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Expert Insight: The Supply Chain Technologist
By Mark Fralick
Date: Nov. 13, 2008
Logistics News: When it Comes to Warehouse Management Consultants, Rates Do Not Equal Value Part 2
 

Should we take the Supermarket Approach, and Net Out the Contractor's True Cost by the Ounce?

On my last post, I talked about the fallacy of deciding what a good deal is for a contractor on a WMS (or any other) project based on their rates. (See When it Comes to Warehouse Management Consultants, Rates Do Not Equal Value.)

More thughts this week on that topic.

Last time my comments were directly related to just costs. But, once you get beyond reporting and other very basic software work and and actually into modifications that require real knowledge, the risks go way up (as do the costs). The problem with these systems is that they are, well, Systems – like living organisms.

Often if you poke one of these things ‘here’ – you’ll see the result of your action three steps later ‘there’.  So, now think about bringing some guy in who says “Oh, yea I’ve been working with the XYZ system for 3 years – I was on staff with them even” or whatever.  The thing about some of these guys is that they often get pigeonholed into some portion of the system and may not have very good breadth or even depth.  This is not a guy you want anywhere near operational mods. 

I spend a good part of my days, in my role as the expert to the experts, looking at these sorts of things and either fixing them or undoing them. It is a pain for everyone involved – especially operations.

Now, that is not to say this it is all about price either. Some guys with good rates know a lot, some guys with high rates not so much (maybe you are paying for a brand name in this case from a big practice). 

Here is a good example: one of my customers came to me with a quote on doing an integration from one of the big guys a month or two ago. They quoted 400 hours, at pretty high rates. I thought that seemed a bit high – so I looked at the specs. If I were to quote this job, I said to them, it would be 60-80 hours at the very most.  So, how can you explain this wide variation? That consultant was obviously totally in the dark or was throwing a complete Newbee onto this integration and expecting my customer to pay for it. Even if they were to reduce their rate by one half, it is still not a good deal.

I previously wrote a piece on my distain for blended rates – for exactly this same issue. 

So, what’s the answer?  Well, I think we should implement the same sort of price comparison tool the supermarket s use.  You know, the “And that’s xx cents per oz” (for those of us who look at such things). We should put a tag on each contractor,  “And that’s really $xxx per hour”. We’d put the sticker on their forehead. Or for some situations we’d take our queue from the pharmaceutical guys “don’t take with xxxxxxxx” warnings.  We’d put a “Don’t do operations mods with me” sticker on their forehead.   

Okay, so more seriously, what’s the real answer to all this. First, be very aware that there are a lot of people scrambling for a relatively small number of very knowledgeable folks in this space.

Second, ask questions of the resources assigned to your project. If they are doing an operational mod, for example, they should be able to thoroughly explain why the mod needs to be done this way, what are to down-stream consequence, and the risks.  

Third, when you take on a consultant or a consulting group, make sure you get right of refusal for resource assignments. If nothing else this gives you the ability to further negotiate rates for resource you identify as Newbees (I like the idea of doing a No Charge situation for these guys for a short time period and ramping up their rates over a couple months).  

Finally, remember that there are deals to be had out there (especially if you are looking at acquiring infinitely more profitable licensable product), but don’t be fooled into thinking it is all about rate.


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profile About the Author

Mark Fralick writes about supply chain technology issues, and is a recognized expert in RFID, Service Oriented Architectures (SOA), Warehouse Management, material handling systems integration, and other technologies.He is also president of consulting firm ROI Solutions LLC, and prior to that Vice President of Architecture for RedPrairie. He is co-founder of Software Architects International, a successful Warehouse Management System (WMS) provider subsequently purchased by McHugh Software (RedPairie).

 

Fralick Says:


I spend a good part of my days, in my role as the expert to the experts, looking at these sorts of things and either fixing them or undoing them. It is a pain for everyone involved – especially operations.


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