More Links in the Chain

As companies drive to become more efficient and reduce cost , their order fulfillment demands increase as they add more links in their supply chain. This is especially true in the world of technology vendors.  There are now multiple delivery models for software, it can be delivered digitally, subscribed to or shipped on a CD.  Delivery models have also changed.  Technology vendors do not want to cover the cost associated with maintaining thousands of tangible goods in their own warehouses and have moved to a drop ship fulfillment model.  This makes perfect sense particularly when it comes to high value items.

When you look at the processes that vendors are switching to it is clear that the changes they are trying to implement are beneficial to both the consumer and the vendor.  Customers can receive software and goods faster, while vendors reduce their cost of doing business.  With all these positives why are more companies not switching to this model? The problem lies within supply chain solutions of the past. They were not built for these models and rightly so. Who would have thought 20 years ago that you would be able to deliver software in an email or that you would not house the inventory you wanted to sell?

Companies who sell in these models have created work arounds to trick their existing systems into this process; creating fake inventory to represent the receiving of drop shipments into inventory or intangible items. These processes are difficult to understand, very time consuming, and even more difficult to trace. The complex debits and credits of trade (let alone the taxation of these fulfillment models) require organizations to examine their current applications and consider upgrading their internal systems. The benefits in efficiency and flexibility of fulfillment models open new markets and lower costs.

As Supply Chain models have matured, back end software applications that support these chains need to step up to the challenge.

Software as a Service at 30,000 feet..

How many businesses in the 21st century have employees that work solely from the corporate office with direct access to enterprise solutions unencumbered by VPNs, multiple logins and slow connection speeds? By now you have glanced around your office and found that while the individuals who keep the lights on are there, I am guessing a fair number of sales personnel and other staff are traveling or simply working from home.

Many companies are moving to a virtual workforce. In fact, according to a survey by GigaOm Pro in March of 2011, on average, 34% of workers work remotely.
This change in organizational structure allows companies to decrease infrastructure cost.

Think of the advantages of a cloud-based solution from a user’s perspective. They can now access their work from anywhere. They can sign in simply using a browser – no need to ensure you have your laptop with the specific VPN download or firewalls set up. You can literally log in anywhere you have access to the internet whether that is your phone, laptop, tablet, etc.

This week we heard one of the most compelling stories about the usefulness of having an organization run its business in the cloud. We received a message from one of our customers, the president of the organization in fact. He was excited. Now I know what you are thinking, an exec excited about software, but it really happened. Why was he excited? He had been traveling and what work would have normally had to wait until he arrived back at the office, he could now do from the plane while sitting at 30,000 feet. Instead of being behind from traveling and trying to catch up, he approved the invoices for his customers for the month while connected to the wifi on the plane.

As the virtual workforce increases so do the solutions that are available in the cloud. It is no longer just for a traveling sales force. Organizations can run their entire business from the cloud including Order Fulfillment, Procurement and Inventory Management , Accounting  and HR . The Cloud is ready for business, but the questions are “Can your business really compete without a change? Are you ready to operate at 30,000 feet?”

SaaS Levels the Playing Field for Supply Chain

From a historical perspective most disruptive technologies are adopted by those who cannot afford the current mainstream offering. Expensive mainframe computers were largely displaced by Mini-Computers which were displaced by lower cost Personal Computers. More recently we have seen PBX offerings give way to Voice over the Internet (VoIP) solutions. These technological shifts occur due to huge underserved markets requiring more affordable and less complex solutions. These underserved markets have spoken again…introducing Software as a Service.

SaaS, Cloud Computing, Hosted Solutions. There are plenty of buzzwords and marketing spin out there. So, let’s try to break it down. Software as a Service provides sophisticated capabilities for the masses.

What are the Characteristics of SaaS:

• Services are offered in a Subscription model  – No high startup cost and no long term commitments
• Scalability is possible due to Multi-Tenancy which allows for shared resources and shared infrastructure
• Upgrades and  support are included in your subscription fee – No maintenance or support contracts
• Accessible from anywhere  with a browser and an Internet connection -No special hardware or software required
• Allows for  Customization even when running in a multi-tenant environment
• Integrates with other applications (on-premise and cloud) through open Application Programming Interfaces (API’s)

So what makes SaaS the right fit for supply chain organizations?

When Electronic Data Interchange (EDI) was introduced it showed promise of enabling the supply chain to more effectively communicate and operate. Large organizations reaped the benefits of EDI but for small to medium businesses it is still a promise unfulfilled. The Order Fulfillment side has not been able to leverage the benefits of EDI. Yet these very same businesses have been forced to adopt EDI because their customers mandated compliance… a cost of doing business. The dirty little secret is that large populations of small to medium businesses are simply going to EDI translator sites and printing Purchase Order messages and manually typing them into Order Entry, Shipping and Finance systems. This is a prime example of new technology not reaching the entire supply chain.

The Procurement side also benefits  in SaaS models.  When a SaaS application has the proper architecture it enables EDI adoption through straightforward web-service connections.  The order fulfillment side of the business can quickly utilize EDI as it was originally intended and mitigate risks in the Supply Chain.

Perhaps the most significant benefit of SaaS in the Supply Chain would be the ability to collaborate and communicate more effectively.  Today the most prevalent forms of communication between procurement and fulfillment organizations  are email, phone and fax.  All manual processes.  Only the largest firms can afford to build highly complex exchange models making it impossible for all members of the supply chain to participate.

So what if you could friend a supplier? -A FACEBOOK for supplier relationship management.

SaaS creates The  Social Enterprise for Supplier Collaboration. Imagine if your company had its own secure collaboration space, a Collaboration Cloud if you will. All stakeholders could participate, share content, garner status and subscribe to relevant feeds.  SaaS applications make it easy for suppliers to work together with procurement organizations regarding purchase commitment dates, progress steps, issues and concerns. Collaboration would fuel better and faster business decisions.

The disruptive technologies that power true SaaS applications surpass the existing exclusionary exchange models allowing everyone to utilize the internet for the democratization of information and accessibility.  All stakeholders can easily contribute and consume relevant information in a ubiquitous environment where everyone is more productive. Access from anywhere can make any company a true global economic power. A true SaaS application levels the playing field.

Need another reason? Panorama Consulting Group conducted a survey for their 2010 ERP Report .   They surveyed 1,600 organizations that have implemented a new ERP solution in the past four years and compared on-premise deployment implementations side-by-side with SaaS deployments.   One of the results they found was on-premise implementations take an average of 6.8 months longer.

Technologies will continue developing to support innovative solutions and companies will develop new disruptive solutions.  Each time the adopting underserved community that desires more capabilities will flourish based on the fact that there is a less complex, more affordable solution.  Who buys the new disruptive technologies? A market that can’t afford the current technology and history repeats itself… Thoughts?

“Nothing is for certain but death and taxes” and for Online Retailers the Phrase is all too Real.

In 1992 the U.S. Supreme Court ruled that retailers do not have to collect taxes in states where they lack a physical presence. That means approximately 10 Billion dollars in taxes are going uncollected annually. Slowly but surely every taxing municipality is try to figure out how to tap this revenue resource. The question is how long will it take before online retailers are required to collect sales tax on their goods and services at every municipality? Every state county and city or part of a city. When they are required to collect, how much work will it take?

While large organizations with a lot of resources can hire a team to manage tax tables, and jurisdictions, for small to medium businesses it is an overwhelming task. In the United States alone there were 459 tax changes in 2011. That does not include changes to boundaries.  To make things even more complicated there is no clear way for a retailer to be notified of the changes. Notification of tax and boundary changes are managed by independent state and local authorities and can be delivered in a variety of methods, from email to regular mail. Taxes also do not correlate to zip codes or other well-defined physical descriptions it can be down to the roof top-level.  This creates a major burden on the small and medium business owner.

So why bother maintaining them, well not collecting or maintaining the necessary documentation can cost a retailer thousands of dollars.  If and when a retailer is audited an error in tax collection of $80 can turn into a penalty of $20,000. That is a steep price to pay for any small to medium business. So what is the solution?

There are cost effective ways to manage the tax burden, and solutions are out there to enable the supply chain to sell and not worry about the rules and regulations that accompany the internet reality. One such company is Avalara, they provide a solution that maintains the tax rules and audit documentation for companies selling to the US and Canada. Companies like this can give small and medium business owners peace of mind.

To read both sides of the argument on collecting sales tax, check out this WSJ article from 2011.