09 February 2010

Viewpoint : Guest Columnists

Surprise, shock, inspire

Published:: 27 June 2007
Article Type:: Viewpoint
Byline:: Stanley Chew

Counting the true costs of warehouse management tools could be an eye opener for businesses, and it’s not so hard to do.

Manufacturers operating in developed countries are rapidly turning into logistics businesses, as time to market becomes the dominant measure of performance. This brings the need for innovative supply chain management tools that allow them to adapt quickly to powerful and abrupt changes.

Those that have made this transition most successfully are using next-generation supply chain management tools based on the service-oriented architecture (SOA), which has already proved so successful in web-based computing.

In the SOA architecture, services exist as functions that are well defined, self-contained and independent of the context or state of other services. Services can therefore be adapted quickly and at low risk, allowing owners to introduce services or to change existing services almost at will.

In addition to this inherent flexibility, SOA is also extremely robust, since changes are confined to services and do not disturb the fabric of applications.

Hence SOA has much to offer today’s logistics oriented enterprises, delivering immense flexibility and responsiveness while at the same time being more stable than typical legacy software products. SOA-based tools can also be customised without involving owners in lengthy and expensive software development.

Leading users have realised dramatic transactional savings by upgrading to SOA-based warehouse management system (WMS) tools. But many other businesses still do not fully understand how to measure the impact on business performance of legacy software.

Vendors of these technologies are benefiting from this lack of understanding and continue to be able to lock their customers into expensive software development partnerships. In effect they are preventing their customers from reacting to the demands and opportunities of the modern market.

For their part, customers are reluctant to break this cycle – migrating to a new warehouse management system is seen as a risky leap into the unknown. In fact, staying put brings the certainty of extinction.

It is therefore imperative for customer IT organisations to first assess the true cost of operating legacy software tools in terms of the cost of support, the capital costs of the hardware and software, and the end-of-life costs associated with the hardware platform.

This last factor is significant, as many legacy warehouse management installations are hosted on ageing platforms that are approaching obsolescence and therefore represent an increasing cost.

An effective way to quantify the effect of these costs on a business is to consider cost per transaction. Running an order profile is an easy but effective way to identify the applications involved in supporting each transaction. Cost per transaction can then be calculated in terms of the hardware and software support to run the applications involved.

In fact, this is the same data that analysts combine with business flow statistics when seeking to squeeze out transactional costs.

For warehouse management system owners seeking to understand the impact of a WMS on their business, this transactional cost analysis enables direct comparisons between the costs of operating legacy tools with the effects of migrating to SOA.

The results will surprise, shock, and inspire.

STANLEY CHEW IS SALES DIRECTOR EMEA AT 3M SUPPLY CHAIN SOLUTIONS

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