Know your integrator

Planning to automate your warehouse? Then you'll need more than just the right blend of software and material handling equipment. You'll also need to have the right team of systems integrators on board. Since it's the integrators' job to make sure the facility's equipment and software can "talk" to each other, choosing the right contractor for the job is key to ensuring the smooth flow of product in and out of the distribution center.

As necessary as their services are, they don't come cheap. For a typical project, integration costs will run to roughly 30 to 40 percent of the combined costs of the software and equipment. Given the amount of money at stake, you want to be sure to pick a contractor that will get the job done on time and on budget. And that requires checking résumés, references, and alliances of any systems integration firm under consideration for the job. Here are some tips on how to do that and what to look for:

1. Be wary of "alliance bias." Many times, systems integrators have ties to specific developers of supply chain software—in particular, warehouse management systems (WMS). While that may be a good thing—for instance, it's a good indication that the integrator knows the software inside and out—the arrangement could also create a potential conflict of interest. Either way, it's something you as a customer will want to be aware of.

"Most of the systems integrators have 'pay to play' relationships with the software community," says Marc Wulfraat, president of the firm MWPVL International Inc. "For example, in the WMS industry, you might pay $25,000 to 35,000 per year to a Manhattan or RedPrairie to be a certified systems integrator. Because it is expensive to develop the resources and to pay this fee, most services firms can only afford to do this with one or two software firms. As such, it is important for the company to realize that the system selection process will most likely be heavily skewed toward the WMS firm that the integrator is paying to be a partner with."

And it's not just software. Many times, integrators also have alliances with equipment vendors, which might even include financial arrangements that could tilt the balance in a given supplier's favor. Wulfraat notes that this is particularly important to keep in mind if your company is asking the integrator for a fixed-bid turnkey quotation that includes both the services and equipment. That's because unless the client instructs otherwise, an integrator will likely obtain the equipment from vendors that provide financial incentives, Wulfraat warns.

2. Find out what past clients have to say. Background checks are a key part of the due diligence process. But don't just ask the integrator for references, says Steve Martyn, chief strategic officer of Invata Intralogistics, a systems design and integration firm. Instead, ask for the names of the integrator's last seven clients. Then contact each of those companies and ask whether the integrator completed their projects on schedule and whether the project ran into any obstacles.

Before contacting past clients, though, Martyn advises managers to get some background information on their projects from the integrator. As for what to ask for, he suggests obtaining the written functional specification documents for any project similar to the one being planned. Those documents should outline goals and objectives of the project with specifics regarding equipment, engineering, controls, interfaces and software requirements. The document should also list the precise areas of responsibility for the integrator and the software vendors.

At the same time, the logistics manager should be looking to make sure the integrator has relevant industry experience. "Once your expectations are defined, SIs [systems integrators] being considered should include demonstrable experience in your industry or like industries," says Robert Nilsson, vice president and general manager of software and supply chain intelligence at systems integrator Dematic. "For example, if you make frozen pies, a company with experience in handling frozen pizza will probably do the trick."

Donald Derewecki, senior business consultant at the transportation engineering and design firm TranSystems, has one other tip for managers conducting background checks. When reviewing the cadndidate's past projects, he says, look for evidence of creativity in deployment. An integrator's past work should show a range of design solutions tailored to the individual customers' requirements, he says. "You don't want to only see scaled-up or -down versions of the same operations design."

3. Get the résumés of project staff. In addition to conducting reference checks, logistics managers should ask to see the names and résumés of the people who will be assigned to their integration project. "For a large-scale WMS implementation project, I would want to know exactly who will be on my project and what their billable rates will be," says Wulfraat.

In the course of their investigation, companies may find that many of the staffers assigned to them aren't actually employees of the systems integration firm but instead are independent contractors. Wulfraat doesn't see that as cause for concern. "Independent contractors usually are transparent to the end customer because they carry a card and appear the same as employees," he says. "Sometimes companies ask to have this spelled out, but I don't think that it's overly important since many of the best and most experienced people will be independents that work consistently for the same firm. Sometimes this is for tax purposes; other times it is because these people just want to be independent."

4. Look for a partner who will be in it for the long haul. Finally, when selecting a systems integrator, Nilsson urges logistics managers to evaluate the prospective supplier the same way you'd evaluate a personal investment. He recommends that managers ask such questions as: Is the integrator consistently profitable? Has the firm grown or shrunk relative to peers in the market?

As much as a logistics manager should strive for the best possible deal, he says, a company should pick an integrator who will be a partner who can "grow, invest, develop, and maintain" the infrastructure put in place in the distribution center.

Says Nilsson: "Look for partners that are willing to take you from strategy to design to implementation to long-term care."