Supply Chain Software Convergence: Synchronization Realized

When Gartner’s Dwight Klappic started writing about the need for “supply chain software convergence” back in 2008, most of his assertions and predictions on the topic were met with blank stares or, in some cases, downright confusion. This was before e-commerce became the force that it is today, and years before the term “omni-channel” would become a buzzword for logistics and supply chain managers.

In Klappich’s eyes, supply chain convergence would give shippers a way to break through the difficulties associated with the coordination and synchronization of end-to-end supply chain processes.

Put simply, if their software platforms could effectively “talk” to one another thus - eliminating the functional silos that existed among warehousing, transportation, manufacturing, procurement, and other activities - then shippers could synchronize their processes across different functions. This, in turn, would allow them to optimize activities across previously siloed functions that didn’t communicate or work with one another.

“In 2008, companies were struggling with the orchestration of processes, namely because of how their operations were functionally and systemically organized,” says Klappich, research vice president at Gartner.

To explain the problem, he uses the metaphor of “blind rugby”—where players just periodically throw the ball blindly in any direction and hope that someone picks up the ball and runs in the right direction. Sometimes the plan works, but in many other cases it simply doesn’t. “When it doesn’t work,” says Klappich, “a lot of extra time and effort goes into aligning the functional organization.” 

Consider, for example, the three-item customer order that’s received and then passed off to the warehouse for fulfillment—then to transportation for delivery. The warehouse management system (WMS) uses case picking for the first two items on the order, but then allocates several hours to manage the kitting process for the third item.

Once handed off to the transportation management system (TMS), the order is allocated to a vehicle that’s arriving at 10 a.m. the next morning— too early for the order, which won’t be ready until 4 p.m. due to the kitting.

So, does the truck sit and wait for the order, or does it leave without it on a truck that’s now half empty? These are the types of questions that could have been resolved early in the fulfillment process had the WMS and TMS been able to communicate with one another.

“Things can get out of alignment pretty quickly when you have to start ripping things apart or deal with angry drivers that don’t want to wait around all day for an order, or when shippers can’t optimize their activities because they’re using two separate, functional organizations to get the job done,” says Klappich.

Keeping pace
Fast-forward to 2016 and the pace of the supply chain has increased significantly since Klappich started talking about the need for supply chain software convergence eight years ago.

Driven by trends like e-commerce, omni-channel distribution, and a growing demand for next-day and same-day deliveries, the need for convergence is greater than ever. By enabling collaboration and optimization across previously siloed functions (transportation, warehousing, manufacturing, yard management, etc.), supply chain software convergence helps companies break down those silos, make better decisions, and better leverage their IT investments across the enterprise.

So how far has supply chain soft¬ware convergence come since 2008? Clint Reiser, research analyst with ARC Advisory Group, says vendors like JDA, Kinaxis, and LLamasoft have all made strides in this area.

By partnering with IBM Sterling, for example, JDA can offer what it calls an “integrated omni-channel supply chain” that supports distributed order management (DOM) - or, the orchestration of order flow from anywhere within a specific network. Reiser says JDA is also offering “destination driven demand,” or, integration between its demand fulfillment application and its DOM capabilities.

Here’s how it works: A retailer like L.L. Bean makes a sale and the order is forwarded to its warehouse. Let’s say the sale came in through the Web, but was actually generated by a customer holding a smart phone and standing in one of L.L. Bean’s physical stores.

In this instance, the sale should be credited to the store and not the Web. “This software allows the retailer to identify exactly how the sale was generated and then use that information for future sales and inventorying purposes,” says Reiser. “That’s pretty useful information for a retailer, in that it now has a better representation of where and how that specific sale occurred.”

Reiser says that progress down the supply chain software convergence path has been “incremental” over the last two years. In the case of LLamasoft, for example, he says the company was traditionally a provider of supply chain design software.

By acquiring Barloworld Supply Chain Software, LLamasoft has now become the purveyor of supply chain planning software and network design software. This has allowed the vendor to combine both tactical and strategic functionalities on one platform—yet another example of supply chain soft¬ware convergence in action.

“LLamasoft had a strategic design tool and then found a complimentary opportunity in inventory optimization,” Reiser explains. Now, shippers that need help planning out their current production facilities can use the same software platform to make tactical decisions around inventory levels and locations.

When systems talk
Like Reiser, Klappich says that the supply chain software convergence movement has been slow and steady over the last few years. Still, he adds that the underlying assumption that systems that “talk to one another” usually support better collaboration and decisions is valid.

Put simply, vendors woke up and realized that having applications in ‘multiple buckets’ passing transactions back and forth—and on completely different systems—creates inefficiencies. Compounding the issue are the specialist vendors whose WMS, TMS, and other systems operate as stand¬alone entities.

“The good news is that over the last three to four years, we’ve seen larger customers pushing back and, in response, more vendors bringing their multiple, standalone products closer together,” says Klappich, who also points to JDA as one of the vendors that’s on the forefront of the current supply chain software convergence trend. “They’ve been able to do some very interesting things because they have multiple products, including warehousing, transportation, yard management, and planning systems.” 

Klappich points to the addition of Quintiq (which specializes in operations planning and optimization) and Apriso (manufacturing execution systems) under the Dassault Systèmes corporate umbrella as another example of how vendors are moving in the direction of convergence.

“There are many cross-synergies between Dassault Systèmes, Apriso, and Quintiq in terms of solution offer¬ings, customer business drivers, and industry challenges,” writes Frost & Sullivan’s Muthuraman Ramasamy in a recent report on the deal. “The capability to deliver solutions from product conception to planning, optimization, and delivery, provides a comprehensive technology platform for customers.”

According to Klappich, the pairing of Quintiq and Apriso makes the manufacturing-to-warehousing link “nearly seamless.” For example, a shipper that’s receiving goods in the warehouse can use the platform to automatically cross-dock to the manufacturing function. “This isn’t necessarily end-to-end convergence,” he says, “but within the software vendor’s domain, it’s a very strong example of convergence.”

How far can we go?
As he looks back on how the concept of supply chain software convergence has evolved over the last few years, Klappich says that it’s the shippers themselves who are championing it. “Customers recognize that they’ve gone as far as they can with the old software architecture,” he explains. “To answer these demands, some vendors have really started to push their applications in the direction of convergence.”

There are a few things that are keeping shippers from getting to a place where their warehousing, transportation, manufacturing, purchasing, finance, yard, and other supply chain systems truly converge onto a single platform. Cost is one challenge.

“These aren’t inexpensive, easy to switch-in and switch-out applications that we’re talking about here,” says Klappich. “It’s like having a two-story house with a foundation that sits on a plot of land in a specific way. To completely reconfigure that footprint is expensive and time-consuming.” The same holds true in the software space, where ripping out and replacing soft¬ware systems is cost prohibitive for the average shipper. 

“The company that has a 15-year legacy WMS in place probably doesn’t have the budget or resources to justify a rip-and-replace,” adds Klappich, who sees software convergence as a “Type A” company move—and one that’s less used by smaller, less technologically-aggressive shippers. “This level of convergence is still at the ‘aggressive adopter of technology’ stage. Companies that are on the forefront tend to get it, but convergence hasn’t gone main stream yet.”