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  - May 10, 2010 -  

Supply Chain News: Thought Leaders Discussion on On-Demand Supply Chain Software

On-Demand is Coming on Strong, but Isn't for Everyone Quite Yet; Important to Take a 360 View of What you Really Need

  by SCDigest Editorial Staff  
SCDigest Says:
Clearly, there are not a lot of IT resources to go around in most companies today, and that is a big driver of the interest. The belief, usually correct, is that you can implement an on-demand system with fewer IT resources than a traditional system.

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For the most recent issue of the Supply Chain Digest Letter, focused on On-Demand Supply Chain Software, SCDigest Editor Dan Gilmore recently say down to discuss a number of issues related to this topic with Tom Kozenski, vice president of product strategy at RedPrairie. That interview is published below.

To download the SCDigest Letter on On-Demand Supply Chain Software and access other articles and information, please visit our resource center: On-Demand Supply Chain Software Resources.

Gilmore: I am very bullish on on-demand – Tom, what is your perspective?

Clearly, the on-demand or SaaS model is becoming an ever increasing part of the overall supply chain software landscape, especially in some areas, like TMS. We are also seeing it become quite popular in retail – think of the challenge of deploying software in hundreds of retail stores in a large chain. On-demand makes perfect sense for that.

That said, there are still a lot of things to consider, and I don’t think companies should make pre-judgments either way quite yet. They should keep an open mind, work with a vendor to see what the options and costs are, and make an informed decision about what is the best path for them.

Gilmore: I’ve heard you bring up an interesting point, that some applications really are best accessed on-demand, meaning just when you need them.

That’s right. Most applications, such as a Warehouse Management System or Transportation Management System, are extensively used every business day.

But that may not be true for some other areas, such as slotting optimization. Maybe I only re-slot the distribution center seasonally, for example. In that case, it may make more sense to have the solution be truly on-demand, accessing its capabilities four or five times a year when I need it, and not have to bother with a full on-site implementation.

Gilmore: What do you see as the reasons companies are interested in on-demand supply chain solutions?


Kozenski: It really varies by company.

Clearly, there are not a lot of IT resources to go around in most companies today, and that is a big driver of the interest. The belief, usually correct, is that you can implement an on-demand system with fewer IT resources than a traditional system. This scenario can be specifically seen in transportation, where historically the transportation department has had a tough time getting IT resources that are tied up on other enterprise projects.

The other big driver is the subscription model versus the up-front payment for a traditional software license. Capital appropriations are especially hard to get in this environment, and so companies are attracted to the idea of accessing the software as an expense versus a capital investment.

I will note though there may be ways of achieving that financial model even with a traditional deployment. Still the idea of balancing cash outflows as an expense with the expected savings over time from an on-demand solution can be appealing. But you have to work the numbers.

Gilmore: Where do you see the greatest interest in on-demand solutions?

As I noted, there is a lot of interest in the TMS area. Retail also likes the on-demand model, which makes a lot of sense across a broad network of stores.

Supply chain visibility and inventory management are other areas where there is a lot of interest, and we think in the end on-demand will be a key part of an end-to-end supply chain offering that enables real-time planning and execution management from manufacturer to retail and all the way to the shelf.


(Supply Chain Trends and Issues Article - Continued Below)




Gilmore: Is this an IT thing, or should supply chain and logistics managers care?

Kozenski: It sure shouldn’t be an IT only thing. First, it may be the only way that the transportation department, for example, can get the technology support they need, so they need to understand it to sell the idea internally.

Beyond that, to make the optimal decision for a company and a specific application area, you really need to perform the right analysis across costs, functionality, support, and many other areas. There can be differences between traditional deployments and on-demand across all those areas and more. There can also be big differences in the delivery capabilities and options between competing on-demand solution providers.

We’ve been at this delivery model, running our own data centers, for quite awhile now. You learn a lot. It isn’t easy to do it well.

These are all issues operational managers need to understand if they want to get the best total solution for their business needs.

Gilmore: Will on-demand dominate the supply chain software market soon?

In some areas, I think it will. But overall, it will take some time, for a variety of reasons. It’s still a relatively new concept for most companies, and economics aren’t always clear.

I believe we will still see traditional deployments for most supply chain software for some time, but that the on-demand market share is going to steadily grow. You want to look for a vendor that can give you several options, and can really help you understand the pros and cons for each option specific to your situation.

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