Do You Need A WMS?

Your warehouse is a mess. Inventory is being misplaced, your customers are complaining about receiving the wrong shipments, and your warehouse employees are working overtime to keep up with demands. How can you reduce lost inventory, and mistakes and, use employees efficiently? The answer is a warehouse management system (WMS).

A WMS is a set of software that manages, tracks activities and automates the flow of all materials and information through a warehouse. WMSs are responsible for managing every step a product takes from the moment it enters the warehouse to the moment it leaves. WMSs must interface with host systems, like enterprise resource planning (ERP) or legacy systems. ERP is a broad set of activities supported by software that helps businesses manage information with different segments of the company. An ERP system can provide information on inventory to the accounting department in real time. Essentially, WMS provides the foundation for sophisticated warehouses to operate efficiently.

Who Needs A WMS?
Answers vary from vendor to vendor regarding who needs a WMS. Generally, the size and complexity of the warehouse go a long way to determine the need. "A lot of Fortune 500 companies don't need a WMS," says Alan Dabbiere, president and CEO of Manhattan Associates (Atlanta), a $62 million WMS company.

"Some large companies only deal with inventory management, which can be handled through an ERP system. However, a $50 million business that sells directly to consumers through e-commerce may need a WMS to integrate UPS or FedEx with its status-tracking information. While this e-commerce company isn't in the Fortune 500, it deals with large orders and provides value-added service to customize products as they are shipped to the consumer."

Basic Components
WMSs can be as simple or technical as needed to fill your company's requirements. Standard components are defined by the complexity of the industry, company and warehouse where the system will be installed. These components can include:

• receiving
• inventory management
• put away
• planning and picking processes
• packing and shipping
• quality control.

"Core components depend on what the end user is looking for in a solution," explains Dabbiere. "WMSs are needed to manage complex supply chains." For example, companies that deal with large amounts of products within the supply chain can be linked with other companies' supply chains and possibly another company's transportation provider.

According to Scott Rishel, VP of marketing for Catalyst International (Milwaukee), a $35 million WMS company, extra components include value-added services. "Value-added services include the areas where distribution centers are taking steps to make products store-ready," he explains. "The distribution center can include services like ticketing and special packaging." Data mining and analysis can also be considered an extra component.

"WMS contains many transactions," Rishel continues. "These transactions are logged. With the right software tools, end users can see areas needing improvement, such as increasing employee productivity or order picking. This function is becoming popular."

Within these WMS components there are standard technologies. These include:

• automatic identification and data collection (AIDC) products such as bar codes, bar-code printers, handheld scanners and fixed-mount scanners
• radio frequency identification (RF/ID) technology and radio frequency data collection (RF/DC)
• the Internet to access and provide information to the WMS inside and outside of the distribution center
• electronic data interchange (EDI), the electronic communication of business transactions, such as purchase orders, invoices and order confirmations
• automated material handling technology, like carousels, conveyors and automated storage/retrieval systems.

Looking For A Solution
There are a variety of ways end users can start searching for a WMS to fit their warehouse needs. Jim Coker is VP of logistic strategy for the MK Group (Islandia, NY), an independent unit of the $5 billion software maker, Computer Associates.

Coker says end users should first map out the solutions they need. "It's easy to get excited about new technology and run out to purchase the newest systems without understanding what they do," Coker says. "The search should begin by defining the business processes within the warehouse," he explains. "Then define how those processes can improve business. Then, the next step is to choose a system with capabilities that map these processes. End users must take care not to get caught up in the trap of using automation for automation's sake. Sometimes, additional automation heightens risk instead of adding value."

For smaller companies, Coker suggests looking for vendors or integrators online and in trade journals. "Smaller companies shouldn't spend thousands of dollars to hire a consultant to define current WMS requirements," he says. "However, if an end user is making significant changes like building new warehouses or designing a new delivery channel, then it would make sense to employ a consultant. These people are trained to look at business goals and help end users make selection processes down the road."

"Along with trade publications," Coker continues, "there are conferences focused on warehouse automation. These events offer a valuable education. End users should attend conferences to learn what systems are on the market and what these systems are capable of delivering."

To find vendors, says Scott Rishel of Catalyst, end users should network within their industries. " In retail, a lot of CIOs get qualified leads by talking with each other. Also, information companies like the Gartner Group, Inc. and Benchmark Capital, which have done WMS research, will be happy to offer reports to help get end users started."

Louis Schilt, COO of Renaissance Software, Inc. (Long Island, NY), a $10 million WMS company, offers end users some advice on working directly with a vendor or an end user. He believes that end users should look for an impartial expert. "Many times, consultants are tied to software vendors so they aren't always aware of the best solution," Schilt explains.

"Make sure the consultant has the expertise to handle your WMS and is not trying to push one product," he advises. "The consultant is there to document and analyze your business processes, and bring three to five viable vendors to the table. When consultants accomplish this, they have done their jobs."

ERP Functionality Versus A WMS
According to Rick Wilkins, director of sales and marketing for Robocom (Massapequa, NY), a $7.5 million WMS company, most ERP solutions have some warehouse functionality. "Without exception," he explains, "ERP functionality is inadequate for running larger companies with complicated warehouses. Integrating WMS with ERP isn't as much of a challenge today as it was two or three years ago. There are also third-party software applications that facilitate the interfacing." Vendors like Robocom have standard asynchronized application program interfaces (APIs) with several ERP providers.

Jim Coker of the MK Group notes that traditional WMSs and WMS capability in an ERP solution should be treated like two different animals. "It's almost a ‘buyer beware' situation." Coker explains. "Don't accept the statement that an ERP solution provides WMS capability as fact. In some cases, end users might have developed their own ERP package and made significant investments in a host system. In those cases, the end user should look for a WMS vendor with expertise in that vertical market."

Seeing A Return On Investment
Return on investment (ROI) from WMSs is seen in a variety of ways. Five areas where ROI can be tracked are:

• Inventory savings – WMSs provide a reduction in carrying costs, lost inventory, scrap, and stolen inventory.
• Labor – "End users forget that the alternative to a WMS is a paper-based system run by an office full of clerks," Scott Rishel of Catalyst points out. "Labor can be moved out of the warehouse and into other departments in the company because the WMS gives instructions to employees instead of supervisors. Efficient businesses require fewer workers."
• Equipment – Efficient warehouses also need less material-handling equipment. This includes automatic picking equipment, tilt-tray sortation, conveyor equipment and automatic labelers. Less material-handling equipment is needed in productive warehouses.
• Facility space – By using space efficiently more products can be stored in the warehouse. Facility space and associated costs can also be reduced.
• Customer service – Item returns are reduced through shipping products accurately and on time. Reducing chargebacks, a cost associated with stopping shipments to check for accuracy, saves time and money. Having fewer chargebacks also reduce the labor needed to check each shipment. Chargeback reductions also eliminate the increased inventory needed because of slow-moving products filled with mistakes.

According to Manhattan Associates' Dabbiere, a great example of ROI occurred when its customer, Western Publishing, added a WMS. Western began working with K-Mart stores and needed to improve its flow-through logistics to keep the relationship. "Western reduced the average time that inventory sat in the warehouse from six weeks to less than two hours," Dabbiere explained. "That pushed Western's bulk distribution center replenishment orders up from six orders per month to 17,000 store-level orders per week. By implementing a WMS, Western knew the right product was being delivered to the right store at the right time."