Even in today’s tough business climate, we still see companies making investments in IT systems, especially in the e-commerce area. In many direct businesses, more than 50% of sales are e-commerce based, though those sales may have been spurred by receipt of a catalog.
In a recent conversation with a client, the discussion centered around why their WMS implementation had failed. The client was trying to better understand what had gone wrong and what they could have done differently. In this case, the client had signed the WMS vendor's contract prematurely, only to discover two weeks later that the bid was incomplete.
If you’re on the hunt for a new system, you know the process and the choices can be daunting. You have to remember that the vendors' job is to sell; yours is to match up your application requirements with the best application strategic approach.
The following five factors will help you do this.
Return On Investment
How will the system improve my bottom line or increase sales? While there are always many intangibles, management should strive to get the user community involved to determine the system’s feasibility based on savings.
Typically, this may cover the current year to the first year under the new system, or the current year operation to several years out to reflect growth. Companies are now striving for short-term paybacks—less than three years, and often as little as 12-18 months.
Total Cost Of Ownership
A frequent mistake that companies make is to look only at the purchase price and what the vendor has in the proposal. You also need to consider the vendor costs for modification, systems integration, adequate training and on-site services, conversion, etc. It’s important to look at this on a multiyear basis: What are the incremental licensing costs as your business grows?
Build Vs. Buy
If you’re developing your application in-house, should this be the strategy
longer term? Consider your growth and complexity—and the rapidly changing technologies of servers and the Internet.
Matching Application Needs To Vendor Functions
There are several steps involved in any reliable process for system selection and implementation:
Here’s the picture: A multichannel company with sales of $20 million has an aging order management system that has been in place for over 20 years. While there are some things that the users like about it, they have basically outgrown the system. They need far better marketing information, e-commerce site to business systems interfaces, forecasting and inventory management, and the ability to deal better with light manufacturing and tracking sets and kits, which are a major part of their business.
Multichannel business managers frequently voice the desire to have one system or software package that is capable of managing the entire enterprise, encompassing all functional areas. Enterprise resources planning (ERP) systems have been available for years. Because the multichannel phenomenon—traditional brick-and-mortar businesses reaching into direct marketing, and traditional direct-to-customer companies developing brick-and-mortar stores as well as a Web presence—is so recent, it has in many cases outstripped the ability of software vendors to keep pace.
Q: We have been investigating replacing our order management system, and we have had vendors in to demonstrate their systems. While we have spent a lot of time, we don’t ever seem to see the whole system or the particular features that are critical to our business.
A: Two words: scripted demos.
Q: We are in the process of planning our file conversion as we implement our new catalog management system. Our vendor is telling us that they normally don’t write a file conversion program for most files. What’s your recommendation?
A: Today’s comprehensive order management system performs integrated functionality for order entry, customer service, order processing, warehousing, marketing and merchandising.
Any company choosing an e-commerce platform is faced with a bewildering number of choices. Determining which of these solutions best fits your needs is no longer as simple as having your local Internet provider develop a Web page with navigation and some type of shopping-cart functionality.
E-commerce solutions have evolved to include core functionality for navigation, shopping cart, checkout, shipping and handling, and taxes and some level of integration to an order management system (OMS), an enterprise resource planning (ERP) system, or a warehouse management system (WMS). Then there are the Web 2.0 options: rich media with audio and visual tools, customer product reviews, social networking, blogs. Newer technology also provides functionality for options such as mouse-over (move the mouse over an image and the description will display without the user's having to click on the image), drag and drop (simply drag the item to the shopping cart without leaving the current page), and one-page checkout.
Given this array of possibilities, how do you determine the best e-commerce platform for your business? Here are a few guidelines:
Question: Our company installed our new order management system in the last 30 days. While we spent considerable time educating our users and completing the conversion, I’m concerned that we are learning how to manage our business with the new system too slowly. What should our plan of action be?
Question: I am trying to select a new catalog management system that also includes warehouse functionality. After reading the brochures, talking with vendors, and participating in Webinars with them, how do I make sense of all the information?
Answer: Software vendors have great brochures and Websites, but avoid narrowing your search down too quickly. Initial discussions and online demos will show you just a portion of what the software can do.
To begin, document your business requirements, listing each and every task that the new application needs to accomplish. Include any future needs and wishes as well. This allows you to send a detailed request for proposal (RFP) to each vendor. You can then evaluate their responses in a comparative format. No one can remember everything that a vendor’s product is capable of, especially after reviewing several online demos. Get the vendors to respond by telling you what is actually available in their base applications rather than something that they will have to modify.
Next, sort through the vendors’ responses and eliminate those that do not fit a high percentage of your requirements without modifications. If there seem to be a large number of modifications from all the vendors, you should ask yourself whether you are looking at the right group of vendors and if the requirements you documented truly what your business needs.
Look to reduce, if not completely rule out, the need for any modifications if possible. Narrow your choices down to two or three software vendors you believe are capable of supporting your business and bring the top two vendors in for scripted demos—your agenda for vendor presentations--keeping a third vendor “in reserve” just in case.
Base your scripted demos on business functions specific to your business that you want to be sure the vendor can perform. Remember, you control the software demonstration, and you decide what is important for your organization to view and understand.
To develop your scripted demos, work with each of your user departments to address their major concerns, reviewing in detail how the software can accomplish these requirements. Send the vendors examples of your catalogs, a link to your Website, and a list of functions you specifically want to have demonstrated, such as drop-shipping.
For the demos themselves, have each vendor walk through the entire business process, from creation of items and offers to writing purchase orders, receiving, and put-away. Ask the vendors to demonstrate the entire order entry process with multiple scenarios, including back-ordered items, ship alone, and multiline and single-line orders. Follow an order through all of its processes from credit-card authorization through pick, pack, and ship. Don’t forget returns and customer service issues that you encounter every day. Be sure you have a scribe who can write down the details of what works well and what does not. Also, there will inevitably be postdemo follow-up queries that you want to have documented and forwarded to the vendors for responses.
Ultimately you are trying to determine which vendor can be a long-term partner and assist you better with growing your business. No vendor is going to be a 100% fit, and you should scrutinize vendors that tell you either in the RFP or in the demo that they can support 100% of your requirements.
As soon as possible after each demo is completed, you will want the participants from each functional area in your business to provide a high-level scoring of the vendor’s functionality. You will need to rank the pluses and minuses of the software demonstration in each functional area while they are still fresh in everyone’s mind.
If at this point the scripted demos—and whatever immediate follow-up is necessary— have you comfortable with these vendors, it’s time to take the next steps in finalizing your decision: reference checks and site visits.
When checking vendor references, ask to see the full customer list, not just the vendor’s selected references. You want to make sure that you will not be either the largest or smallest client with a particular vendor. If you’re the largest, you risk having to drag the vendor along in order to enhance the application fast enough to suit your growing business. If you’re the smallest, you may not receive the level of attention you need from the support group.
Call as many as possible of the vendor’s customers that are of a similar size or have a product makeup similar to your company, as well as any other companies that you feel are leaders in the industry. It’s a good idea to review any areas that you feel might pose a problem for your company and ask if the vendor’s clients have had any issues in that area. Ask if they have to work around any of the vendor’s functionality.
You are trying to confirm that you are headed down the right path in selecting the best possible partner for a long-term investment. Ask the references everything: Did the vendor complete the installation on time and within the budget? How are the software releases—are they full of bugs or pretty clean? How is the vendor’s support? How active is the user group? How well does the vendor listen to its customer base?
Choose one or two of each vendor’s clients to visit. Seeing first-hand how a similar business uses the application is very important. Here you can tell where the true work-arounds are and how efficiently customers are able to use the application. You will also get a much deeper perspective then you would from a phone conversation.
Hopefully at the end of this process you will have done all the homework and research you need to make a well-founded decision that will create a partnership with a vendor for many years to come.
