How to Build Fourth Party Capability
In order for fourth party logistics providers to rise, they must be careful to deploy web enabled supply chain software. Too much of the software available in the market is not properly web enabled. This includes SAP, i2 and Oracle as well as probably many others that we do not have direct experience with. The sales arms of these companies would strenuously disagree with this statement pointing toward their portals products as evidence that they are web enabled. However, this rings false for two reasons:
- This is only part of their products. Most of their product still uses non-HTML interfaces, which are clunky proprietary and hard to use.
- The major vendors seem to have a problem developing easy to use HTML interfaces. Companies like Arena and MCA show the way in developing good web interfaces, but they are the exception rather than the rule (this is another reason both are leaders in offering hosted solutions). SAP Portals is essentially a demo of how not to develop an interface.
What Web?
Furthermore, the major supply chain vendors don’t seem to even grasp what the web can do for their software. There is a lot of talk about SOA and thinking web-centrically, but this mostly left in the room as soon as the executives leave the conference. They then go back to their old software with its old software design. There is too much self congratulation and patting of oneself on the back, and not enough actual progress being made.
Investing in supply chain software and relationships that are web-centric is critical to setting up the preconditions for growth. In this market, openness trumps deep logistics complexity.
The Future of IT
Fourth party logistics providers, and those that seek to become them, need to be careful that their supply chain software purchases don’t eventually become paint them into a corner. In the future, deep functionality is going to take backseat to interoperability and information sharing. After all the talk of advanced mathematics in supply chain, very few companies actually run optimizers and most use simply semi-automated heuristics. Simple mechanisms like automatic safety stock setting is routinely violated. The promise of the benefits of complexity have not materialized. For one, companies by and large cannot figure them out, secondly, parochial interests work against system-wide optimization, and complex systems are prone to breakage and are difficult to maintain. Hosted applications that integrate well with other hosted applications have a profound advantage in the future marketplace. Companies that create essential platforms can gain customers through the web, as Amazon.com does with their fulfillment services, without the need for aggressive Oracle style sales forces with their expense accounts and inherent corruption.
Changing of the Guard
We have worked for years on large systems implementations projects for supply chain, and we would like nothing more than for them to go away, and be replaced by hosted solutions. Companies will be more willing to experiment with solutions they can begin using immediately and recursively building upon, rather than the gianormous ERP implementation model that thrive on complexity and bilateral monopolistic lock-in. Instead companies can sign up for month-to-month service contracts, and be charged on the basis of volume. All the work involved in maintenance of the instance is managed centrally by the people most able to do so. In the future, people will look back at how we currently implement software and consider it quaint. Those concerned about data security need to work the angle from the legal side, companies that leak data or engage in industrial espionage can be sued in court, and if the damages are sufficient, put out of business. This should not be used as an excuse to block this concept, but rather should be worked into contracts. Every new concept presents risks, however working around those risks defines whether a company is actually dedicated to innovation.
Web Enablement
It goes without saying that all these applications should be web enabled, and we have written about why in this post.
http://supplychaininnovation.wordpress.com/2009/05/29/web-enable-supply-chain/
