So you're shopping around for vendors, software and services to replace your current Web platform. Several questions no doubt go through your mind.
What are the features and functions we need? How can we use social media? Should we investigate SaaS or acquire a license and host our own solution? Or should we use a service to host?
What will the cost be? What are the due diligence steps we need to take with the vendor to make a sound decision?
Before you get hung up on the technology, consider some top-level issues key to the decision. Sure, features and function sets are nice, but other factors, such as how much the vendor will increase your company's marketing expertise, and whether the platform will increase your sales, may be more important in your analysis.
First off, you have to understand how acquiring the vendor's software and services will build your sales. This should be a requirement for any new Web platform. Here are a few examples:
- Is the proposed platform SEO oriented? Just as important, how will the change in platform affect your SEO rankings both short term and longer term?
- How strong is the platform's internal search functionality? Can the customer easily find product, price points, etc.?
- Does the vendor have the ability to split test offers, promotions, pages?
- Can the platform send triggered e-mails? For example, after the first order, can you send a thank-you message and a special discounted offer within a certain specified time frame?
- For abandoned carts, can you send e-mails that feature products in the same categories?
- Can you send out e-mails based on pages visited or products searched?
- Can the vendor set up microsites for landing pages to improve SEO and SEM?
Large and diverse product assortments may achieve a higher search engine ranking by featuring major product categories on specialized sites.
Ask your prospective vendors for hard, tangible facts about how their applications have increased other companies' sales and conversion rates. During your reference checking before the purchase, ask the client companies for practical examples. Does one vendor have a clear advantage over another?
Here are a few other points to consider when shopping for a Web platform system.
AIM TO improve the customer shopping experience.
This is typically the top objective for our clients when we're working with them on replacing Websites. Here are some of the main issues they look to resolve:
- Ease of use for the customer
- Minimal clicks to find product
- Search engine optimization
- One-page checkout
- Customer self-serve for the majority of transactions
LOOK FOR a leader in Internet marketing.
What is the marketing expertise of the individuals who own the company and the people you will be working with? For smaller multichannel marketers, the Web provider may also act de facto as the e-commerce marketing department.
Are you acquiring an updated technological platform? Or are you expecting to have a partner that will improve your Internet marketing and recommend best practices?
Many of the Internet professionals are self-taught and may not have a broad range of marketing skills. Will you be drawing on practical marketing expertise with these channels or an adaptation of the technology only?
ASSESS THE marketing analysis capabilities.
You have to determine how the new platform will improve your analysis of what promotions are truly generating orders and which are cost effective. For many companies, measuring the Website response to promotions is flawed in that the data does not flow down into the order management system.
We have seen competing channel managers attribute response in ways that are unfounded and actually overstate demand by a considerable percentage of the demand booked in the order management system. Will analysis from the Web platform to order management system to promotional analysis be improved and have data integrity?
What's more, do you accurately allocate costs to promotions and Internet media considering the various internal and external resources used? Many businesses are now taking a closer look at this cost analysis as the total cost of Internet marketing increases.
CHECK THE stability of the vendor.
Several order management vendors that also hosted Websites for clients exited from the business this past year. In the Internet space, where everyone is racing to provide the latest and greatest, we may see similar fallout.
Quite a few small vendors provide services and platforms to small and moderate-size businesses. Perform your due diligence and make sure you know the financial strength of the vendors you will be counting on.
SHOP FOR best-of-breed functions.
The software marketplace has been changing in recent years. Web providers are trying to add order management functionality; order management systems vendors are selling Web platform solutions they or other vendors have developed.
Remember that vendors are always looking to increase sales and market share. If a provider can offer a single-source solution for both, are you getting the two best systems you can afford? Or are there shortcomings in the combined offering?
Here's an example. One of the leading Web platform providers also sells an order management system. While the Web platform can accept Amazon and Google checkout, the order management system can't accept it as a payment type.
To get this functionality, you'd have to fund the modification. There are lots of examples when you look at combined functionality.
PUSH FOR a product development strategy.
What's the product development plan your prospective developers have for their systems? Ask them for the 10 most significant things they have added to the platform in the past year.
What are the five most beneficial features or services the provider will offer in the next 12 months? Which vendor will keep your business moving ahead?
SORT OUT the system's security and audit ability.
There are a host of issues here, from compliance with the Payment Application Data Security Standard (PA-DSS) to how auditable the Web applications are. Has the potential Web platform provider achieved certification through a third-party PA-DSS certification process? Do not overlook this in your selection process! (For more on PA-DSS, see “Security standards update” on page 47.)
What audit trails do the Web platform applications you are considering have? Other commercial applications went through enhancements to meet stringent data security and audit standards by external auditors and management. Be sure your new Web platform meets these as well.
DETERMINE THE total cost of ownership.
Whatever platform options you look at, be sure you understand the total cost of ownership. In this age when different apps come from different sources and vendors don't necessarily sell both the hardware and software, it's much harder to be sure of the investment.
And when you're trying to compare, for example, SaaS (on demand) models vs. license and hosting models, it gets even more complex. Challenge your staff and your prospective vendors to help you create the total resources required and the multiyear cost and justification model.
Advantages of the SaaS model are that users gain new Website functionality quickly, as well as lower operating costs, reduced dependence on internal IT staff, vendor-provided IT security and administration, PCI-Compliance and continuous upgrades.
What are the advantages you want from an inhouse developed site? Is it control and flexibility? Do you expect costs to be lower? When you look at an inhouse developed system, either internal or externally hosted, are you creating an “apples-to-apples” comparison of costs and benefits?
Another aspect of the financial analysis is looking at it on a multiyear basis; don't consider just the initial start-up costs. This analysis will give a truer picture of the support costs, growth required through increases in sales, support of various marketing programs, and so on.
Many merchants consider the open system platforms to be less expensive. But don't assume that. Develop estimates in total considering equipment, staffing, add-on applications required, support costs, etc. Do you have a true comparison in terms of costs and advantages?
There are many considerations that go into selecting a Web platform system, and it's no easy task. So do your homework, choose carefully and remember that the right system stands to improve your business considerably.
F. Curtis Barry & Company is a national consulting firm for catalog, e-commerce, and retail businesses offering clients expertise in order management systems, warehouse management systems; warehousing and distribution; inventory management and forecasting solutions; and operational benchmarking for all business channels.
Please contact Jeff Barry to discuss your upcoming projects at jbarry@fcbco.com or 804-457-4028.
If I were to ask “what is the biggest problem faced by your multichannel company today?” I’m sure you would have a lot of ready answers. But when it comes to the biggest business information problem you face, there is one that stands head and shoulders above the rest: finding a “single version of the truth.” Just as you have multiple channels for dealing with customers, you have multiple systems with numerous, and differing, occurrences of key data and metrics. Many companies have grown up selecting best-of-breed systems for order management, fulfillment, call center, marketing, product information, inventory, finance and e-commerce. Companies with large-scale multichannel systems are often surprised to learn that their problem is even worse, because these “systems” are, in reality, multiple individual applications. That’s because no one vendor in the marketplace today can provide more than two of the best-of-breed components needed, and the reality is that even most ERP systems available to the direct marketplace don’t provide specialized direct, retail or warehouse management functions that are as good as best-of-breed.
The result of all these silos of information is that no one system provides more than 10 percent of the data needed by senior management. Management has to go to extremes to get what they need, either by requesting that department managers pull data or by using business analysts to come up with reporting. Because these are manual efforts using sources not originally geared to management’s needs, they are delay-riddled, error-prone processes. Valuable productivity and service data exists in systems such as telephone switches (ACDs), but management usually doesn’t have access to it. Worst of all, data often doesn’t reconcile from one information system to another; with database structures that can span 25 years of systems development, built upon different programming languages, they still don’t deliver a “single version of the truth.” Management faces the question: On which version of the data should you base your decisions?
Enter the Dashboard
Business intelligence (BI) solutions with dashboards and analytics are now becoming available that can potentially solve this problem. By pulling standardized data from systems across the enterprise, they open up tremendous possibilities for management to sharpen critical decision-making. More than just extracting data, such solutions allow management at various levels to set up actionable Key Performance Indicator (KPI) alerts that act as a dashboard for the business. For the first time, management has complete access to data across all systems in the enterprise—and senior management can keep informed about results on a real-time basis. Such BI/dashboard/executive analytic tools not only provide a consistent view of all the data, but permit managers to set up alerts keyed to specific objectives, and allow each department to look at the segment of data that is meaningful to them.
Think for a minute, what data do you want to gain access to across your business? What information do you, as a member of senior management, need to run the business? Figure [1], Defining Your Personal Dashboard and Analytics, shows how a company president in one of our client companies interpreted what she wanted, seeing what the benefits and data could be. When you look at this menu, you can see that much of what is included isn’t found in any one information system—and a number of these analyses and KPIs are created by including data mixed and matched between information systems.
Many Views, One Set of Data
Whether they’re analyzing inventory levels or fill rates, demand or sales, the new BI tools ensure all departments are utilizing a standardized view of the same data. Such BI solutions also allow users to take cuts of the data and compare them in multiple ways, including this year to last year or actual to plan, as well as to reassemble the data and analyze it from one department to another. Each department needs to maintain their own way of analyzing data, but also be able to bring their plans and results together in a consistent, uniform way.
Here’s an example of an advantage provided by the access to uniform data these BI solutions allow. Merchandising, Marketing and Inventory Control may have different information needs during the product and promotion life cycle, but they all revolve around gross demand planning and results. Merchandising wants to know the quantity of each product that is needed across all promotions—print, electronic and store. Marketing arrives at the catalog gross demand plan based on their circulation plans by drop, by house file, and by outside list segment. Merchandising’s catalog pre-season plans are built top-down by merchandise category, and bottom-up by product—but they should come close to tying together with Marketing’s demand plans at the demand level. It’s Inventory Control’s job to interpret the plans and selling results and purchase product far enough in advance to be in stock when customers order. However, management allows Inventory Control to purchase more product than the demand plans indicate, based on vendor lead time, vendor discounts offered, etc.—so they aren’t going to tie back to the others’ plans exactly.
Week-for-week, one of the hardest things to do is read selling trends and interpret them in a way that allows you to make the right decisions—which ultimately provide the base line projections for yet other departments, such as Call Center and Fulfillment. You can see that with the many different versions of plans and results used by these various departments, management needs to find a common source of information. In this instance, gross demand data ties all the planning and results together. BI solutions that can pull this common data out of all the departments’ databases can then provide accurate KPIs, viewable as executive dashboards.
Taking Stock
For an even more specific example, let’s look at inventory data. Inventory is the largest balance sheet asset in most multichannel businesses; its effective management largely determines your level of customer service and profit. If management had the ability to easily analyze some key inventory conditions, here are some of the ways they could benefit:
- Inventory aging. Keep track of age of inventory across the business and by product/SKU for various inventory statuses (active, inactive, future and return to vendor) by warehouse and by inventory control manager. One of our clients found that 30% of their inventory was older than 12 months. Having access to this view allows top management to continually stay on top of products that are not selling. Merchants can regularly schedule liquidation of overstocks and slow-selling merchandise.
- Inventory carrying costs. Provides costs of maintaining inventory in the company’s warehouse, including rent, utilities, insurance, taxes, fulfillment labor costs and the opportunity cost of tied-up capital. While inventory control applications have the on-hand quantity and dollars, financial management may want to develop a fully burdened cost for the inventory to more accurately reflect performance.
- Gross margin return on investment (GMROI). This can be split out by category, product and inventory control manager. GMROI analyzes a firm's ability to turn inventory into cash above the cost of the inventory. It is calculated by dividing the gross margin by the average inventory cost.
- Customer service measured with fill rates. Analysis can be provided for initial item and initial customer order fill rates, and final item and final customer order fill rates, by category and product. Many companies measure back orders daily, but they don’t measure how well customers are being serviced—in other words, what percent of orders are shipped complete. We find the initial customer order fill rate to be 10 points lower than the line item fill rate in many businesses. For example, a fashion apparel business may have a difficult time achieving an initial order fill rate above 70% because of the newness of a style and the inability to reorder. However, a home décor business can achieve an order fill rate of 85% or higher.
- Back order cost analysis. Identifies the total cost of being out of stock, both by products and categories creating the biggest issues and expenses. The cost analysis takes into account the total back order history by product for costs such as call center (“Where is my back order?”), second order picks and packing material, loss of shipping and processing revenue, etc. Most companies report back orders daily, but there are few systems that keep track of cumulative back order costs by product throughout the year. Our studies in hundreds of companies show that back ordered merchandise costs $7 to $12 for each backordered unit of product.
Are They Worth It?
Can the expenditure for this kind of solution be justified in today’s economic climate? It may be useful to ask the opposite question: What’s the cost of not having timely and accurate information to manage and control your business? Especially in this economy, knowing exactly where you stand is essential. You can only control expenses and inventory and know which products and promotions are working—and which aren’t—if you have accurate data on which everybody across the company can agree. An old axiom says, “You can’t improve something you haven’t measured.” To that we might add, even if you have measured it, you still can’t improve something if you can’t get accurate readings, or if you have multiple measurements that don’t agree.
There are great benefits to the organization when data can be shared across the enterprise and used for department analysis. One of the biggest benefits executive dashboards provide is the ability to get back in touch with the business from an analytical perspective. KPIs can easily be set up and changed to monitor performance in your areas of responsibility, with instant access to all the most important data needed to make decisions. In our experience, companies that used such BI solutions to overcome information problems have been successful in getting a positive ROI from these types of systems within 12 to 18 months. And in today’s business environment, that’s a “single version of the truth” on which we think everyone can agree.
Curt Barry is president of F. Curtis Barry & Company, a multichannel operations and fulfillment consulting firm with expertise in multichannel systems, warehouse, call center, inventory, and benchmarking; Learn more online at: http://www.fcbco.com.
F. Curtis Barry & Company is a national consulting firm for catalog, e-commerce, and retail businesses offering clients expertise in order management systems, warehouse management systems; warehousing and distribution; inventory management and forecasting solutions; and operational benchmarking for all business channels.
Please contact Jeff Barry to discuss your upcoming projects at jbarry@fcbco.com or 804-457-4028.
You have just spent four months doing your homework to replace your aging call center and order management system: gathering user requirements, writing an RFP, getting capable vendors to bid on it, conducting demos and selecting the finalist. Yet there is one more activity that, if not done superbly, will shake management’s confidence that replacement of the old system will go smoothly. If you haven’t adequately studied how management at every level—from CEO to department managers—will get the information they’re used to having in order to run the business on an online, daily, weekly, monthly and year-end basis, your credibility could be in trouble.
Even when business analysts feel they have done an adequate job of determining user requirements, this area frequently gets cut short. There are a variety of reasons:
- In requirements and demos, users often spend too little time reviewing the entire system. Some feel they can do it in half a day. In reality, it is a two-day task—and even then you run the risk of not seeing everything.
- Vendors have stopped developing reports—yes, that’s right: no reports. “But we have online displays of data!” software vendors and less experienced users will say. Of course, when you go live with the new system, users line up at your door and want to know, “Where are those 10 important reports I had in the old system?”
- Then there’s the fact that management, while sponsoring the systems replacement effort, takes little time to see whether their most important data is in the system or find out how they will get it from the new system. The biggest area of systems deficiency is in the lack of plans and historical data. Many order management systems have been developed without history by product, category, list segment, total business by year, or any other criteria. Management therefore has adapted with its own spreadsheets and Access systems. How will they get the information in the formats they will need?
- Software vendors convince the users that they can develop the reports they need with Crystal Reports, a query language or a data warehouse tool the vendor has included in the purchase agreement. But here’s the problem: Do you know how many and which reports will need to be replaced, or how much effort this will take? Our experience in implementing order management and warehouse management systems is that there are literally hundreds of reports that have to be replicated in order to be comparable. Just this week, in working with a client we discovered there were over 200 key reports that would have to be replaced in some form.
Think about some of the reporting needs of various departments:
- How will Merchants get their merchandise performance reports? Do they require history? Plans? Vendor analysis? Category trending? Contribution to profit?
- Does your Marketing department require source code statistics? Do they need figures by channel performance in terms of demand, average order, etc.? How about conversion rates for first time to multi-buyers? Reactivation of inactive customer accounts? What about history and plans?
- Is there productivity analysis required for the Call Center? What about customer compliance and inquiry reporting from customer files?
- What data do you need to provide Fulfillment with reports about picker and packer productivity? How will they feed their departmental productivity and cost systems, which may be manual or spreadsheets?
You get the picture.
Here’s what you need to do: Be proactive in soliciting specifics on what analysis is required. Collect the requirements and determine where each analysis will come from in the new system. Get users to sign off on the new system, confirming that it meets their needs. Cost out the time and effort required to provide all of this and make it a key ingredient in your system conversion work plan.
I think you’ll find that reporting is an area of systems requirements on which many don’t spend enough time before going live.
Brian Barry is a Senior Consultant with F. Curtis Barry & Company, a multichannel operations and fulfillment consulting firm with expertise in multichannel systems, warehouse, call center, inventory, and benchmarking; Learn more online at: http://www.fcbco.com.
F. Curtis Barry & Company is a national consulting firm for catalog, e-commerce, and retail businesses offering clients expertise in order management systems, warehouse management systems; warehousing and distribution; inventory management and forecasting solutions; and operational benchmarking for all business channels.
Please contact Jeff Barry to discuss your upcoming projects at jbarry@fcbco.com or 804-457-4028.
Introduction
Consider the hundreds of reports and millions of data elements that are generated in your business by merchandising, marketing, fulfillment and financial systems. From all that data, what are you using to run your direct and retail business? What are the key performance metrics, indicators or dials that tell management about customer satisfaction and service levels, whether you’re on sales plan by channel, how is your inventory performing, what your cash flow needs will be, etc.?
Coming up with effective management reports, KPI’s and metrics has always been a challenge. This may sound like Business Management 101, but we are constantly surprised that this seemingly fundamental aspect of the business is being ignored by many direct businesses. As companies grow and continue to add new channels and titles, KPI’s and Business Intelligence (BI) are key to helping top management keep a finger on the pulse of the business without micro-managing.
One concept worth exploring is the “corporate dashboard” – a series of visual KPI’s (or dials) in the corporate cockpit-that reflects the key performance metrics from each department. How can your direct business benefit? By improving customer service, increasing top line sales and profitability. What are the essential elements to implementing this highly refined online reporting?
What is a Corporate Dashboard?
By dashboard we mean, key performance indicators (KPI) that reflect the overall performance of the business including customer service and satisfaction, sales analysis against plan and overall profitability. When highly summarized, they give management an accurate and timely picture of the business. In order to do this, the information systems also need to provide detail answers (drill down) as to why the various indicators or dials or metrics are reporting what they’re reporting. Also, as you think through these dials and metrics, you need to determine which need to be plans, projection and/or actual.
Here are some metrics and KPI’s we see in direct business dashboards or weekly analysis:
- From a marketing perspective for the current active promotions-the demand dollars to date; revenue dollars per catalog for house file and prospect lists separately and in total; average order in units and dollars; order forecast by week; total number of one time buyers versus multi buyers, what is the cost to acquire a new customer, how profitable are multi time buyers, etc.
- From ecommerce data, total sales generated; unique visitors; total new customers; shopping cart abandonment rate; inventory out of stock; sales per marketing effort (organic search, paid search, e-mail, shopping portals, banner ads, affiliate marketing, etc.).
- Merchandising metrics may include category projections; top 20 and bottom 20 selling products; net contribution to profit by category style and SKU; contribution analysis for new versus repeat items, import versus domestic, core products versus non-core products, etc.
- Inventory Management indicators might show initial customer order fill rates compared to item fill rates for the year; summaries of cost recovery and margin loss by liquidation media; summary of initial coverage of products/SKUs as new catalogs mail, etc.
- Customer Contact Center indicators may be limited to call and order activity by channel; call to order ratio; summary of inquiries/complaints and service indicators such as time to answer and call abandonment rate.
- In the Fulfillment Center in-bound receipts and receipts requiring buyer or vendor attention; aging of customer back orders; pick/pack error statistics; order and return turnaround times, packages shipped, etc.
- Finance may report sales actual to plan; summarized cash flow and days to refund/credit customers.
We have created a corporate dashboard pictorially representing many of these dials and metrics. One can obviously argue that a dashboard should include or exclude specific dials or metrics. There is no one way or standard to implement this as it will vary by management’s specific hot buttons, the importance of multi-channels and the ability to report in detail at all levels of management.
Additionally, weekly reporting/analysis will obviously differ from monthly analysis. On a monthly basis more formal analysis points are taken (e.g. profit & loss statement, inventory turnover calculated, etc.).
There is a wealth of information in our direct businesses. What specific metrics will give a complete picture of your business?
Three Examples
While many catalogs have not formalized their key performance metrics, leading direct companies have moved beyond reporting to online management systems that integrate the results of information systems across the enterprise into highly refined dials, graphs and bar charts that are easy to read and interpret.
To better understand what other direct leaders are doing with corporate performance reporting, here are three examples:
- Company A with sales over $1 billion annually-including retail stores, 10 specialty catalog titles and the Internet-has developed an online system that displays all the key business indicators daily. Some indicators are obviously kept as weekly, monthly, catalog-to-date and by season. Sales from the retail stores are downloaded automatically each hour. Every five (5) minutes, phone and Internet order management systems report the number of orders and dollars, average order of sales check by channel. The fulfillment system reports every five (5) minutes on in-bound receipt status and packages shipped. A 52-week history of initial customer order fill rates are reported vs. initial item fill rates as a measure of customer service.
- Company B has overlaid its fulfillment, marketing and financial reporting systems with a financial reporting package that uploads key metrics on a daily, weekly and monthly basis. Some of the data is displayed online as well as key metrics reporting.
- Company C has implemented departmental operational statistics reporting throughout the company. Marketing, merchandising, call center, fulfillment center and finance managers are responsible for maintaining departmental reports. Departments are also responsible for data integrity, timeliness and accuracy and then extracting and reporting the key daily, weekly and monthly metric. While Company A and B require a significant investment for purchasing a commercial system or developing in-house programming, Company C’s model is one that we recommend all catalogs implement.
Detailed Departmental Reporting Key
No matter what approach you take to develop your metrics, detailed departmental reporting and analysis is essential both to providing key performance metrics at an executive level and being able to break down more detailed statistics when necessary. Let’s take for example metrics that are provided to the weekly management team reporting (above) by the director of a Customer Contact Center. The detailed Customer Contact Manager’s departmental reporting typically covers 25 to 35 measures of inbound orders, call and non-order activity; outbound contacts and correspondence; performance service levels and cost per contact, call and order. Data integrity, timeliness and accuracy, which are at the heart of this effective reporting, should remain the responsibility of the director of the Customer Call Center.
What are the Benefits?
There is an old industrial engineering principle that says, “What hasn’t been measured can’t be improved.” Establishing this principle will push each of the departments to improve their analysis and internal reporting of efficiency, cost and customer service. One of the most beneficial results that will come from this is “benchmarking internally against yourself” season to season and year to year. Through continual process improvement, your organization will improve internally.
Start Realistically
If you’re not reporting key performance benchmarks, start out on a small scale. Reduce it to the essentials and the build on it. Don’t get overwhelmed with how many things you could report. Be cognizant of data integrity, timeliness and consistency. If you don’t, the process will not be maintainable.
Set realistic benchmark goals (internal and external) by exchanging benchmarks and best practices with other. External benchmarking plays an important role in the development of these concepts. While businesses vary dramatically, there are certain foundational benchmarks and best practices that are always important. These external benchmarks are obtained through exchanging ideas with other catalogs and trade organizations.
Conclusion
In this period of uncertainty, there is no better way to improve your direct businesses’ performance, customer service, achieving sales and profitability-than implementing a corporate dashboard of key performance metrics.
Curt Barry is president of F. Curtis Barry & Company, a multichannel operations and fulfillment consulting firm with expertise in multichannel systems, warehouse, call center, inventory, business intelligence systems and benchmarking; Learn more online at: http://www.fcbco.com
About Manage Metrix
Manage Metrix is a business intelligence system with KPI alerts and dashboard capabilities that can be easily customized for each user. In addition, managers can use pre-built retail and direct analytical templates and KPIs or clients can customize their own unique analysis. Senior management has drill down capabilities into the same detail data as the department management assuring everyone is using “the same version of the truth”. Another unique approach offered is that F. Curtis Barry & Company works with the client management to set appropriate KPIs and action plans for improvement. Modules have functionality for inventory management, merchandising, marketing, call center, fulfillment, retail merchandising and finance which shares data across the enterprise. The product is co-developed by Taurus Software and F. Curtis Barry & Company. To learn more about Manage Metrix, visit www.managemetrix.com or call 650-482-2022 x1.
About Taurus Software
Taurus Software has been making data liquid since 1987. Taurus offers an entire range of solutions that incorporate products such as DataBridger—a robust open platform data foundation creation tool, and application specific data models such as Ecomedate for Ecometry customers and Analysis Suite—a powerful analytical and reporting toolset. Taurus is a member of the HPe3000 Transition Partners Program and has technology partnerships with DirectTech, Quest Software, Lund Performance Solutions, Managed Business Solutions, Escalate Retail, Orbit Software, Pathway Pacific, DST Health Solutions and Acumium. To learn more about Taurus Software, visit www.taurus.com or call 650-482-2022 x1.
About F. Curtis Barry & Company
F. Curtis Barry & Company is a consultancy specializing in multichannel operations and fulfillment for catalog, e-commerce, and retail businesses. F. Curtis Barry & Company offers clients expertise in business process and order management systems, inventory management systems, warehouse management systems; warehousing and distribution; contact center services; inventory management and forecasting solutions; and strategic, financial, and operational planning for all business channels. To learn more about F. Curtis Barry & Company, visit www.fcbco.com or call 804-740-8743.
F. Curtis Barry & Company is a national consulting firm for catalog, e-commerce, and retail businesses offering clients expertise in order management systems, warehouse management systems; warehousing and distribution; inventory management and forecasting solutions; and operational benchmarking for all business channels.
Please contact Jeff Barry to discuss your upcoming projects at jbarry@fcbco.com or 804-457-4028.
Your senior management just read you the riot act about the company’s proliferation of systems and the lack of data integrity in those systems. “We have the same data—like sales and inventory—in different systems, with different timing and accuracy. Between our order management, warehouse management and forecasting systems, there is no single version of the truth. We are no longer in touch with the data, and the department managers are analyzing performance in different ways and getting different results—even though they are using the same data! No one system gives us more than 25% of the data we need to plan and manage the business. And we aren’t even users of the major business systems.”
They have given you 30 days to come up with a plan to eliminate this confusion and deal with these realities.
Sound familiar? So what’s the answer? Some IT professionals try to mash together solutions by extracting data from a wide range of applications into spreadsheet management reports. But this strategy doesn’t work long-term, because of the manual effort necessary and resulting inaccuracies. Others use query tools, but those require technical training and knowledge of the data aspects of the various systems. And they don’t allow you to analyze data across the enterprise.
Clearly, the smartest solution is to research and select business data intelligence solutions that will allow you to analyze data across the business from any and all information transactional systems, telephone ACDs, spreadsheets, etc.
This article discusses the issues involved in selecting business intelligence (BI) solutions for your multichannel business. Why are we talking about BI solutions, rather than just BI development software? Because there is plenty of BI development software out there, but we feel that the most effective approach to answer this challenge is to select a vendor that has not only software, but predefined industry best practices, views and analysis already integrated into the system. This reduces the time needed to deploy the system and get actionable solutions in place.
#1 Access to Data Across Multiple Disparate Systems
How will the BI solution tap into the data from multiple disparate sources and data sets? In reality, moderate to large multichannel businesses have a wide variety of systems ranging across call center, e-commerce, warehouse management, forecasting and inventory management, merchandising, and marketing. Figure 1, Using Inventory Data Across the Enterprise, shows how various managers can get multiple uses of inventory data from multiple systems, with their own dashboards, Key Performance Indicators (KPIs) and analytics.
In order to make this a reality and gain access to these multiple systems, you first have to determine which data is necessary for analytics, and is usable. The next steps are to determine what pieces of data are common from one application to the next, so that data can be utilized in any analytic environment. One you have the common data indentified you need to create a normalized and standardized database layer, to which all data from these systems will be mapped. This makes it much easier to map the data feeds for the BI solution and to have audit capabilities for the data. In addition, you will need to consider: What are the methods and processes that are involved with this? How will you make this transformation of the data? What services does your BI solutions provider have to shorten this implementation? With what frequency will the data be updated to the BI database?
#2 Back In Touch With Their Data
As in selecting any system, developing user requirements is key to getting the proper solution match for your business. In order for you to put management back in touch with their data, you must know what decision support tools, analytics, KPIs and dashboards they want implemented with a new BI solution. As Figure 1 shows, the KPI alerts and analytics must be relevant to their responsibilities. Additionally, the applications need to be easy to use. Can senior management and department managers set up their own views and change KPIs as their needs change?
Does the BI solution allow you to use field and file names that are more intuitive to the user—or are they going to remain the programmer oriented mnemonics or abbreviations utilized by the company that developed the various business applications? To be most effective the applications need to be point-and-click oriented and not require users to know the data structure, file names, etc.
Programmers and business analysts will need to implement the systems. But does the BI solution require programmers or business analysts on a day-to-day basis to bring the benefit to senior management? Have we unnecessarily inserted an additional IT resource or analyst into the process?
#3 Industry Templates
Many BI software tools do not have direct and retail industry oriented templates. Does your BI solution provide ways to analyze inventory, analyze productivity in the call center and warehouse, and incorporate channel metrics for retail, catalog and e-commerce, marketing, merchandising, and finance? BI development software is often generic analytical software that requires you to do all the data design, determine the analytics needed that are oriented to your industry, and then implement.
#4 Actionable KPIs and Dashboards
What lies at the heart of what managers need, is the difference between data or reporting data, and truly setting up KPIs that alert them to changes in performance which are outside the managers’ pre-defined values or goals. An example maybe helpful. Most inventory control systems report units and dollars by category and product. KPI alerts will help managers stay on top of their business if they are alerted to conditions such as:
- When a category of merchandise falls below a certain fill rate or inventory turns goal, (with drill-down into the items that are negatively affecting that category)
- When backorders exceed a certain user defined threshold
- When aged inventory over a certain number of days exceeds a certain percentage of the total inventory
In addition, these applications should also assist managers with identifying potential issues so they can be headed off before becoming a problem that affects customer service, top line sales or profitability. In considering inventory management, these might include:
- Products which are selling better than plan and may become a stock out based on the weeks of supply on hand and the vendor’s lead time to get back in stock
- Products that should be considered for liquidation based on their low rate of sale, excess weeks of supply on hand and whether or not they are going to be offered in future offers
- When a merchant exceeds a user defined threshold for open to buy
Companies will need to consider how the BI solution should be used to provide alerts across the business in inventory, merchandising, marketing, fulfillment, call center, finance and retail management.
In addition, senior management will want to be using the same data as their department managers and be able to drill down into the details. This achieves the goal of getting everyone on the same page.
KPIs and alerts need to be able to be set up and flexible. Some may be tied to your strategic plan. Some KPIs may tend to be temporary in nature, utilized to address problems mangers are trying to stay in contact with and solve. All systems have data and general operational type reporting, but do they have KPI alerts that allow management at all levels to stay in touch?
#5 Open Systems
Even if the BI solution has predefined views to assist in analysis, does it have an open system architecture so that you can modify the KPIs and analytics to be even more meaningful to your business? Does it require extensive programming from the software development company to alter some of the KPIs?
#6 Strategic Nature
Does the BI solution show you where to take strategic action with your business? Or is it simply reporting results? We think that the strategic approach—“where and how to take action” type alerts—is critical to improving performance and getting the most from the application. Do the solutions and applications include industry best practices?
#7 BI Solution Rather Than Just Software
Services, education and training are part of the selection. Does the BI solution provide best practice improvement as part of the solution? Can the provider truly assist you with strategic thinking and how to really get the most from the solution? Do they understand your business environment or are they just developing software?
#8 Data Integrity and Timeliness
Companies must insure that the data being mapped to the BI solution is clean, usable and has integrity in the information. What data will need to be fed, at what intervals? Can data feeds from transactional systems be near real-time as well as batch, depending on the need for the quickness of the data to be updated?
#9 Time to Deploy
How much time will it take for your vendor and your staff to have the data mappings and BI solution implemented? In our experience, the selection and implementation of BI solutions is no different than any other major system. In the case of BI, where there are no industry templates, it may take months to years to have any operational systems up and running. Thoroughly understand the internal and external resources that will be required.
#10 Total Cost of Ownership
Included in the total cost of ownership is the hardware, licensed software, third party hardware and software modules, annual maintenance and support costs, training and professional services. What internal resources will you have to expend to select and implement the BI solution?
Most Critical of All
In addition to these 10 considerations, there is one more that may be even more important than all the others: Return on Investment (ROI). What hard savings and intangible benefits will be derived from the BI solution? Which BI solution can bring the higher ROI in the shorter amount of time? We believe that well designed, industry specific business intelligence solutions will provide a positive ROI in 12 to 18 months, by enabling these functional areas of the business:
- Inventory Management – by optimizing inventory, companies should be able to now develop their strategy for balancing inventory levels with fill rates and backorders; reduce costs associated with processing backorders; improve overall inventory turns and increase Gross Margin Return on Investment (GMROI); reduce aged inventory and implement comprehensive liquidation strategies.
- Merchandising – Analyze merchandise performance and the net contribution to profit. This allows companies to understand what merchandise segments are working and which ones are under performing. BI solutions should help you to determine your breakeven price point, plan to actual performance and develop strategies for determining winning items and improving top line sales.
- Distribution Center – Ability to report productivity and performance of workers against an internal standard or goal. Develop long-term trends with regards to costs associated with fulfilling customer orders such as direct and indirect labor, occupancy costs and more. Business intelligence to assistance with product velocity and movement for efficient slotting and warehouse profiling. Ability to develop strategic initiatives to balance costs, customer service levels and facility utilization.
- Call Center – Ability to report productivity and performance of workers against an internal standard or goal. Develop long-term trends with regards to costs associated with supporting customer orders and service calls, chat, email correspondence and more, including labor costs and occupancy costs. Understand and measure the cost per transaction and cost per contact against a plan, and balance that with the stated customer service level objectives.
- Marketing – Solutions should allow companies to understand their customer file—how many one-time buyers versus multi buyers. Do customers cover the marketing expenses associated with subsequent customer orders? What are the costs associated with acquiring new customers? Understand what type of marketing initiatives are most effective at customer retention versus customer acquisition. Measure offer response rates and performance against plan. Understand both Lifetime Value and Recency, Frequency and Monetary Value (RFM).
- Finance – Financial executives should now be able to manage and understand all aspects of the business that affect profitability, from inventory management to marketing results.
One of the biggest benefits to management is to get back in touch with the business from an analytical perspective. BI Solutions and KPIs can easily be set up and changed to monitor performance in your areas of responsibility—providing you with hard savings, performance improvements and a rapid ROI.
About Manage Metrix
Manage Metrix is a business intelligence system with KPI alerts and dashboard capabilities that can be easily customized for each user. In addition, managers can use pre-built retail and direct analytical templates and KPIs or clients can customize their own unique analysis. Senior management has drill down capabilities into the same detail data as the department management assuring everyone is using “the same version of the truth”. Another unique approach offered is that F. Curtis Barry & Company works with the client management to set appropriate KPIs and action plans for improvement. Modules have functionality for inventory management, merchandising, marketing, call center, fulfillment, retail merchandising and finance which shares data across the enterprise. The product is co-developed by Taurus Software and F. Curtis Barry & Company. To learn more about Manage Metrix, visit www.managemetrix.com or call 650-482-2022 x1.
About Taurus Software
Taurus Software has been making data liquid since 1987. Taurus offers an entire range of solutions that incorporate products such as DataBridger—a robust open platform data foundation creation tool, and application specific data models such as Ecomedate for Ecometry customers and Analysis Suite—a powerful analytical and reporting toolset. Taurus is a member of the HPe3000 Transition Partners Program and has technology partnerships with DirectTech, Quest Software, Lund Performance Solutions, Managed Business Solutions, Escalate Retail, Orbit Software, Pathway Pacific, DST Health Solutions and Acumium. To learn more about Taurus Software, visit www.taurus.com or call 650-482-2022 x1.
Curt Barry is president of F. Curtis Barry & Company, a fulfillment consulting firm for catalog, e-commerce, and retail businesses. We offer clients expertise in business process and order management systems, inventory management systems, warehouse management systems; warehousing and distribution; call center services; inventory management and forecasting solutions; and strategic, financial, and operational planning for all business channels.
He can be reached at 1897 Billingsgate Circle, Suite 102, Richmond, VA 23238, phone: 804-740-8743; email: cbarry@fcbco.com; website: http://www.fcbco.com.
F. Curtis Barry & Company is a national consulting firm for catalog, e-commerce, and retail businesses offering clients expertise in order management systems, warehouse management systems; warehousing and distribution; inventory management and forecasting solutions; and operational benchmarking for all business channels.
Please contact Jeff Barry to discuss your upcoming projects at jbarry@fcbco.com or 804-457-4028.
For a long time, many prospective buyers of direct and retail systems have complained that there were not very many choices in terms of vendors and their offerings. The good news is that over the last couple of years, some truly new and good competitors have emerged for the multichannel industry. Some of this change stems from acquisitions; more is based on the competitive need to expand offerings to provide more functionality to customers.
Some e-commerce platform providers are expanding offerings into order management. Enterprise-wide systems are starting to be installed more widely in this market niche. There are multiple choices to manage the warehouse and supply chain. Would a service offering fit your requirements better than an in-house licensed implementation? These are just some of the trends we see emerging that give you, the software buyer, many realistic choices. Drawing from our multichannel consulting practice, we present what we see as those choices.
E-Commerce to Order Management
A number of leading e-commerce solution providers are expanding from Web site development into order management and on into fulfillment. In some cases this is driven by competition and in some by it being a logical extension of functionality.
GSI Commerce acquired NewRoads, one of the leading call center and fulfillment 3PLs. The company has a service offering that spans e-commerce all the way through fulfillment. What’s interesting is that the bricks and mortar retail industry, which has generally favored in-house, licensed software options, has been willing to embrace services, including e-commerce, Web development and hosting, point-of-sale, help desk functions, etc. Look at King of Prussia, PA-based GSI’s client list and you’ll be impressed with the retail leaders to which they provide services.
In the Cleveland, OH-based MICROS-Retail family, Fry—the provider of choice to many leading e-commerce companies—has integrations to CommercialWare’s Order Management Suite, Serenade. Fry also has a service offering for call centers with Convergys, a strong player in call center outsourcing. The MICROS acquisition of CommercialWare, eOne (e-commerce solution to small and moderate sized direct businesses) and Fry rounds out their multichannel POS and store offerings. This synergy is apparently paying off. The fiscal year ending June 30, 2008 was one of record sales for MICROS and MICROS-Retail.
Another provider we think is worth looking at is Vcommerce Corp. (Scottsdale, AZ), which has as clients Target and Overstock.com. Their software offering includes e-commerce and a solid order management solution.
Where we see e-commerce companies extending functionality, it often includes call center and customer service. There are a reasonable number of customer calls that overflow from the Web site as customers seek answers to their product choice, inventory availability and offer questions. Many customers are also wary of submitting their credit cards in an online shopping cart. One of the biggest benefits to this expansion in scope—whether a service or a licensed product—is that it can eliminate some of the most complex integrations between a Web site and business systems, involving business rules, inventory availability, pricing engines, etc.
Unfortunately, in many cases these new offerings do not offer the fulfillment system functionality that is required for warehousing functions, and will require a warehouse management system for backend fulfillment.
WMS, WCS or SCM Systems: Which Do You Need?
Assuming that your order management or ERP system does not have fulfillment functionality or cannot meet the more complex needs of your warehouse or supply chain, there are three categories of software you should consider: the warehouse management system (WMS), the warehouse control system (WCS) and the supply chain management (SCM) system.
Just a word about each of these warehouse related systems. Order management and fulfillment systems may be less robust than a full function WMS. A warehouse management system is a key component of the supply chain, as it manages the four-wall inventory location and movement throughout the receiving, checking, stock put away, replenishment, picking, packing, shipping and returns departments and processes. Work order systems are available to assemble kits and sets in the production process. Additionally, they help schedule labor and report on productivity. WMS often provide and use barcode scanners, mobile computing devices, and radio frequency for real time data capture. Generally, a WMS does not have the advanced software drivers required to manage workflow and material handling equipment (MHE). Workforce management systems interface to enterprise (ERP) or order management systems, which pass down to the WMS orders for in stock, pickable product.
One needs to be smart about the choices. There are literally hundreds of tier 1, tier 2 and tier 3 WMS vendors, and their systems are available with varying functions and costs. But many of these WMS do not have small order pick, pack and ship fulfillment industry experience.
A WCS is generally imperative where there is advanced MHE which must be interfaced between the order management or warehouse management systems. The WCS directs automation of conveyor lines, shoe or tilt tray sorters, automated packaging systems, palletizers, etc. There are some WCS vendors that are planning to add more WMS functions to their future offerings.
SCM systems encompass the movement and storage of raw materials, work in process, and finished goods from the point of origin to the customer’s home, place of business or stores. In our opinion, Atlanta-based Manhattan Associates offers the broadest and deepest functionality in this area for the multichannel industry, including:
- Warehouse management
- Retail, e-commerce, catalog and wholesale SCM planning, forecasting and inventory management optimization
- Multi-warehouse inventory management and order fill rules for distributed centers, by region or from-store fulfillment.
- Inbound and outbound freight management
- Labor management and slotting
- Workflow management
System choices that are considered often revolve around IT platforms. Manhattan Associates offers three levels of product offerings that cater to major IT hardware and software platforms: Microsoft .net, iSeries, and Open Systems. While the offering is not identical for all three platforms—resulting in different license costs—Manhattan makes much of the full functionality available to a wide range of company sizes and number of users, including small and moderate sales volume companies.
ERP Into Marketplace
Almost universally, we hear clients declare they want to have a single ERP system for all functionality, eliminating the need to develop interfaces/integrations between best of breed systems. They also want to eliminate the need to deal with multiple vendors, and the associated IT complexities. The reality is that a robust ERP system customized to the direct industry doesn’t yet exist. However, ERP systems are becoming more robust with Direct Marketing systems functionality. Two good examples are Sage ERP X3 (formerly Adonix) and Junction Solutions. Irvine, CA-based Sage North America is working with direct companies A.M. Leonard and Carrot-Top Industries to develop more direct functionality. Chicago-based Junction Solutions has implemented its products at industry leader Miles Kimball. Junction Solutions’ mission is to provide multichannel functionality from POS through backend fulfillment.
We also see several SAP value-added retailers developing marketing and implementation approaches to the multichannel industry. Look for these offerings to become stronger and meet the needs of the multichannel industry.
Limiting Implementation Time and Cost
For many in-house, licensed software products, as much as 50% of the cost is in implementation services. To reduce the cost of more comprehensive systems software, companies are selling pre-parameterized software implementations to scale back the effort required by both the vendor and the client to implement the system. Two examples of this are SAP (SAP Business All-in-One) and Manhattan Associates. Full functionality is generally visible to the customer, so once the initial implementation is successfully up and running, your IT management and users can then see how functionality can be expanded through changes to the system set-up parameters. The result is to reduce implementation cost, time frame and complexity.
Multichannel Forecasting and Inventory Management
The challenge of planning, forecasting and managing inventory for retail, e-commerce, catalog and wholesale channels falls directly into the laps of merchandising and inventory control management. Direct Tech and Manhattan Associates have answered these needs with two totally different approaches.
Omaha, NE-based Direct Tech, with 37 installations in direct and catalog companies, has researched and developed a statistical-based forecasting system for businesses that have product history. Additionally, they will import retail selling history to be combined in the model for companies that have retail stores.
Manhattan, on the other hand, offers specialized planning, forecasting and management across all three channels, based upon their acquisition of Evant several years ago. Their offering looks at retail store replenishment and multi-distribution center inventories.
Expanding Functionality
One of the key reasons customers buy an annual support contract for software is to receive the upgrades in functionality that vendors develop and offer. Company sources offered three key areas of developing functionality for this article:
- Escalate Retail now has many of its users converted from the MPE platform to Open Systems. Brian Johnson, VP & general manager of the San Diego-based company, raised an important point: the credit card industry (and VISA in particular) has made it a requirement that all software companies and their clients in the retail and direct industry must implement the PCI standards for PA-DSS by 2010. The credit card industry has had its hands full trying to deal with millions of retailers on PCI compliance. While the date may change, it appears that they are pushing adherence through our vendors. Take heed.
- Barney Stone, president of Plymouth Meeting, PA-based Stone Edge Technologies, points out that they are beginning to implement a number of advanced picking options, which should make their fulfillment users more productive. What’s important here is that typically Stone Edge markets to small e-commerce and catalog clients—and they have 2,000 implementations.
- Tyce McIntosh, VP Marketing of Indianapolis-based order management provider Natural Solutions, sums up his company’s direction by saying that many clients and prospects want to greatly improve their Web site and shopping cart integration and functionality. “This is where the business has migrated, and we need to make this a robust solution.”
Good Time to Invest In Systems
For companies that have relative financial health, this is an excellent time to invest in the e-commerce, order management and warehouse management software that your business needs to become more efficient and to grow. It’s now, during a time of uncertainty, that your competition may not be able to make the necessary changes. There isn’t a software vendor in the retail and direct commerce space that hasn’t seen soft sales. We see this as a time when you can negotiate a fair but reduced cost. From a return on investment perspective, management is expecting an 18- to 24-month ROI from the savings. In order to sell more software, vendors need to find ways to assist their prospective clients in cost justification—something at which many are inept.
These are exciting times for the direct and retail software industry. There is real change and more choices emerging for your direct business, which will help you to save money and serve your customer better.
Curt Barry is president of F. Curtis Barry & Company, a fulfillment consulting firm for catalog, e-commerce, and retail businesses. We offer clients expertise in business process and order management systems, inventory management systems, warehouse management systems; warehousing and distribution; call center services; inventory management and forecasting solutions; and strategic, financial, and operational planning for all business channels.
He can be reached at 1897 Billingsgate Circle, Suite 102, Richmond, VA 23238, phone: 804-740-8743; email: cbarry@fcbco.com; website: http://www.fcbco.com.
F. Curtis Barry & Company is a national consulting firm for catalog, e-commerce, and retail businesses offering clients expertise in order management systems, warehouse management systems; warehousing and distribution; inventory management and forecasting solutions; and operational benchmarking for all business channels.
Please contact Jeff Barry to discuss your upcoming projects at jbarry@fcbco.com or 804-457-4028.
How many times does this happen in your company? You go to a meeting about sales performance, and Marketing says they think sales are up 3.5%, but the merchants disagree and say sales are up 6.3%. The specific numbers in this example aren’t important; the point is that the two figures aren’t even close. That’s the reality in most companies today.
Or, say management has tasked you with developing a report and you try and go back to prior results, maybe from a season or two ago. How many different versions of the sales, purchase and inventory plans are there? Which ones are the actual and which were prior versions?
Some readers might say we could do a better job of controlling and eliminating versions of plans—which is certainly true, and something every company should work toward. Or you may say if we use only one enterprise system we can eliminate this dilemma. But that isn’t really the solution; such systems aren’t viable for most companies, and anyway, there are multiple data elements that are all valid for whatever processing system is being used. There isn’t a “single version of the truth”—one official set of figures for sales, inventory, plan, history, etc.
Take for example a product’s inventory. You can find sales plans on a user-derived Access system or Excel spreadsheets. A product’s inventory on hand in units and dollars occurs on your order management system. A separate best-of-breed warehouse management system will also include the same product on hand, but needs to be synched up daily. The finance system will also carry the total company inventory in dollars—probably not updated real time, but daily or weekly. You may also have a specialized standalone forecasting and inventory management system, to project inventory by promotion or catalog campaign.
Additionally, because the major transaction systems require a high degree of training, management does not use them as the source for their information. Management has to go to extremes to get what they need, either by requesting that department managers pull data or by using business analysts to come up with reporting. Because these are manual efforts using sources not originally geared to management’s needs, they are delay-riddled, error prone processes. And they still don’t deliver a “single version of the truth.”
You get the picture. There simply isn’t a “single version of the truth” for the major data elements used in many businesses. For management to have confidence in the integrity of the data they’re getting, I think the time has come to advocate and budget for projects that resolve these problems. Such problems are not new, and I believe they inhibit the effective management and growth of direct businesses.
Here is a hierarchy of solutions you should consider:
- Extract data from major transaction processing systems into Excel or other reports
- Access databases, and business analysts using OLAP tools
- Data warehouse products
- Business intelligence systems with dashboards and analytics
As the New Year approaches, it’s time to advocate with management for solutions to this problem. Especially in this economy, knowing exactly where you stand is essential. You can only control expenses and inventory and know which products and promotions are working—and which aren’t—if you have accurate data on which everybody across the company can agree. In our experience, companies that used business intelligence systems to overcome such information problems have been successful in getting a positive ROI from these types of systems within 12 to 18 months. And in today’s business environment, that’s a “single version of the truth” on which all companies can agree.
Brian Barry is senior consultant with F. Curtis Barry & Company, a multichannel operations and fulfillment consulting firm with expertise in multichannel systems, warehouse, call center, inventory, and benchmarking; Learn more online at: http://www.fcbco.com.
F. Curtis Barry & Company is a national consulting firm for catalog, e-commerce, and retail businesses offering clients expertise in order management systems, warehouse management systems; warehousing and distribution; inventory management and forecasting solutions; and operational benchmarking for all business channels.
Please contact Jeff Barry to discuss your upcoming projects at jbarry@fcbco.com or 804-457-4028.
More and more companies today are outsourcing fulfillment to avoid making investments in that non-core area, or in the technology necessary for it. We’ve also seen hundreds of start-up e-commerce companies that simply don’t want to be in the fulfillment business. All of these companies are turning to third-party fulfillment (3PF) providers like you. With so much riding on it, it is very important that your front-end (call center, customer service, and marketing) and back-end (warehousing, order management, and fulfillment) systems and technology give you a continuing competitive advantage. The systems you select will have significant ramifications for your personnel’s productivity, as well as how effectively you serve your customers and help them grow their businesses—and the management information these systems provide can help you grow your business. No matter what type of system you’re considering, the purchase is a long-term investment. In short, selecting the right front- and back-end systems for your 3PF business is a major undertaking.
In this article, we’re going to lay out the major functional considerations for new software and the methodology for selecting a system. Over our past 25 years as industry consultants, we have both assisted companies in selecting third-party fulfillment providers and helped third-party providers select new front- and back-end systems to improve their fulfillment services, reduce costs and improve customer service.
General Considerations
As you start to review systems, it’s important to consider the uses for which these systems will be implemented. As we all know, there are many types of products and services that have different fulfillment system requirements. These business differences include:
- Catalog management
- E-commerce
- Retail store replenishment
- Infomercial
- Printed point of sale and point of purchase materials
- Collateral and printed materials
- Replacement parts
- Returns processing
The point is that you need to be sure the focus of your fulfillment operation can be accommodated functionally by the application. A good example is catalog management. Does the customer service system allow identification of e-commerce versus catalog orders? Does the pricing engine accommodate all the pricing, discounts and services that a catalog requires? Are the analysis systems geared to page, depiction, merchandise analysis price range, and other catalog-specific requirements? Additionally, some types of products such as apparel with color size matrix or multi-dimensional matrix require on-line displays and reporting geared to this merchandise.
Overall, since a company using third-party fulfillment is giving up direct contact and control with the customer, the system and process needs to be highly functional. But there isn’t a single “one size fits all” solution that typically fits all businesses. The application needs to be scalable to high peak volumes and be very flexible to accommodate differences in client businesses. And since not all clients will want the full line of services, can the system be used in a modular fashion?
With these general comments in mind, the following specific points are important for front-end, back-end and analytical tools required by 3PF providers. In each major system function we will list key functionality to be considered.
E-Commerce
Today, the traditional catalog company has more than 50 percent of its sales coming from the Internet and e-commerce. Most catalog management feels that a high percentage of e-commerce sales result from receipt of the catalog. So the functionality that 3PF companies have to provide must support the expansive growth of e-commerce. Many 3PF companies offer expanded services to build and support client Web sites as a way of providing a one-stop service. Among the major e-commerce functions:
- Business system to Web site integration for inventory, customer and shipment tracking
- Search engine optimization (SEO)
- Personalization
- Ability to build and support client Web sites
- Ability to customize the look and feel of the site
- Integration with other industry leading Web analytics, search, rich media and review systems
- Support of e-mail campaigns
Call Center, Customer Service and CRM
One of the major areas of functionality at which third-party software has to excel is to have complete multi-company functionality throughout the entire application. Even for e-commerce and “bricks and mortar” companies that don’t have catalog, there are call center requirements that have to be provided. Some of the larger providers, such as GSI, have many major retailers that have outsourced their call center and e-commerce support. Additionally, the more effective call centers are really tuned into revenue generation for the client. This not only takes the form of up-selling and cross-selling functions, but also outbound selling of product.
Important functionality in this area includes:
- Multi-client, multi-title front end
- PCI compliance
- Expanded customer and order notes
- Multiple addresses for ordered by, bill to and ship to
- Ability to flag customers for future action using a workbench or workflow system
- Ability to handle pop-up of company and customer through CTI
- Full customer order-taking and service for catalog and Internet
- Up-selling and cross-selling capabilities
- Remote call monitoring through the ACD
- Customer purchase, segmentation and lifetime value history
- Outbound selling
- Internal fraud checking
- Ability to set credit limits and thresholds
- Interface to major credit card processing providers
Pricing Engine
A third-party system needs a good pricing engine in order to be able to effectively handle multiple clients’ business rules, as well as various rules imposed by individual clients, for promotional pricing, discounting, targeted pricing by customer segmentation, free shipping, and a multitude of other options.
Order Management & Fulfillment
Third-party order management and fulfillment embodies what we consider to be the most critical functionality for the back-end application. In order to ensure profitability, the order management system has to make the fulfillment provider efficient in terms of labor, capacity and facility utilization. Among the most important areas:
- Picking options: batch pick, zone pick, pick to cart, pick to tote, pick to light, etc.
- Velocity slotting and cube utilization
- Random or directed put away
- Pick slot replenishment
- Hot pick processing
Labor involved with picking and packing is more than half the total direct labor cost, while direct labor is more than 50 percent of the cost per order, not including outbound shipping costs. Functionality such as picking methods, slotting, hot pick areas, streamlined returns processing, etc. all help to keep costs in line.
- Wide variety of product types and sizes requires different WMS storage functionality
A major challenge facing 3PF businesses is the frequent need for storage and fulfillment of a wide variety of products encompassing various weights and dimensions.
- Rate shop shipping methods
- Interface to major shipping systems
Outbound shipping has become the largest single expense, even exceeding direct labor costs. Rate shopping and interfaces to major shipping systems are critical to helping your customers lower their shipping costs.
- Bar code scanning receiving, put away, replenishment, picking, packing, shipping, returns, cycle counting
Bar coding inventory through the processes will allow you to reduce shrinkage and to track inventory throughout the center.
- Multi-warehouse capabilities
For multi-facility operations, consider: what are the business rules that are under your control? Issues include partial shipment of multi-line orders and the ability to project item inventory by center.
- Expedite warehouse processing of returns
Streamlining returns processing in apparel businesses is important because returns can vary between 10% and 40% by category, depending on its fashion content. Tailored fit and color/size selection also increase the return rate. Your objective should be to handle returns in as few steps as possible, including the inventory disposition and the customer return, credits, refunds and exchanges.
- Drop ship vendor processing
Vendor processing systems have greatly improved with regard to drop shipments. Even though the client is not asking you to warehouse 100% of their product, a streamlined drop ship system can greatly increase sales without having the inventory in stock. The better systems put low cost terminal/printer combinations in the vendor environment. Orders are downloaded on-line or in batches. Confirmed pick transactions are interfaced to the customer service files. The client can track the vendor’s shipping status, service levels, etc.
Other important areas of order management and fulfilllent functionality include:
- Multichannel support for catalog/Internet, retail, wholesale which have radically different order and product profiles
- Extremely flexible to handle different client operating requirements
- Security between client info and data
- Supports vendor compliance programs which differ by client
- Cartonization for box size selection
- Scalable for peak volume processing
- DC inventory management including cycle counting and shrinkage control
- Productivity transaction capture and reporting
- Track client transactions and activities for billing purposes
Inventory Management
Inventory is the major balance sheet asset in most direct and retail businesses. Accurate inventory tracking reduces shrinkage and identifies bestsellers and candidates for liquidation, assisting clients in building sales and earning more margin. To provide services to the client’s merchants and inventory control departments, inventory planning and forecasting functionality includes:
- Catalog pre-season planning
- In-season forecasting product requirements by campaign, offer, drop
- Demand planning products across promotions
- Master scheduling of when stock-outs will occur
- Some or all of these functions may be provided by interfacing standalone specialized systems
Purchasing
Most companies provide the systems functions for purchase order placement. One trend in fulfillment services is to actually do the purchasing and printing of collateral for clients. Purchasing functionality can include:
- Ability to generate purchase orders
- Full function support for client vendors and factors
- Advance shipping notices from vendor (ASNs)
- Visibility into inbound receiving
- Vendor portals for processing POs, invoicing, viewing inventories, etc.
Marketing
Understanding the complex nature of multichannel marketing is a key function you need from your fulfillment system. How can you help your clients better understand their businesses from a marketing perspective?
- Measurement of catalog, space, e-mail media and offer results
- Customer purchase segmentation analysis
- Lifetime Value Analysis
- Analyzing customer channel preference and profitability by channel
Merchandising
Offering unique and profitable product is at the heart of a direct marketer and retailer’s success. How will your system assist your client’s merchants to be better selectors and sell more product? Functionality in this area may include:
- Multichannel category and item sales trends
- Fast and slow seller results
- Contribution to profit by channel and by product
- Vendor scorecards based on merchandise analysis and meeting fulfillment standards
Plans and History
Many systems do not capture and archive history sufficiently to support multichannel businesses. Functionality needed includes:
- Multi-year and seasonal history for channels, catalogs/promotions, products and retail stores
Executive Analytics and Dashboards
Industry leaders such as Budco and The Jay Group have developed executive analytics, KPI alerts and dashboards which make senior management users of the customer service, fulfillment, merchandising, marketing systems, etc. for the first time. This will generally provide an advantage that in-house IT departments usually only develop or acquire in the largest companies.
General Requirements
- Ability for clients to log in and manage their business remotely
- Individual company ability to get reports as they desire
- Interface to other corporate systems (merchandising, marketing, accounting, Web sites, etc.)
The Selection Process
We recommend you follow a four-step selection process; these four major steps will ensure that you have taken into account and considered all the use and functionality required to replace your existing system.
Step 1: Organize the Project Internally
- Management should appoint a senior management “sponsor” to represent system user interests and get management’s input— to elevate the project’s perceived importance and encourage participation in the process.
- Set up a project steering committee representing all areas affected by the new system. Steering committee draws up written plan for evaluating and selecting vendor and installing system; meets monthly to review progress.
- Identify business functions to be accomplished by the new system. Management should provide company growth plans; anticipated changes in business direction; budget guidelines; and decide whether the new system should run on existing hardware.
- A project coordinator who is well disciplined and organized can help keep the project on schedule and within budget. This person is responsible for the day-to-day system selection and vendor activities.
Step 2: Define Your Requirements
- Deciding what system functions you want is critical to pick the right “match” for your needs. The most effective systems generally have a 70 to 80 percent fit before modification. Modifications and complex integrations are risky, expensive and can cause serious delays.
- Prioritize functional requirements and get department manager input for each subsystem (e.g., order-entry, inventory, fulfillment, merchandising, marketing, etc.). Include unique requirements, key data elements missing from the current system, major screens and reports, and/or data interfaces to other systems.
- A decision matrix is critical to evaluating a vendor’s specific system functionality against those you require, and to make comparisons on an apples-to-apples basis between vendors.
Step 3: Evaluate the Vendors
- Document business requirements; list each and every task the new application needs to accomplish now and in the future.
- Send a detailed request for proposal (RFP) to each vendor.
- Specify that bidders include in writing all of the pricing, guarantees and schedules for the application; the software and hardware to be provided; pre-installation training; modifications required before and after installation; a list of other package systems with which it has successfully integrated; and file conversion and support.
- Evaluate responses in a comparative format, as discussed above.
- Narrow choices down to two or three; bring the top two vendors in for scripted demos, keeping a third vendor “in reserve” just in case.
- Base scripted demos on business functions and transactions specific to your business. Work with each user department to address their major concerns, reviewing in detail how the software can accomplish these requirements. Remember, you control the software demonstration; require vendors to show functions that you want to see rather than the functions that the vendor wants to show you.
- While still fresh in everyone’s mind, get participants from each functional area to rank the pluses and minuses of the software demonstration on the matrix.
- Use the RFP responses and scripted demos to work through which system has a better fit for your company.
- Review in detail what the vendors feel the costs of customization and integration will be. The purchase price when installed will often be 40% to 50% professional services. These are at best difficult to estimate. Determine what reporting is available compared to your current system. What will need to be developed? What integrations will require additional services?
- Determine the total cost of ownership for replacing your complete application.
- Request a detailed implementation schedule and what the vendor’s assumptions are regarding involvement and time required of your company’s personnel. It usually involves a major time commitment by your company.
- Include as part of your evaluation process how well the vendor will continue to update, enhance and support the system.
- Check vendor references. Ask to see the full customer list, not just the vendor’s selected references. Make sure that you will not be either the largest or smallest client of a particular vendor.
- For the reference checks, ask the same questions of each vendor’s clients, allowing comparison later.
- Choose one or two of each vendor’s clients that are similar to your business to visit for a much deeper perspective than you would get from a phone conversation. If possible, make these trips without the vendor present, to allow users to be as open and frank as possible.
Step 4: Examine the System’s Potential ROI
- Determine the ROI of a new business system purchase before you make that major investment. What savings and benefits do you expect to gain?
- Don’t base your ROI calculation on the vendor’s promotional data. To get the most accurate sense of your potential ROI upfront, ask: How long will it take to recoup the investment?
By the end of this four-step selection process you should have gathered enough information to make a well-founded purchase decision—but don’t rush into anything. Be thorough; the devil is in the details. The more detailed your planning, the better chance of the application being implemented on-time and within budget and delivering real savings.
Summary
Front- and back-end systems encompassing call center, customer service, marketing, warehousing, order management, and fulfillment functionality are at the heart of the services that you provide your fulfillment clients. They are essential to assist your clients in growing their businesses and in making your business as efficient and profitable as possible. Selecting the right systems is critical to your success as a third-party provider.
Curt Barry is president of F. Curtis Barry & Company, a fulfillment consulting firm for catalog, e-commerce, and retail businesses. We offer clients expertise in business process and order management systems, inventory management systems, warehouse management systems; warehousing and distribution; call center services; inventory management and forecasting solutions; and strategic, financial, and operational planning for all business channels.
He can be reached at 1897 Billingsgate Circle, Suite 102, Richmond, VA 23238, phone: 804-740-8743; email: cbarry@fcbco.com; website: http://www.fcbco.com.
F. Curtis Barry & Company is a national consulting firm for catalog, e-commerce, and retail businesses offering clients expertise in order management systems, warehouse management systems; warehousing and distribution; inventory management and forecasting solutions; and operational benchmarking for all business channels.
Please contact Jeff Barry to discuss your upcoming projects at jbarry@fcbco.com or 804-457-4028.
Selecting software, be it an Order Management System (OMS), Warehouse Management System (WMS), Enterprise Resource Planning system (ERP), E-Commerce solution, or some other system, is a challenging task. The process normally begins by documenting a set of requirements, constructing a Request For Proposal (RFP), identifying vendors, viewing web demos, and conducting site visits and reference checks. Recently a trend appears to be emerging to select vendors based on word of mouth recommendations and two-hour web demos. Is that really the right approach? Selecting the right vendor is critical to the success of your company. The choices in the software marketplace are overwhelming, and if the software solution meets your requirements, how do you determine if a vendor is the right vendor for your business? Here are a few points to consider.
Full Cost
No matter how many times I’ve heard businesses claim that cost is not the primary factor in the selection process, in actuality it always becomes a prime factor after RFP responses are returned. But is enough information provided in the RFP to ensure the vendor’s pricing is accurate? Does the pricing include the software, hardware, number of user licenses, transactional volumes, upgrades, maintenance, training, integrations, modifications, conversions and implementation services? I’ve seen instances where clients developed what they thought was a good RFP, which the vendor responded to appropriately with an initial cost based on the defined requirements—but after due diligence determined the real cost was more than double the original. The best course of action is to have an RFP that not only covers all the requirements but also identifies any and all unique business processes. The more detail provided to the vendor, the more likely the pricing will be closer to actual. Key areas that affect pricing are data conversions, integrations and implementation services.
Stability
When investing in software, either purchasing a licensed software solution or using a Software as a Service model, vendor stability is key to ensuring that the vendor will be around in the future. Does that mean a vendor has to have been in business for 25 years? No, but there are questions that need to be answered. Besides how long the vendor has been in business, consider if the executive team includes proven industry leaders. What is the size of the vendor? What is their core business, and does their software support your industry? How is the vendor staff organized? How many people are within the organization? Is their software solution proven in the marketplace? Inquire about where the vendor stands in the market: Do they consider themselves a top-tier, mid-tier or low-tier player? Inquire if the vendor is being acquired or acquiring other companies. Are they involved in any litigation or lawsuits that may affect their services?
Financials
Along with stability, you should try to determine if the vendor is financially secure. Is there an investment group backing them? Are they public or private? Have the vendor describe their ownership structure, including any parent or holding company. Ask for their total billings/revenue and the revenue for the type of business segment you are in.
Client Base
The client base will indicate the vendor’s experience relating to your business segment or industry. Is the vendor a strong player in Business to Business or Business to Customer (Direct to Customer)? Do they specialize in apparel, gifts, furniture, electronics, etc.? Most vendors are willing to share their entire client list. Other key questions to ask are:
- Does the vendor hold annual user meetings?
- What size are most of their clients?
- Would you be the largest or smallest client?
- How many of their clients are in your business segment or industry?
- What modules of the software are clients using?
- How many clients are currently being implemented?
- How many clients have left the vendor in the last 24 months?
Reference Checks and Site Visits
A critical aspect to identifying the right vendor is conducting reference checks and site visits. Vendors will typically provide a list of 3 to 5 clients for reference checks. It’s best to take that a step further and contact clients outside of the list the vendor provides. And don’t just ask typical simple questions such as, “Does the software work?” or “How did you configure order entry?” Ask more revealing questions, such as, “Did the vendor do what they said they were going to do?” “How did the vendor treat you?” “How did the vendor respond when things went wrong?” “Did the install meet the implementation schedule?” The face-to-face with a client using the software has always proved to be worth the investment in travel and expense. Visiting at least two client sites will provide a good indication of how well the vendor does what they say they are going to do. Not only is it recommended that you visit at least two client sites, you should also consider visiting the vendor’s headquarters to meet with the executives of the company, the implementation team and the application developers.
Vendor Strategy
Does the vendor have a long-term development strategy for the software? Do they utilize user input for implementing new features, or do they require that each client fund modifications, which are then incorporated into the core application? How does the vendor prioritize new features?
Implementation
It is equally important to meet the implementation/project manager along with the account liaison or future account manager. You will want to know the project plan, timeline and the number and amount of resources needed to keep the project on track, on time and within budget. If the vendor cannot provide any of these it usually indicates that they don’t use a proven methodology for implementation.
A Successful Partnership
Last, but not least, one of the most important keys to successfully selecting the right vendor is having a good culture fit. Creating a partnership with a vendor that understands your business, is willing to work with you and “gets you” is paramount to a successful relationship. That is why you want to spend the time onsite at the vendor’s location to meet with the executive team, project manager and account manager to make sure the “fit” exists. Doing so will give you a clear understanding of what it will be like to work together. At the end of the day, creating a successful vendor/client relationship means being able to look them square in the eye and trust them to deliver on whatever is promised.
F. Curtis Barry & Company is a national consulting firm for catalog, e-commerce, and retail businesses offering clients expertise in order management systems, warehouse management systems; warehousing and distribution; inventory management and forecasting solutions; and operational benchmarking for all business channels.
Please contact Jeff Barry to discuss your upcoming projects at jbarry@fcbco.com or 804-457-4028.
Recently cited information from the technology firm CNET reveals that roughly 49 percent of IT projects suffer from budget overruns, and 47 percent suffer higher than expected maintenance costs. It’s imperative that companies identify and properly plan for all expenses associated with replacing a business application to avoid these costly mistakes. Here are seven ways to help you go about this process.
1. When considering replacing your software application, ask yourself the following questions during the due diligence process:
* What applications will be considered, and what functionalities are required?
* What are the major milestones and time frames necessary to complete the project?
* What’s the total cost of ownership necessary to complete the project?
2. When asking a vendor to submit a formal proposal, include all the vital information necessary to receive a detailed proposal. For example, in the case of an order management system, vital information includes, among other things:
* Peak and average figures for the number of concurrent users;
* Order volumes by month, with the peak week;
* Average lines and units per order; and the
* Number of customer records.
This information isn’t only necessary in identifying the licensing, but also the proper sizing for application and database servers.
3. Analyze the vendor proposal painstakingly. For items such as training and implementation services, understand the number of days being proposed and what roles or tasks will be performed by the vendor. Be careful of terminology like “the normal training days are X” or “the standard project management days are X.” Make sure the “typical” or “standard” days are sufficient for your project.
4. Understand the vendors’ license maintenance and support plans and when payment is due. Many vendors charge these fees once the application is delivered. Some maintenance plans can be as high as 20 percent of the MSRP or originally proposed license fees.
5. From an application licensing perspective, review the pricing model and any optional modules that may be necessary to support the functionality within your business. If the vendor is supplying the hardware for the application and database servers, be certain the hardware is sufficient and budgeted for, including the necessary hardware upgrades if optional modules are added later or if the licensing forces the hardware into major upgrades.
6. For program modifications or integrations to other software applications, provide functional specifications for the vendor to submit a formal proposal. While the vendor responses may only be estimates, the more detailed the specifications, the better a vendor can estimate the expenses. Don’t wait until after the project is approved to get these expenses.
7. So far these expenses have focused on vendors’ costs and haven’t addressed planning for internal expenses. Be careful, because internal expenses are usually less budgeted for and can lead to project overruns very quickly.
Travel expenses are one example of internal expenses to potentially budget for. It’s often necessary to travel to and from vendors’ facilities, as well as travel expenses for the vendor to be on-site. These expenses can be as high as 15 percent to 18 percent of the total services for the project. Be aware, some vendors charge a travel fee if the travel is over a certain number of hours or they charge cost plus 2 percent to 3 percent.
Other internal expenses to consider budgeting for include:
* an increase in payroll or overtime to complete the project;
* the hiring of temporary labor or outside resources, such as consultants or programmers; and
* upgrades to other network hardware or the rewiring of the internal network.
Formalize a full budget before proceeding, being sure to build in sufficient dollars for items such as services, programming and training that may not have been sufficiently budgeted for by the vendor. By clearly defining your budget, you can avoid being one of the 49 percent who exceed their IT budgets.
Brian Barry is a senior consultant at F. Curtis Barry & Co., a multichannel operations and fulfillment consulting firm with expertise in multichannel systems, warehouse, call center, inventory and benchmarking. Learn more online at http://www.fcbco.com .
F. Curtis Barry & Company is a national consulting firm for catalog, e-commerce, and retail businesses offering clients expertise in order management systems, warehouse management systems; warehousing and distribution; inventory management and forecasting solutions; and operational benchmarking for all business channels.
Please contact Jeff Barry to discuss your upcoming projects at jbarry@fcbco.com or 804-457-4028.