The Changing Software Vendor Landscape

     

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. 

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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.”

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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.