Special Report - August 2004

How the On Demand model can energize a sagging supply chain

The modern-day energy drink can boost the human mind, body and spirit due to its potent blend of vitamins and minerals. Similarly, the "pay-as-you-go" On Demand model can breathe new life into a sagging supply chain. Simply put, On Demand software will change the way customers buy, vendors sell and investors invest, according to a recent report "Software Goes On Demand" by Merrill Lynch.

The report says that supply chain performance and scalability issues often drive need for additional hardware, software, tools, services and licenses and while patching helps, it can be problematic, ultimately leading to unforeseen "ripple" effects in the infrastructure. Additionally, businesses can overpay for maintenance costs if they do not pay close attention to usage at renewal, particularly after corporate downsizing.

See Spots Run
On Demand's pay-as-you-go model alleviates the aforementioned sore spots because there is no need for a huge up-front investment. This avoids the need to chase after costly upgrades and additional maintenance fees. The Merrill Lynch report agrees and goes on to state that the value of the On Demand model could lower the overall costs of IT deployment by five to 10 times compared to traditional implementation methods.

"There appears to be room for saving money not only in the upfront license and maintenance fees but perhaps more importantly in the hidden cost areas such as customization and implementation, hardware, labor, training, and upgrades," the report says. "This also does not include some of the soft-benefits such as getting access to technology enhancements in a much more rapid manner."

When an On Demand solution provider adds an upgrade or fixes a problem, the customer is usually left out of the equation and only has to worry about logging onto a Web site to obtain access to the improved technology. This level of simplicity is why the On Demand model can generate a high level of user acceptance, which ultimately leads to a higher level of innovation within an organization.

Where It Works
While customer relationship management (CRM) technology works well under a On Demand model as offered by vendors like Siebel, transportation management systems (TMS) work even better. TMS technology provides the robust visibility needed in order to monitor the status of inventory in the pipeline, thus opening a rush of information for buyers who are making the replenishment and stock transfer decisions and for operational managers who are managing the flow of goods. On Demand is also a great way to link disparate, legacy systems, according to Jeff Potts, vice president, sales and marketing for Lean Logistics. "The On Demand model creates a single version of visibility across all models because access is shared through the Web," says Potts.

That's exactly why Pinnacle Foods, known for Swanson frozen foods and Vlasic pickles, selected the LeanLogistics Transportation Management System (TMS).  Pinnacle is doubling in revenues and volume from its merger with Aurora Foods and sees significant cost benefits and scalability by bringing freight management in house using the Web-native LeanLogistics solution. The LeanLogistics TMS enables daily optimization of the transportation process, best utilizing the capacity of Pinnacle's carriers with fewer internal resources. "It adjusts to what we need -- not more, "says Jeff Cowan, vice president of logistics for Pinnacle Foods. "We can handle higher volumes without buying more software licenses or performing IT 'heart transplants' (processor upgrades)."

Pinnacle handles tens of thousands of shipments per year from manufacturing locations to Distribution Centers (DC).  The LeanLogistics TMS will provide better analysis for continuous moves and greater visibility of shipments for Pinnacle and its customers. It enforces carrier compliance and uses the optimal carrier for the lane.  In the future, Pinnacle can handle ever-increasing volumes or new scope, such as controlling and scheduling shipping beyond the DC. The latest LeanLogistics customers include Unilever and Procter & Gamble, which means only one thing: It's only a matter of time before On Demand will soon be in high demand.