The Analyst Corner: Fulfillment & Logistics

With globalization, RFID mandates and a host of other concerns looming large for corporations of all sizes, this market is starting to hit its stride.


With globalization, RFID mandates and a host of other concerns looming large for corporations of all sizes, this market is starting to hit its stride.

[From Supply & Demand Chain Executive, October/November 2004] A New Englander, refurbishing the entryway in his quaint, 100-year-old residence, orders a commonly stocked runner for his stairway. His local retailer, discovering no inventory, orders the runner from an overseas supplier. Originating in the Netherlands, the shipment should arrive and be delivered to the New England distribution center within two to three weeks a realistic promise date given the average 12- to 14-day ocean transit times for transatlantic shipments.

Eight weeks later our frustrated homeowner is still without his carpet. After investigating the logistics breakdown, he learns that the shipping container that holds his runner is part of a larger cargo bottleneck being held up because of security reasons.

This New Englander's logistics woe underscores the bigger challenges being faced by the world as a whole as globalization continues and runs parallel to increased logistics security concerns. And it's not just about globalization and supply chain security issues logistics professionals also want ever-increasing insights into the topic of radio frequency identification (RFID).

In the world of fulfillment and logistics, then, no shortage of critical matters exists.

Mike Dominy, director of enterprise services for Boston-based The Yankee Group, clearly lays out what most concerns professionals when discussing the fulfillment and logistics landscape: "With continuing merger and acquisition activity in the applications market, logistics is no exception. But the single largest development in fulfillment and logistics has been RFID and electronic product codes (EPC). RFID will shift the best practices curve in logistics, making it essential that enterprises improve their logistics processes and technologies or outsource to third-party providers."

Dominy adds that cross-border logistics, also known as global trade management, increases the level of security concerns. "The continued march to source supply and manufacturing from the Asia-Pacific area, especially China, has led manufacturers, distributors and wholesalers into a global logistics battle that includes such new challenges as longer transit times, multiple transportation modes and evolving customs requirements," he explains. "Once again, enterprises will need to evaluate their logistics performance against new best practices and different benchmarks. The likely result will be a realization that improved processes and technologies are necessary, or the outsourcing of specific supply chain activities must be carried out."

This edict for improved processes and technologies leads the charge for change in the fulfillment and logistics market. "For example, companies now look at fulfillment as a process, rather than just a function," says Noha Tohamy, principal analyst in supply chain for Forrester Research. "To enable the fulfillment process, then, organizations need a solution that spans order management, customer service, financials, inventory management, transportation and more. A lot of companies have already invested in some or most of these functions. The challenge for them this year is to use these pieces to define a process solution. Vendors in the space have helped with this effort, since vendors, like SAP for instance, offer xApps that are intended to use multiple applications to offer visibility and decision support for a process such as order fulfillment."

As a result, a lot of consolidation among the providers exists for exactly the same reason. Says Tohamy: "If I am a vendor that offers warehouse management systems (WMS), I need a transportation management system (TMS) and/or a visibility solution to create the order fulfillment process solution. We see this consolidation effort in examples like Red Prairie acquiring LIS, Arzoon acquiring Vigilance (a visibility vendor), and then both EXE (WMS) and Arzoon (TMS) being acquired by SSA Global in an effort by that company to offer a complete listing of solutions for its clients."

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