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Logistics functions farmed out; WMS rescued from near-death experience

Inside Out Along with their expanded role in direct-to-customer fulfillment, outsourcers are now viewed as vital partners in strategic planning and supply chain management at companies in a wide range of industries. A survey of 163 companies in the U.S., conducted last summer by the University of Tennessee, Exel, and Cap Gemini Ernst & Young, found 73% of respondents to be users of third-party logistics (3PL) services.

The industries surveyed include automotive, retail, computers and peripherals, and consumer products. Seventy-eight percent of the respondents indicate that logistics functions represent a major competitive advantage for their companies; 68% report emphasis on improved supply chain management; and 46% say that they are under pressure to enhance logistics customer service. Respondents also indicate a shift from using largely transportation-based 3PLs to contracting with suppliers of a comprehensive menu of services, such as customer service, information technology, global linkages, and warehousing and distribution.

The top logistics activities farmed out to 3PLs are warehousing (63.3%), outbound transportation (60.7%), freight bill auditing/payment (59.8%), inbound transportation (44.6%), and selected manufacturing functions (39.3%). Activities outsourced least frequently include order fulfillment (10.7%), inventory management (10.7%), information technology (8.9%), product assembly/installation (8.9%), customer service (4.5%), and order entry/processing (2.7%). Reasons for not outsourcing logistics, given by the 27% of respondents who do not use 3PLs, include worry about loss of control over outsourced functions and fear that costs would not be reduced and service level commitments would not be met.

Respondents who use 3PLs report quantifiable improvements in logistics performance. On average, their logistics costs are 8.97% lower, logistics assets are 21.3% less, order cycle length is down from 8.8 days to 6 days, and overall inventories have been reduced by 9.9%.

White Knights Defend Castle Bad news travels fast. Last August 15, several hundred users of Evanston, IL-based Haven Corporation’s Wizard WMS received an e-mail from Bruce Holmes, president and CEO of Haven, announcing that the company was ceasing operations that very day. Citing cash flow problems and an inability to complete Castle, the long-awaited Windows upgrade from DOS-based Wizard, Holmes announced, “We are simply shutting down.”

The number of active Wizard users is not clear – hundreds, possibly over a thousand. Holmes’s announcement left this market segment of small to medium-sized direct-to-customer retailers seemingly without technical support just as they needed to gear up for the 2000 holiday season.

Wizard’s relative lack of sophistication – it has no e-mail address base and allows just 5,300 SKUs in its inventory listings – and its low cost ($7,500 for up to 100 users, compared to costs as high as $300,000 for more powerful systems), have made it a mainstay for smaller catalog and DTC operations. The promise of the long-awaited, compatible Castle, in development for years, has kept some companies hanging on to Wizard longer than they might have otherwise.

Now Haven’s demise is a potential windfall for such vendors as Dydacomp, points out Deborah Ross, president of Axton Enterprises, LLC, a technical service consultancy that specializes in working with users of Dydacomp’s Mail Order Manager (M.O.M.), one of the few systems comparable to Wizard and with a price point of about $1,800-$3,000 per workstation.

To the rescue But in a remarkable demonstration of support and cooperation, Wizard users almost immediately formed a Web forum to air their reactions, discuss solutions, and share mutual wisdom to deal with immediate technical problems. With a couple of exceptions – one respondent’s message snarled, “See you in court, asshole” – the majority of Wizard and Castle clients in the group seemed sympathetic to Holmes and the plight of Haven.

That sense of sympathy, the relative lack of viable alternatives, and the “somewhat predatory” approaches of rival companies have helped fuel attempts to save Haven in some form. Tom Danner, president and CEO of Redmond, WA-based Advanced Multimedia Concepts, Inc., a Wizard user and Castle beta tester, became the “de facto point man” for efforts to salvage Haven’s assets.

At press time, a formal announcement of a new entity, New Haven Software Corporation, is imminent, according to Danner. Danner et al. have found another company willing to support final development of Castle and incorporate such Haven assets as the program’s source code and customer lists and to ensure that Bruce Holmes will be involved in some capacity in the venture, which will be based in the Chicago area.

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