RFI Analysis: Supply Chain Management Vendors   Chain of Tools
NWC Inc. issued an RFI in hopes of optimizing its supply chain, We got four responses, each with some impressive strengths

December 8, 2005- Network Computing Magazine

Written by: Lori MacVittie

In the early 1990s, TSR, producers of the infamous Dungeons and Dragons role-playing game, was in a bind. The distributors of its products, mostly books and character miniatures, could not obtain stock, even though many warehouses across southern Wisconsin held thousands of square feet of product, just gathering dust. TSR employees, however, had no idea where its stock was located or how much it had to sell. When Wizards of the Coast finally snatched up the game inventor in 1997, most of its inventory-including thousands of books, today worth a fortune to collectors-was summarily incinerated to clear warehouse space for more lucrative inventory from other manufacturers. This supply chain management snafu earned TSR the dubious distinction of a Wikipedia entry that mentions lax stock control as an element of its downfall (see en.wikipedia.org/wiki/TSR%2C_Inc.).

The cost of warehousing any inventory is huge for organizations whose primary income is the sale of a manufactured product. As important as supply-side optimization is to the bottom line, so too is sell-side distribution and inventory management. Having stock available at the right time is only one part of the equation; you also must have it in the right place to meet demand.

Executives of our fictional widget maker, NWC Inc., want to avoid following in TSR's footsteps. We don't want thousands of widgets sent to the scrap heap because we don't know where they are. Besides, we might be able to recover some of our investment by selling those old widgets on eBay. You never know. (Buy some NWC Inc. widgets at inc.gb.nwc.com and read about day-to-day operations at www.nwc.com/blog/archives/nwc_inc/index.html.)

SCM is, essentially, a huge integration problem. Manufacturers must purchase components from suppliers to make finished products. Distributors must know where to send which products, when to send them and how many to send. And someone must keep track of it all, balancing the number of items manufactured with the number sold, while keeping an eye on its bottom line. As NWC Inc.'s IT staff, we decided to build out our systems to gain visibility into the company's supply chain. After all, we have inventory management and business integration in place (our Cognos Series 7 implementation) to analyze sales patterns. How hard could hooking up NWC Inc. to its component suppliers and distributors be?

Very difficult, actually. Although EDI, XML and VPNs have lessened the prohibitive expense of dedicated lines among suppliers and distributors, systems still must speak EDI to communicate effectively with partners' systems. And though our analysts can review the reports and data presented by Cognos to determine which and how many widgets to ship to distributors at what time, there's still the little problem of getting that data from the head of the analyst to whatever system the IT staff is cooking up to organize widget distribution. Note to selves: Custom RFID (radio frequency identification) implants aren't a solution, no matter how good they sound over drinks at 2 a.m.

So we did what most small and midsize businesses would do when faced with such a daunting task. We sent out RFIs to vendors whose products offer links in the supply chain to find out just how much our venture would cost. We asked Xenos to spec out an integration hub and Fidelitone Logistics to give us a quote on virtual distribution services. We asked Ariba, Epicor Software, Infor Global Solutions, i2 Technologies, Manugistics, Oracle and SAP to give us their best complete SCM systems. We sent requests to IBM, Tibco Software and webMethods for answers and products that would at least jump-start the project and save our IT staff from a task estimated to take at least five years to complete.

Fidelitone Logistics, Oracle, webMethods and Xenos stepped up to help NWC Inc. Epicor and Manugistics gave it the old college try, but both bowed out before the end. The others, well, we hope they aren't using their own SCM applications to manage their RFI processes.*

  Business Drivers

• Optimize stock on hand to reduce storage and shipping costs

• Maximize profits by reducing costs to distribute and deliver goods

• Ensure ability to respond to sudden surges in demand

• Provide partners and distributors with visibility into the supply chain

  IT Challenges

• Limited visibility into distribution channel

• Multiprotocol, multistandard environment

• EDI, the industry standard for communication between partners, requires a 1:1 data connection

Potential Solution: Fidelitone Logistics Technology-Based Supply Chain Outsourcing Service

Fidelitone Logistics replied to our RFI regarding its capabilities in the distribution and sell-side link of our supply-chain. Fidelitone Logistics can best be classified as a virtual distribution provider, and its services meet all our needs with a fraction of the IT resources that would be necessary if we were to implement a similar system ourselves.

Fidelitone Logistics owns warehouse space in the Midwest and has access to warehouses across the country. That saves us the time of locating and negotiating for the warehouse space necessary to distribute our widgets to retailers and consumers. Using a customized inventory-management app, Fidelitone Logistics claims it can do for NWC Inc. what it does for Best Buy and other national service organizations: provide pick, pack and ship services for customers and retailers on demand. Besides distributing our widgets from the nearest warehouse, it can analyze sell-side patterns to determine how best to distribute our stock across its network.

"Fidelitone Logistics will serve as the warehouse facility for NWC's finished product. Distributors will place orders through a corporate EDI environment that is transmitted to Fidelitone Logistics. Fidelitone Logistics will then pick, pack and ship that product to the distributors, or even direct to consumers, as needed."

Fidelitone Logistics uses EDI to communicate with its customers, using an IPsec VPN. That means NWC Inc. must deploy, configure and monitor a VPN to communicate with Fidelitone Logistics regarding sales and its requests for more inventory. Choosing Fidelitone Logistics also means that our IT staff must code a custom application to speak EDI with Fidelitone Logistics, or implement integration software that can convert EDI to something our backoffice apps understand. The cost savings in choosing Fidelitone Logistics would be achieved mainly through the reduction in time spent by NWC Inc. locating and finding warehouses to store widgets until they are distributed. We also would see improved inventory management without a huge investment in an in-house application, which also reduces maintenance costs for hardware and software.*

LORI MACVITTIE is a NETWORK COMPUTING senior technology editor working in our Green Bay, Wis., labs. She has been a software developer, network administrator and member of the technical architecture team for a global transportation and logistics organization. Write to her at lmacvittie@nwc.com. Post a comment or question on this story at www.nwc.com/go/ask.html.

*Excerpts from the December 2005 article.