Schurman Fine Papers has staked its future on the paper business—the company not only owns the 150-store Papyrus stationery chain, but also supplies greeting cards, wrapping paper and fine stationery to large retailers like Borders and Barnes & Noble. Yet although it has built its business on paper, Schurman found that operating its distribution center in Goodlettsville, Tenn., solely on paper was not good for business.
"When we were paper-based, we had no idea where our inventory was," explains Del Duquette,WMS manager. "We wanted a way to capture all of our movements in real time." Like many small to medium-sized distributors, Schurman realized it needed to improve its distribution processes, reduce labor, provide visibility within its own supply chain and share data with trading partners. The company turned to supply chain execution (SCE) software to manage its warehouses, fill orders and speed them along to its customers.
It used to be that sophisticated systems like SCE software were only available to big-time players, large retailers and manufacturers. But as with everything in technology, big-time functionality has made its way down to tier one, tier two and even tier three levels. Affordable software is now available to most businesses—and it can radically alter their distribution operations.
The potential benefits of supply chain execution systems are just too great to ignore. A successful implementation can provide users with improved inventory visibility, improved data accuracy, faster throughput and higher inventory turns, better control of transportation costs and improved customer service.
SCE systems are not a single software program, but rather, a suite of execution tools tightly integrated to improve supply chain operations across the board, from inventory visibility through customer service and conformance to customer requirements. Typical supply chain execution software components include warehouse management, inventory management, labor optimization, transportation management and yard management systems, all of which can integrate easily with the other components. The software also typically offers visibility tools and the ability to integrate data with trading partners' systems. Additionally, most SCE systems are designed to share data with material handling controls, usually through middleware available in most SCE programs to interface with warehouse equipment. In other words, the systems offer everything needed to process an order and deliver it to its destination.
"It really hinges on the word 'execution,'" says Steve Simmerman of Swisslog, a software, consulting and systems integration firm. "Supply chain execution begins at the time the order is taken and released for fulfillment. It is an order-driven system."
It all starts with a foundation that provides the basic infrastructure and the business logic. Specific modules that handle functions like warehouse and transportation management are You no longer have to be a Wal-Mart to afford supply chain execution (SCE) systems. Even small companies can trade in their old paper-based systems for these more than powerful hypernetworked tools. paper savings then added to create the functionality required by the user. "The foundation is the glue for the modules," says Jim Stollberg of material handling systems manufacturer HK Systems and its software arm, Irista. "It makes sure that the systems function as one."
As SCE systems have come of age, the platforms have also become more sophisticated. They no longer just hand off data from one module to another. Instead, they provide true integration. "Years ago, integrating software meant that data could pass between them," explains Tom Kozenski of RedPrairie, a company that provides supply chain, warehouse and logistics software. "Now the program modules are designed to actually utilize functionality within the other modules."
Timing is everything
Clearly, the more functionality that can be integrated, the greater the productivity gains. But when is a company ready to invest in SCE? One indication might be an operational bottleneck or a customer service issue that demands better distribution performance.
"Companies should look into a supply execution system when they find they are leaving money on the table and when they're falling behind their competition and not meeting their customer service demands," says Praschant Bhatia of Manhattan Associates, which provides supply chain planning and execution systems.
In recent years, a number of SCE systems have appeared on the scene that smaller companies can actually afford. It used to be that broad SCE functionality was only available on systems with a six-figure price tag. But today's systems can be acquired for as little as $75,000. This buys the platform and some limited functionality that can get a company started down the paperless path, as well as provide a software system that can grow with the company. Most SCE software actually is delivered to the customer with full functionality; it's just a matter of turning on those functions that are paid for. This makes upgrading to new modules and capabilities quite easy. Licensing is typically based on company size and the numbers of users at the site. A company's return on investment (ROI) for the systems can vary. "The ROI will depend on the modules used," explains Kozenski. "ROI for labor and transportation modules can be a year or less, while a warehouse management system may take one and a-half to two years. It has a higher cost because usually hardware is also deployed."
Nonetheless, even businesses with just one DC may be able to benefit from investment in an SCE system. "We see a lot of activity on the low end of the market. As companies grow, they need a platform to build on and then additional functionality is added," says Swisslog's Simmerman.
A good example of that is Wacoal America. A U.S. division of a Japanese intimate apparel company, it operates one DC in Lynhurst, N.J., to distribute its DKNY, Teenform and other undergarment and sleepwear brands to department stores and other outlets. Several years ago, after steady growth, Wacoal realized it wasn't able to keep up. "As we kept growing, control of inventory in and out was becoming more cumbersome with a manual system," says Ismael Vicens, Wacoal's corporate director of distribution.
Vicens adds that his customers have became more demanding, requiring such improvements as reductions in backroom inventory and shorter shipping windows. Those require a greater exchange of information, including advance ship notices coming from Wacoal's plants and the shipping data it provides to its customers.Wacoal invested in an SCE system from Manhattan Associates that includes warehouse management modules that manage inbound products, inventory control and order processing. It also has a transportation module that directs the building of outbound loads.
The system also offers labor tools that allow managers to see on a daily basis how each employee is performing—for example, tracking how many picks a particular worker completes during the shift. Radio frequency-directed picking, added along with the SCE systems, has also made training easier, which allows Vicens to hire temporary labor as needed to meet peak demand.
Inventory tracking has also improved from the paper-based days. The cycle-counting function built into the software has been so effective that the facility hasn't had to perform a physical inventory count in more than five years.
"There are also a lot of nuances we can use," adds Vicens. "We can track carton history. Knowing where a carton is and what was the last item put into it is very helpful.When you get systems like this, you cannot go back to manual operations."
Wacoal's is not an isolated case. Schurman Fine Papers has experienced similar results since installing an SCE system from RedPrairie in 2003. Processes have improved and efficiencies have been created at a time when its DC workload continues to grow. The facility currently averages between 30,000 and 35,000 lines each day. Labor management has seen significant improvements. Headcount has been reduced from 120 to only 85 workers today. Work that used to take a full day can now be completed in six hours. Just a few years back, extra workers would have to be hired for a second shift during peak periods. Now the work can be completed in a single shift.
Forklift drivers are also much more productive, largely as a result of the warehouse management software's slotting capabilities. Drivers are now averaging 35 drops per hour—more than triple the 10 drops per hour averaged before the software was installed. Additionally, overall distribution costs dropped 3 percent from 2003 to 2004. This past year, costs dropped by another 3 percent. Overall accuracy is now over 99 percent. "The real-time information and inventory accuracies have been huge factors for us," says Duquette. "Fulfillment accuracy has gone up tremendously, and we have increased our productivity about two and a-half times."