Finding the Right Fit

Finding the Right Fit

In good economic times, companies can throw money at the latest and greatest in innovations. They can buy new information technology solutions right off the shelf with little worry for the ultimate return on investment these technologies will yield.

In today’s economy, companies must choose carefully and thoughtfully from the wide range of solutions available to create the best IT infrastructure for the lowest possible cost. Technology options in supply chain management include bar coding, RFID, software as a service, computerized inventory systems, electronic data interchange, Internet ordering and exchange of forecasting information. These technologies make it possible to link departments and networks of suppliers and consumers.

The potential is significant, but only if you find the right solution for your company.

IT systems and e-business solutions influence in a big way how supply chains are managed. Supply chains have evolved from simple production operations to real-time, performance-driven systems that depend on sophisticated e-business technologies. The proper implementation of high-tech solutions can lower inventory, reduce costs and streamline processes, resulting in significant improvements in the bottom line.

So how should companies choose e-business solutions that are right for their needs? The recession, financial crisis and the earnings crush that resulted forced businesses to look even more closely at areas of potential savings. The challenge is to find ways to implement the right technology solutions that will keep your company ahead of the curve, without breaking the bank. Savvy business owners and CEOs understand the importance of technology improvements, but often struggle with finding the right mix.

As a result, many companies are turning to third-party logistics providers to customize solutions that will streamline their supply chains so they can focus on core competencies. According to IBM’s Small and Medium Business Center Web site,, “Logistics companies are pressuring the cost structure of traditional wholesale distribution channels by offering a la carte supply chain services without the constraints of a buy-and-resell business model.”

Traditional warehousing methods are often associated with continuous fixed costs and a substantial upfront investment in infrastructure. As a result, many knowledgeable 3PLs recommend companies transition to software-as-a-service systems. In an SaaS model, the vendor owns and operates the application, and is responsible for software, hardware, maintenance and upgrades.

SaaS systems also deliver a near immediate return on investment, given the relatively low cost for implementation and maintenance. “There seems to be a consensus emerging that SaaS thrives in a cost-conscious, capex-constrained economic environment, such as we’re currently experiencing,” said Phil Wainewright, CEO of strategic consulting firm Procullux Ventures.

The risk of upgrading existing technology, or implementing one for the first time, is reduced because there is significantly less burden on the IT department to oversee software installation and implementation.

Through the proper implementation of SaaS systems, many companies can realize year-over-year cost improvements. SaaS reduces or eliminates dependence on an internal IT department, keeps warehouse management expenses proportional to business trends, and increases overall efficiency and monitoring ability.

Having a 3PL handle your SaaS system gives your company the freedom to focus on your core competencies instead of allocating resources to something that can be done at a lower cost by a 3PL provider.

3PLs use several methods when designing and implementing an IT solution within a supply chain. Radio-frequency identification, a tracking method enabling customers and shippers to retrieve product data virtually throughout the shipping process, is a common component in a customized IT solution. RFID systems employ tracking devices that exclusively categorize each item, allowing the user to isolate the location of any product and the delivery time for every shipment.

The use of wireless networks in the warehouse is an IT strategy that, if implemented correctly, can have outstanding results. “In the warehouse, the productivity improvements from wireless networks come from substituting technology for potentially error-prone human activities such as order processing, inventory control or picking,” said supply chain expert Adam J. Fein, founder and president of Philadelphia-based Pembroke Consulting.

He gives the example of data sent from handheld wireless scanners or RFID chips that updates stock information in real time, thus eliminating the need for expensive and time-consuming manual inventory maintenance. As technologies advance, 3PLs use ever-improving ways to manage supply chain operations through high-tech systems.

As Winston Churchill said, “There is nothing wrong with change, if it is in the right direction.” This wisdom is relevant to any company looking to streamline their supply chain with e-business solutions. The efficiency of an organization’s supply chain can make or break the bottom line, although it is often overlooked in lean workouts for the organization as a whole.

A good option for companies inexperienced in implementing supply chain efficiencies, or companies that have struggled with 3PL relationships in the past, is to pursue a relationship with a 3PL that has demonstrated expertise in identifying and implementing technological upgrades to increase the overall effectiveness and simplicity of the supply chain at the lowest possible cost.

Ron Cain, author of “High-Tech Solutions in Supply Chain Management Technology,” is chairman and CEO of TMSi Logistics. He can be contacted at 603-373-7233, or at