WMS also enables a mid-sized warehouse to eliminate using a pallet of reams of paper for operations each week.
Cost savings arise from several sources. As Figure 1 displays, the cost savings possible with a SaaS WMS for a small- or medium-sized warehouse (or for one-fourth of a large warehouse) with a $2-10 million inventory level is $330,000 savings the first year and $230,000 in subsequent years.
Moya says Argent is now working on its third customer implementation with SmartTurn. "Their WMS scales as fast as we can establish additional warehouses at significant cost savings and meaningful environmental savings."
"Another good thing about the SmartTurn solution is that the software is very flexible," says Moya. Argent requested some functionality for generating custom reports of orders that Argent can then trend out into the future. "Nobody's product can do that today, but SmartTurn is working on it for us."
He reports that, although there is no such thing as one warehouse management system fits all, SmartTurn's system is flexible enough to model to different implementations. "So far, we have implemented eight different models for our customers, and that's hard to do in most applications," says Moya. "It's even flexible enough that we're getting ready to use it for a customer implementation in a products-assembly environment and inventory management process."
Cost savings, cost avoidance, flexibility, faster implementation time, and improved customer satisfaction are some of the highlights that characterize the state-of-the-art SaaS model WMS, all of which have traditionally proven to be benefits of outsourcing. "The more we use this solution, the more we like it," says Moya. "And the SmartTurn guys are a good team. I couldn't be happier."
Lessons from the Outsourcing Journal:
- Small- and medium-sized warehouse owners and 3PL outsourcing providers face challenges in managing visibility of inventory and information-sharing across an entire supply chain. They also lack flexibility to change their cumbersome systems (or must use manual processes) if they want to change or add another supplier to the supply chain. Applying the software-as-a-Service (SaaS) model to warehouse management, inventory management, and supply-chain management solves these challenges.
- Time to implementation (days instead of months) and cost (low monthly fees versus tens of thousands of dollars) are compelling drivers for a SaaS model warehouse management system and management processes.
- A supply chain has multiple trading partners as well as customers and others who need to share information and need visibility into some warehouses but not others; this creates a complex security challenge for automated systems. Applying modern social-networking technologies to the SaaS model facilitates building the necessary security layers and yet allowing permission access to certain information with just a click of a button.
- An effective supply-chain management and warehouse-management system must have the flexibility to enable modeling the solution for implementation in different types of manufacturing environments.