Logistics Viewpoints

A complete analysis of logistics trends, technologies, and services

Visual Logistics: Replacing Text with Graphics

Logistics Technologies | By •

The folks at Tecsys, a supply chain execution software vendor, sent me a whitepaper called Visual Logistics.  The concept is simple: information displayed to warehouse workers on RF terminals should be more visual.  Here is how picking information is typically displayed on a text-based RF terminal:

Traditional Text-Based RF Display (Source: Tecsys; click to enlarge)

With the traditional text-based approach, the operator scans a product-specific UPC bar code to validate that the right product is being picked. A small percentage of the time, however, warehouse workers scan the correct slot but pick from an adjacent slot accidently.   

Compare that to a visual display:

Tecsys Visual Cues Display (Source: Tecsys; click to enlarge)

On a visual display you get visual information about the stock keeping unit (SKU), which is more memorable than text-based information. Pick errors would virtually disappear if the cartons to be picked contained visual logos.

Tecsys claims that workers are more productive with visual presentations. Without further research, I’m not sure I believe this claim when it comes to experienced warehouse workers. However, employee turnover is high in warehouses (over 10 percent a year on average). I have no doubt that visual cues would improve the productivity of new employees or that workers would prefer these types of displays. 

Other Visual Cues Applications (Source: Tecsys; click to enlarge)

Here are some other applications where visual cues could be used:

  • Upon request, the RF device screen could provide an operator with a warehouse location map on where to go for the next pick.
  • In multi-order pick-to-cart, the handheld device could provide an order selector with visual information on how to sort product into the correct carton.
  • Packages may have multiple barcodes (e.g, SKU number, lot number, serial number, catch weight, expiration date). Visual cues can help ensure that the correct barcode to support a particular process (receiving, quality control, etc.) is scanned.
  • Visual cues could support pack operations. Packaging requirements can be different based on the customer or the SKU. For example, a hazardous product might require a special insert and a temperature-sensitive product might need to be packaged in a special container.

Over the past couple years, ARC has heard several supply chain software vendors talk about their investments in making their products easier to use. These screenshots from Tecsys are a great example of what’s been developed and the direction the market is heading towards.

Software as a Capital Expense

Cloud/Software-as-a-Service | By •

Earlier this year, some of my colleagues here at ARC wrote a Strategic Report titled “Capital Expenditure Survey 2009” (available to ARC clients only). The report got me thinking about the differences between how hardware and software are expensed, and how those differences affect a logistics executive’s annual budget. 

I talked to executives at some of our logistics software vendor clients, including i2 Technologies, RedPrairie, Manhattan Associates, and Tecsys, to see how their customers approached this issue. According to these vendors, companies typically depreciate software within three to five years, a much shorter timeframe than expensive capital equipment. However, the ROI model customers use to justify software purchases can be quite different. Manhattan Associates, for example, reports that in helping customers put together a ROI model it often shows costs versus savings, and the time value of money, over a five to seven year timeline. 

How do these budgeting issues affect logistics executives? In my conversations with them, almost all report that the annual budgeting cycle involves cost targets, and these logistics costs roll up to the Income Statement.

For logistics executives with private fleets, the Balance Sheet also comes into play. For these executives, one of their annual budget exercises is to look at their trucks and decide which ones to sell based on their book value, whether a truck is experiencing excessive downtime or increased maintenance or repair costs, and the opportunity costs involved (i.e., the costs of not investing in new equipment). New trucks might have better operating performance, in terms of fuel efficiency, safety, or emissions, so the differences in performance and quality between old and new equipment can be missed opportunities for performance improvements.

So, one key difference between software and hardware is that hardware has a book value, while software does not. The book value for hardware represents the resale value, which is reduced by annual wear-and-tear. Enterprise software contracts forbid customers from reselling their software and thus the software has no book value. Basically, there is an exit scenario for hardware that does not exist for software, and the Balance Sheet exercise described for private fleets would never take place for software.

The issue of wear-and-tear and opportunity costs takes a different form for software. Let’s take the wear and tear issue first. A company that buys a warehouse management or transportation management system would almost always purchase a maintenance contract, at least in the early years. The maintenance contract includes helpdesk support, which helps to keep the software up and running, and helps prevent downtime issues that can occur with aging equipment. If a company does not engage in periodic upgrades, the software might pass a point in time where helpdesk support is no longer provided.

The upgrades included as part of the maintenance contracts also include new functionality that allows for new performance improvements. Software maintenance and implementation services hit the Income Statement as an operating expense.  While some companies I have talked to have decided to get an upgrade after every few releases (or in some cases, after every release), some companies perform an ROI analysis to determine whether the new functionality and performance improvements are worth the new costs that will impact their budget. 

Based on the software’s architecture, some solutions are much easier to upgrade than others. If the software is relatively easy to upgrade, staying current is an easy decision. With other solutions, where upgrades require more costly implementation services, the upgrade decision is more difficult. This is because if you wait too long and there are many releases between the version you bought and the current release, upgrading becomes far more expensive, often rivaling a new implementation in terms of cost and time. In short, while an individual upgrade might not be cost justified when considered in isolation, there can be an opportunity cost associated with not doing periodic upgrades.  From a budgeting perspective, the software’s architecture can matter greatly.

This is where the software-as-a-service (SaaS) model gets interesting. There are no capital expenses associated with SaaS, so software purchased under a SaaS contract doesn’t affect the Balance Sheet. Instead, all the costs and benefits hit the Income Statement. If the SaaS solution is single instance, multi-tenant, then there is minimal costs (often none) associated with upgrades.  From a budgeting perspective, this strikes me as much cleaner.  (For more on SaaS see “A Beginner’s Guide to SaaS and “More Questions about SaaS”).

The Value of Becoming a Technology-Driven 3PL

Guest Commentary | By •

In the past, entering and competing in the Third Party Logistics (3PL) marketplace required sales savvy, options for inexpensive warehouse space and good operational management skills.  With these things in hand, a 3PL could acquire clients, lease space, hire workers and launch operations in very short order. Price was always king and the 3PL with the lowest price usually won.  Contracts were renewed provided the 3PL met its service levels and prices remained low.  New 3PL companies sprouted overnight and everyone was happy.

Gone are the days where being the lowest-cost provider is enough to win the business.  Today, customers expect 3PLs to offer advanced and adaptable solution offerings, which allows 3PLs to compete on a higher plane than just price.  In turn, this enables more efficient and flexible operations and provides stronger returns for end clients.  Becoming a technology-driven 3PL is not only the key to winning new contracts; it also provides stronger client partnerships, which are harder for the competition to overcome when contract renewal time arrives.

So, what exactly are these advanced solution offerings?  It is not only advanced warehouse management systems (WMS) and transportation management systems (TMS) that ensure real-time visibility and accuracy.  It is these applications working hand-in-hand with a client’s systems and users.  Let’s look at a few examples of what is possible today.

Unlimited Visibility: 3PL’s now have the technology to offer their clients real-time information through secure browser applications.  Clients can access this information at their office, at Starbucks via their Blackberry or smart phone, or at their end customer’s offices while discussing sales and delivery opportunities and/or issues.  A client’s end customers and suppliers can also access the same information for broader supply chain collaboration.  As a direct result, clients save money, improve customer service and improve margins.

Fast, Easy and Immediate Knowledge Transfer: For example, a client has a fast-breaking product opportunity that requires special packaging or other value-added services.  The client can create their own detailed instruction documents, and even short video clips on proper techniques, and post them directly on their internal site.  The 3PL operator can view these documents and videos through live hyperlinks on their workstations to aide in the process.  As updates are posted the 3PL operator sees the changes immediately, including animated graphics if needed to draw attention – no email, no phone calls required.  Clients benefit from faster speed to market, improved quality and consistency, and rapid response to changes.

Image-Driven RF Operations: The latest technologies allow 3PLs to provide RF operators with instructions using images and videos in combination with, or even in place of, traditional text data.  3PL clients benefit immediately from improved quality by showing images of the required unit of measure, the required packaging instructions, and kit assembly videos to RF operators unfamiliar with their products.  A 3PL can deliver more complex operations while keeping operating costs below those of the manually-driven processes of its competitors.  The 3PL also benefits from increased retention, closer client partnerships, and stronger value propositions for attracting new clients and revenue sources.

Merged Information with No Integration: Integration technology has advanced over the years to allow faster and easier integration with various client ERP applications.  Today, separate client system data can be embedded directly on the 3PL’s WMS screens (PC and mobile RF).  Users see information from both systems on a single screen without realizing two systems exist, all without extensive IT work required.  Information sharing today also extends beyond text and numbers, and now includes full multimedia capabilities for embedding documents and images.  Clients benefit from easier on-boarding of the new 3PL, less IT investment, and improved quality and efficiency of their 3PL partner.

With all of this capability in hand, today’s 3PL winners – both existing players and newcomers – can become valued, shared partners with the clients who need them in today’s ever changing economy.  Without this technology advantage, 3PLs may be unable to reduce their prices low enough to overcome the higher client ROI offered by technology-driven competitors.  

John P. Reichert is Product Manager, Warehouse Management Systems, at TECSYS Inc.  His career encompasses close to twenty five years of strategic and operational expertise in product development, product management and deployment of ERP systems for domestic and international companies. Since 1998, Mr. Reichert has been a key contributor to the development and marketing of TECSYS’ WMS initiatives for healthcare and high-volume distribution companies.  Prior to joining TECSYS, Mr. Reichert was a senior manager in R&D, product management and solution engineering with three logistics software companies.  Prior to that, Mr. Reichert was with Frito-Lay where he was a key contributor in the development and deployment of distribution systems across the U.S. during a seven year span.

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