Logistics -- the art of moving goods from one place to another efficiently -- is an area of great opportunity for manufacturers, especially now that fuel costs are rising rapidly. Deploying logistics management software can help manufacturers cut costs by enabling them to make better decisions about storing and shipping goods. These systems can also increase employee productivity, boost process efficiency and improve customer experience by improving on-time deliveries and boosting visibility, experts say.
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"The payoffs can be really, really high," said Roz Wilson, senior business analyst for Delcan Corp., a consultant to the transportation industry. "It is so critical to the bottom line to be able to manage things like excess inventory."
It is no surprise, then, that most manufacturers -- beyond the true "mom and pops" -- have invested in at least one aspect of logistics, to automate things like inventory management and warehouse operations where the improvements can be immediate.
Getting to the heart of logistics management software
According to Dwight Klappich, research vice president of logistics for Stamford, Conn.-based Gartner, logistics management software comprises three broad solution categories: warehousing, transportation and global trade, all of which are available in traditional on-premises as well as cloud-based on-demand versions. Warehouse management systems (WMS) focus on the processes around storage of inventory and fulfillment of orders typically across one or more locations or distribution centers, including pick/pack and shipping.
"As customer needs have grown, vendors have extended WMS with value-added capabilities that augment the core -- capabilities like labor management, dock scheduling and decision support," said Klappich.
Transportation systems relate to the movement of goods, managing such things as multi-modal shipping and different package sizes. Manufacturers often outsource part or all of this function to a third-party logistics (3PL) supplier; they may also implement their own transportation solution that connects to the 3PL's systems.
The third category, global trade management, is beginning to grow as commerce becomes ever more global, said Klappich. "Companies need help managing cross-border movement of goods. Rules and regulations in different countries add complexity to the logistical picture."
The largest ERP software vendors do have modules spanning all three categories, making it possible to implement an end-to-end solution covering logistics holistically. Most manufacturers, however, tend to install point solutions aimed at tackling their most prominent pain point, or they put together a best-of-breed approach, according to Klappich. "Most companies don't view logistics as a one integrated business process," he added.
Flexibility key to logistics management
Wilson recommends manufacturers look for software that is scalable and flexible when evaluating logistics management systems. "You may start in one area and expand it," she said. "Or, your company might grow. Things change so often." Companies don't want to implement one system only to find out that it won't suit their needs for more than a year or two. If a manufacturer makes the right selection, it should be able to stick with that software for three to five years, she said.
A company's logistics software business case will be that much stronger, said Wilson, if it can tie the investment to improved customer service. Above all, customers appreciate visibility (the ability to see exactly where their orders are located as well as all related data) and flexibility (the ability to change something if circumstances change).
While many logistics capabilities are now offered in on-demand, cloud-based iterations, it is worth noting that many companies still do not feel comfortable yielding control of such critical processes to a service provider, experts say. As humble as logistics may seem, the ability to get goods from one place to another -- reliably, securely, speedily and cost effectively -- is crucial to a company's being able to serve its customers.