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Expert Insight: Supply Chain Insight for Medium-Sized Businesses
By Dr. Chris Norek
Date: March 11, 2009

SMBs Should Invest in Supply Chain Technology NOW?!?!

On-Demand Supply Chain Solutions Change the Financial Dynamics, and May Help Improve Cash Flow Right Away


Business leaders everywhere are addressing the current global economic crisis by “hunkering” down and cutting costs. Sometimes, however, you need to spend a little to save a lot and make a move while others stand pat.  Supply chain technology investment is one such area and, as a result, spending on supply chain technology applications is predicted to remain pretty steady. 

Small and medium-sized businesses (SMBs) can use supply chain technology implementations to reduce costs and increase profits. Software as a Service (SaaS) options now make significant solution functionality affordable for SMBs. SaaS options exist all across the supply chain technology functionality spectrum - from eProcurement to transportation management systems, to warehouse management systems and beyond.

The Costs


All software adoptions entail some up-front costs for implementation. With SaaS, however, there are no up-front license purchase costs. Once implemented, the costs are based on usage and these costs are negotiated based on anticipated volume per time period.

This pay-as-you-go approach offers a great advantage in that it may be possible to find a solution and a subscription price that provides near “instant cash flow” – meaning that the monthly expense is less than the monthly savings right away.

The Benefits


Some companies prefer to expense operating costs rather than capitalize them and SaaS use allows this. Other benefits include significant reduction of manpower by automating processes and increased profitability from optimizing supply chain functions.

I know of one SaaS provider which upgrades its solution six times a year. The upgrades are included in the subscription fee and are automatic since the solution is hosted outside a client firm’s systems.  This is in contrast to company-hosted solutions that require internal IT to make changes for new upgrades.

We recently enabled a TMS selection coupled with an implementation in a three-month timeframe. Three months after implementation, the entire project paid for itself and then began contributing to profitability. We are currently working with a SMB in a traditional, heavy manufacturing industry (like the overall economy is down significantly) who realizes that now is the time to invest for growth while others are cutting back on investments for improvement. TMS is one area of opportunity they are pursuing.

Consider the Opportunity


During these difficult economic times, well-planned and executed supply chain technology investments can allow SMBs to grow and save costs while many of their bigger counterparts are shrinking.

It is during these kinds of times that SMBs can make significant gains on their larger competitors.

Agree or disgree with Norek's perspective? What would you add? Let us know your thoughts for publication in the SCDigest newsletter Feedback section, and on the website. Upon request, comments will be posted with the respondent's name or company withheld.


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profile About the Author

Christopher D. Norek, Ph.D. is a founding Senior Partner with Chain Connectors, Inc. He has been in the logistics field and consulted for major firms for over 15 years.  Dr. Norek has been active in publishing for journals in the field. He is on the editorial advisory board of Logistics Quarterly (LQ) and DC Velocity and is an outside reviewer for the Journal of Business Logistics.

 
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Norek Says:


This pay-as-you-go approach offers a great advantage in that it may be possible to find a solution and a subscription price that provides near “instant cash flow” – meaning that the monthly expense is less than the monthly savings right away.


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