By Fawn Fitter

They frequently happen without warning: canceled orders, delayed shipments, sudden changes in demand. The greatest difficulty in managing the supply chain is that so much is out of your control. And most enterprise resource planning (ERP) systems are not designed to fully address such issues as demand forecasting, capacity planning or storage optimization.

In Summary:
• Supply chain niche applications can help your company make smarter decisions about inventory, capacity and demand.

• These applications are meant to add functionality to your existing ERP system in critical areas, especially warehouse management and transportation management.

When the service level you’re trying to provide involves continuous visibility from the time you receive an order to the time you ship it out, [a supply chain application] can make all the difference in the world.

When companies grow to where they need additional supply chain management features, they often find that a comprehensive supply chain management solution from a vendor such as Manugistics or Oracle is far more than they require, says Stephen Scott, director of Syncresis Ltd., a supply chain and manufacturing consulting firm in Kingston-upon-Thames, England.

The practical answer might be to invest in niche applications that integrate with your ERP system to provide just the specific functionality you need.

Consider warehouse and transportation management
Experts say that almost every midsize company, regardless of your industry or operational requirements, should consider adding warehouse management (WMS) and transportation management (TMS) solutions to their ERP systems. Both have an almost immediate impact on the bottom line, explains Tom Singer, a principal at Raleigh, N.C.-based Tompkins Associates, an international supply chain consulting firm.

Warehouse performance directly affects customer service, and transportation costs are rising so quickly that optimizing them is the only way to keep them from cutting too deeply into profits.

In general, WMS allows companies to receive, store, “pick and pack,” and ship inventory in the most efficient way. Other features can include space optimization, shipment verification, or bin replenishment prioritization. TMS offers functionality like route planning, load optimization, shipment scheduling, and package tracking.

By expanding their systems to include this advanced functionality, midsize companies can provide more real-time information about product availability and order fulfillment to their customers, says Bob Parker, vice president of research for Manufacturing Insights, an IDC company based in Framingham, Mass.

A success story: Distributor adopts warehouse management
Hy Cite Corp., which has 350 employees, is one company that dramatically improved its supply chain operations by adding warehouse management capabilities. Main operations for the wholesale distributor of Royal Prestige brand housewares were crammed into a 60,000-square-foot warehouse in Madison, Wis., with other small warehouses scattered throughout the city.

Hy Cite’s ERP system did what it was meant to do: track the number of units available for each product and the financial value of available inventory. However, it could only update inventory records after someone manually input shipping manifests at the point of dispatch.

“The distribution center people had to sort pick tickets by hand, pin them to a box and send the box down the line,” says Arin Brost, Hy Cite’s vice president of information systems. “We couldn’t tell where products were, how many were allocated to specific orders, where an order was in the pick process or if [it] was fulfilled until it was shipped.”

In early 2005, Hy Cite found an opportunity to plug this gaping hole when it consolidated its operations into a single, 200,000-square-foot warehouse. First, it installed warehouse equipment with scales, bar-code scanning and automated container routing on the floor, and deployed handheld computers so employees could refer to pick lists in electronic format. Then it began shopping for a supply chain application to integrate with its ERP system.

HighJump Software, a 3M company and Microsoft Gold Partner in St. Paul, Minn., provided a warehouse management solution. It was chosen in part because, like Hy Cite’s ERP system, it is based on Microsoft technologies. A team of Hy Cite employees from purchasing, procurement, distribution and IT spent six months customizing the HighJump software. In the end, the warehouse management solution interfaced with the Hy Cite ERP system, as well as its accounting and procurement systems, and a UPS shipping application.

The ERP system continues to track inventory levels and values, while the WMS module follows materials as they move through the newly automated warehouse.

After 15 months, the business benefits are clear, Brost says. The warehouse management system releases orders directly to workers with handheld computers on the floor for faster fulfillment. Employees can see and track orders from the time Hy Cite receives them to the time they are delivered to vendors, which can check their progress on the company’s extranet at any time. Hy Cite has also doubled its daily shipping volume, from 900 boxes to 1,800, without hiring more employees.

“When the service level you’re trying to provide involves continuous visibility from the time you receive an order to the time you ship it out, [a supply chain application] can make all the difference in the world,” Brost says.

Analyze your supply chain gaps to consider further enhancements
If your company has already optimized its warehousing and/or transportation, you will want to work closely with the business side to solve other problems in the supply chain. Your pain point will be wherever unpredictability causes the most problems, Parker says.

• Variable demand. This tends to be a particular issue for consumer packaged goods. For example, a fruit juice distributor realizes that overall demand rises in the summer, but it cannot predict heat waves or a sudden fad for apple juice in a particular city. Companies that need to be sure they have the product customers want, in the locations where they want it most, should shop for a demand planning and inventory optimization application.

• Fluctuations in production. When companies manufacture a broad mix of products in a single facility, the demand is stable, but the processes and tools necessary to meet it shift rapidly. These companies, which tend to be in the automotive and industrial machinery sectors, should consider software like a factory scheduling application.

• Supply inconsistency. A common issue in consumer electronics and technology companies, this refers to the inability to get enough of a specific component necessary to build and deliver a high-demand product. Parker advises companies in this situation to adopt a procurement application — for example, a Web-based supplier information hub.

The question for many midsize companies is not whether they will need to add supply chain management applications, but when, Scott says. IT must continually discuss with the business side where the supply chain needs to be improved and examine legacy financial and business applications to find the gaps. Finally, look at applications that can bridge those gaps without requiring a complete ERP upgrade.

Fawn Fitter is a freelance writer in San Francisco, specializing in business and technology. She has written for publications including Fortune Small Business, Knowledge Management and Computerworld.
Source: Microsoft.com