DC Velocity - June 2015

compared with only 47 percent of respondents from companies with less than $100 million in revenues. This may indicate that small companies still have a hard time justifying the software’s expense.

Next on the list of most widely used applications was enterprise resource planning (ERP) software—again no surprise given that most organizations use ERP programs as the system of record for financial transactions. Tied for third place were transportation management software (TMS) and business analytics solutions. (For the full list, see Exhibit 1.)

The study also found that different types of businesses favored different types of software. For example, manufacturers were the top users of WMS and warehouse control systems (WCS) as well as control towers and solutions for demand planning, supply planning, and analytics. Companies in the wholesale distribution sector were the primary users of inventory optimization software, while third-party logistics service providers (3PLs) were the biggest users of TMS and yard management software. Interestingly, labor management software usage was evenly split among manufacturers, retailers, and 3PLs, indicating that all three groups are seeking to optimize DC work force performance. Finally, in a bit of a surprise, slightly more manufacturers than retailers said they had deployed distributed order management systems (DOMs). DOMs, which are designed to help users determine the optimal location from which to fill a particular order (i.e., from store inventory vs. DC stock), are generally regarded as a tool to be used by retailers engaged in omnichannel commerce.

Asked about their recent software purchasing activity, 23 percent of survey takers said their company had invested in software in the past year. As for which applications they had bought, WMS again came in first, accounting for 21 percent of new purchases. TMS came in second ( 10 percent), followed by business analytics ( 9 percent).

THE PAYBACK CHALLENGE

Since a software purchase can run into the thousands of dollars, it’s hardly surprising that companies would be looking for a quick payback on their investment. But what constitutes a quick payback? As the survey made clear, expectations vary all over the map. At one end of the spectrum were companies that expected payback within three months ( 5 percent); at the other were businesses that expected payback within three years ( 24 percent). The remainder expected a return in one year ( 31 percent), two years ( 28 percent), or six months ( 12 percent).

In regard to actual payback, many respondents expressed
disappointment with their software implementations. Only
48 percent reported that they had realized the expected
payback from a software investment, while 18 percent said
they had not. Another 34 percent were uncertain as to
whether the software had met the company’s expectations
for return on investment (ROI).
As for the reasons behind the disappointment, one
common complaint was that the vendor had oversold the
software’s potential for improving performance. Wrote one
reader about a WMS deployment: “Support and mainte-
nance continued to bleed cash as the products overpromised
and underperformed.” Another reader reported that a WMS
deployment had resulted in “cost overruns, project delays,
a large number of defects, and overall poor performance.”
Yet another complained that “too many modifications were
needed, which all were à la carte and cost extra $$.”
One option for companies looking to minimize software
implementation costs is to take the cloud-based route—a
model in which the application is hosted by the vendor (or
a third party) on an off-site server and delivered via the
Internet. Among other advantages, this allows the user to
avoid a hefty upfront capital outlay for software licenses as
well as ongoing expenses for upgrades and maintenance.
Plus, the user can configure the cloud application to its
business needs instead of having to pay a programmer for
custom coding.
And in fact, one-third of the survey respondents have

Warehouse management 57% Enterprise resource planning 52% Transportation management 41% Business analytics 41% Order management 35% Demand planning 30% Inventory optimization 24% Labor/workforce management 23% Supply chain design/network optimization 22% Supply chain planning 21% Distributed order management 20% Warehouse control 20% Yard management 11% Control tower 10% Trade management 9% EXHIBIT 1 What applications are readers using?