Caveat E-Emptor!

“Web-enabled supply chains may be the future, but in the near term a manufacturer lives or dies on the quality of its goods and its relationships with suppliers and customers. It does not help when expensive and complicated supply chain management systems fail.” — Robert Delaney, vice president, CASS Information Systems.

I excerpted this quote from Mr. Delaney’s 12th annual “State of Logistics Report” because we all need to be brought back down to earth where e-commerce is concerned.

As editor of this magazine I see hundreds of press releases a week announcing partnerships involving service providers and system suppliers. I rarely hear anything more about these relationships after their initial media splash. They either go under silently or stay afloat due to the lifeline they maintain between them and their clients.

After reading an announcement that APL, a third-party supply chain management service provider, acquired GATX E-Logistics and re-named it APL Direct Logistics, my curiosity got the better of me. I arranged for an interview with its new CEO, Frank Dimaria, and asked him what will keep him and his clients in business where others who’ve ventured into e-commerce relationships have failed.

“What drove a lot of people out of business was their failing to manage inventory properly,” he answered. “They bloat their inventory. A catalog company typically looks for five or six turns. But some of these Internet guys aren’t getting a quarter turn a year. That’s crazy. They don’t do the right planning so they carry everything, and it eventually bleeds them dry.”

Dimaria also said that the arrogance of a lot of the bigger retailers makes them believe their business skill set will translate into the direct consumer space. Toys R Us proved that was faulty logic. Dimaria says that’s why his company asks clients to provide forecasts six weeks out and to revise them on a regular basis.

“For some of them, it’s the first time they thought about providing a forecast and linking marketing with fulfillment,” he concluded. “Retailing needs to synchronize their business initiatives with the logistics side of their organization.”

Those are primarily people skills, not system capabilities. In fact, Bob Delaney told me systems are at the bottom of the totem pole. People come first, then process, then systems.

“A lot of Application Service Providers are putting systems first and people last,” Delaney says. “Consequently many are going under, or, if some have an account following, they attempt to partner with somebody. You’ll see major software vendors pick up some of these ASPs and put them into their suites.”

If you want to see the full text of Bob Delaney’s “State of Logistics Report,” go to www.cassinfo.com. After reading it, and this issue’s e-commerce report, I think the message will be clear: whether you’re using the Internet to purchase a sweater or to arrange for fulfillment services: Let the buyer beware.

Tom Andel, chief editor

tandel@penton.com