Daily Archives: June 29, 2011

TMS Requires 100 Million, Does ERP Require 1 Billion?

A recent article over on Logistics Management that put[s] the spotlight on ERP had a great quote from
Ben Pivar, Vice President and North American Supply Chain Lead for Capgemini regarding Transportation Management Systems (TMS) Pivar says that the economics of installing a TMS package on a client server, for example, doesn’t really work until you have nearly $100 million in freight spend and that’s why on-demand is so popular in that space.

SI has to agree. Unless a firm has tens of millions in freight spend, the costs of installation, maintenance, and usage tend to dwarf the benefits of using a TMS system. However, what’s even more important to note is that enterprise ERP (from a top vendor) is, on average, at least five, if not (usually) ten times, more expensive to install, integrate, maintain, and use than TMS. This would seem to indicate that the economics of traditional ERP don’t make sense unless your company has 1 Billion in spend, or at least 1 Billion in revenue. In other words, unless you’re a member of the Fortune 2000 or Global 3000, traditional end-to-end on-premise enterprise ERP is probably not for you. And it would appear that Oracle, one of the largest players, tends to agree. Why do you think it has advertisements stating it has 98% of the Fortune 500? It’s not just because the Fortune X, it’s target market, provide it with its biggest deals. It’s because Oracle also understands that unless a company has reached a critical mass, given the cost of the system, the company won’t get the advertised return (which is a key to keeping the company as a high-paying customer year after year).

However, every organization needs a good transaction store and data repository as analysis is key to supply management success. So what does this mean if you’re not one of the lucky ones? Don’t look at a a tradtional on-premise end-to-end ERP from a big boy. Look at either a newer, smaller, slimmed down offering from a smaller player, possibly based on an open-source solution (like Compiere), a suite from a provider that maintains its own transaction store, or a newer, slimmed down, SaaS offering from a traditional provider that can integrate with some BoB solutions in the cloud and offer an effective hybrid solution. Just don’t go for the billion-dollar solution, because your organization likely won’t get a return from the millions it will cost.

Trade Extensions: No Rest for the Wicked-ly Powerful – Part II

As per yesterday’s post, it’s been less than five months since we last checked in with Trade Extensions, who had traded up to a Fact Sheet User Interface and added a slew of new features, including improved RFI support, multi-dimensional rankings in e-Negotiation, Google Earth integration, new incumbent rules, and an OLAP foundation to reporting, including the implementation of a new n-way comparison report. Since then, Trade Extensions has been on a tear to add new functionality as fast as it can to make the platform not only one of the most powerful expressive bidding optimization platforms on the planet, but also one of the easiest to use — listening to its users (which include the Fortune 1000) and adding features and functions that make an average buyer’s life easier, taking usability to a whole new level yet again. And while earth-shattering technology improvements are cool, it is usability that is the ultimate key to to adoption, use, and, ultimately, cost avoidance and reduction in your sourcing organization.

Scenario Creation & Analysis

Not only are there new rules that allow partial awards to be fixed based upon existing scenarios, but the number of constraint categories has doubled. While there were only general and incumbent constraints in the past, there are now an entire category of scenario reference rules and post processing rules. With respect to scenario reference rules, not only can allocations be kept, but bids can be favoured or penalized as well. The post-processing rules are also quite useful. Allocations can automatically be rounded and allocations that don’t meet a minimum number of units can be removed (or re-assigned to the supplier who meets a minimum allocation with the lowest total cost).

Feedback Mechanisms

The buyer now has fine-grained control over what the supplier sees, and can even mix feedback types. For example, if the buyer only wants the top three suppliers to know they are top three, but suppliers four to six to know their exact rank, they can specify that specific rank starts at bidder four, and the top bidders default to “top 3”. In addition, if the supplier does not meet a minimum bid increment, which can be defined in a number of ways (including, minimum dollar or % decrease over last bid), the supplier gets a nice red error that the bid is not acceptable AND a message indicating the minimum increment required. Finally, and this is really cool, the user can define custom color-coded bid feedback fields based on dynamic formulas that now only let the user know where they rank, but how competitive their bid is (against the current bids from the competition) in English using a buyer defined scale such as “Competitive”, “Slightly Competitive”, “Not Competitive”, and “Not Acceptable”.

Plus, the buyer can now chat with users online in an integrated IM client, and immediately see who is online when they log in as it is a widget on their project management dashboard.

Odds and Ends

The “dashboards” for RFX and auction phases have also improved. The summary, bidder summary, and lot summary are now completely customizeable by the user, support custom fields, and user-defined colour codings in the rankings. In addition, there is integrated show/hide, drill-down functionality, and customizeable pop-up (bid, trend, and bidder activity) charts where a user can select one, some, or all of the rows in each report.

They have also added a basic workflow engine that allows buyers to initiate rate requests, lot requests, and allocation publishing requests of project managers / administrators when new needs arise during a project. This allows managers and supervisors to maintain control and a complete project history to be maintained. The workflow is fairly basic at the present time, but I suspect it will mature and fill out quickly given Trade Extensions’ track record of rapid application development over the past two years. (Especially since the feature is being used by a couple of very large companies.)

All and all, it’s a lot of new functionality in a short time frame that makes the tool extremely useable by an average buyer.