Every distribution center requires the functions provided by a warehouse management system (WMS) to facilitate inventory movement, from receiving and putaway to picking and packing — and of course the management of returns. A WMS also serves as an important link in the supply chain, from materials management to product allocations and shipment planning. As a plus, a WMS offers workforce planning and productivity analysis.
However, unless you are a third-party logistics provider (i.e., all you do is run a warehouse and fulfillment center), the critical question for most companies is whether your order management or enterprise resource planning (ERP) system is sufficient for handling your inventory, or whether you need a dedicated WMS.
This is particularly true for direct-to-customer marketers, whose order management systems were generally designed in the first place to handle all of the inventory movement and fulfillment activities that most catalog or e-commerce companies require. Although ERP systems were not originally intended to encompass these functions, many of them have added such features in the last few years — thanks in large measure to the dot-com boom, which exposed the need for such tools to systems developers.
A MATTER OF DEGREE
The decision to acquire a WMS is typically a matter of degree rather than of kind. Typical questions to ask are: How much better will a WMS do the tasks our order management or ERP system can already handle, and how much more efficient will it allow us to be (which of course is tied to the basic ROI question — how much will we save by implementing a WMS, compared to the costs of implementation)?
Before addressing those questions, though, a word of caution: Whatever theoretical payback you calculate, you must take into account the challenges you will encounter in implementing and integrating the WMS into your current systems architecture. It is an unfortunate fact of life that getting a WMS to function completely in sync with an order management system, in particular, is fraught with difficulty.
The reason for the disconnect is that the logic of any given WMS may not be consistent with the logic of any given order management solution. Take “line-item allocation,” for example. There is no universal standard by which allocations of line items on an order are processed among the various order management systems themselves, so expecting a WMS to automatically match the way your system currently handles this is likely to be unrealistic. Moreover, not all systems handle the relationship of line items to orders in the same way, either, which can have a significant impact on the way an order is picked, packed, and shipped.
MY LOGIC OR YOUR LOGIC?
Worse still, not every mismatch in the logic of the two types of systems can be anticipated. Only careful testing using multiple inventory management scenarios can reveal them all. And some unanticipated modification of either the WMS or the order management system may be required to get both systems singing in key. Be sure to allow time for this dissonance during an implementation. Indeed, the industry is haunted by horror stories of otherwise well-run companies that encountered massive operational snafus in the hectic holiday season, with tens of thousands of unshipped orders, double-shipped orders, incorrect orders, and every other conceivable kind of fulfillment mistake, all caused by a failure to get the order management system and the WMS integrated properly.
BENEFITS OF A WMS
There are many benefits that a WMS can provide that your current inventory management system may not address as effectively, if at all. Probably the most common of these is the management of warehouse automation. If you want to employ pick-to-light, carousels, automated picking, or complex conveyor and gate/diversion management, you most likely spot a WMS on the horizon. The same goes for radio frequency (RF) workforce management or the use of hand-held or truck-mounted units. And if your supply chain partners require support for RFID in a multichannel environment, you’re almost surely in the market for a WMS.
Another major reason for installing a WMS is improved space utilization. This can range from directed or random putaway to more sophisticated slotting (more on this in a moment). Also related are more efficient receiving and putaway, including automatic putaway, provided the supplier offers an advanced shipment notice (ASN) and item-level bar codes. And if the supplier does not, your own WMS may be the best way to generate bar code labels at the item and bin level.
Some other compelling reasons to acquire a WMS: You need more flexible or complex kitting and assembly (MRP) functions than you currently have. You need support for EDI, you require more options than you have for cycle counting, you need a greater range of picking options (wave, zone, consolidated), you must do retail (bulk) distribution as well as direct-to-consumer fulfillment, you have trouble managing cross-docking for backorder fulfillment (picking at receiving without item putaway), or your current system can’t provide the workforce management and productivity tracking tools you feel you need.
SLOTTING FOR DOLLARS
We noted that slotting is a major reason for acquiring a WMS. There are a number of ways to approach this issue, all of which address optimizing the location of items in the warehouse. But optimizing for what — putaway, storage, picking, a combination of these factors? The challenge can be so complex that there are actually separate slotting systems you can acquire. But most WMS applications support slotting as part of their suite of functions, and it is certainly one of the biggest benefits they offer.
The trick to effective slotting is to find a way to manage a multitude of variables that are in constant flux. In brief, any slotting tool should allow you to establish, define, and manage warehouse zones; assign item, package, or pallet types (and sizes) by zone or location; use assigned random putaway; optimize picking locations by item demand velocity (and assign A, B, and C velocity codes to the inventory); minimize picker travel distances and balance these with putaway travel distances; assign items to multiple locations; optimize carousel bin assignments (including assignment of a merchandise SKU to multiple bins); and report on workforce efficiency on a user-designated basis.
There is another eminently practical way to view the slotting challenge. If your decision to acquire a WMS is not driven by the goal of efficiency for its own sake, it may be driven by order volume. When you have reached the point where your order management system simply cannot handle the movement of inventory required to support order volume in a timely fashion, there’s a WMS in your future.
Ernie Schell is president of Marketing Systems Analysis Inc. in Southampton, PA. He can be reached at (215) 396-0660 or firstname.lastname@example.org.
Dozens of WMS solutions are available. The following, listed alphabetically by vendor, are the most widely adopted within the direct-commerce fulfillment and distribution environment.
HighJump Software (www.highjump.com) offers a Web- and RFID-enabled solution, Warehouse Advantage.
Integrated Warehousing Solutions’ IRMS system (www.iws-irms.com) includes interfaces to Ecometry, Sigma Micro, Synaro/Island Pacific and many other order management and ERP systems.
Manhattan Associates’ (www.manh.com) Warehouse Management (WM) and WM for Windows come from a market leader that now supports Web Services on its powerful new Windows version. Users can expose key application components and data as Web Services to share with other systems.
QSSI’s PowerHouse WMS (www.qssi-wms.com) is a Windows-based solution that integrates with Great Plains. Also available are ePowerHouse (browser interface) and PowerHouse FastTrack (PHFT), a scalable entry-level version.
Radio Beacon WMS (www.radiobeacon.com) has a browser interface, runs on SQL/Server, and integrates with Great Plains and Best Software accounting packages. It can support up to 100,000 order lines per day.
Although less widely installed in direct-commerce fulfillment operations, applications from these other vendors also deserve a look: GERS, Island Pacific, LIS, Logility, RedPrairie, Retek, Swisslog, and Tecsys.
To help you evaluate which WMS will best suit your needs, here is an abbreviated checklist of important features and functions:
- Support for multiple divisions, companies, and warehouses
- Product storage types supported
- Material handling equipment supported
- Multiple SKUs per location? Multiple locations per SKU?
- ASNs (inbound, outbound)
- Planned and unplanned receiving
- Vendor performance tracking
- Support for EDI
- RF support (what type, which functions)
- Bar-coding symbologies supported
- Package labeling
- Random, directed putaway (with “top-off” capability?)
- Slotting management, space usage evaluation tools
- Pick batch functionality
- Picking methods supported
- Replenishment methods
- Demand tracking and analysis
- Warehouse transfers
- Kitting and assembly, work-in-process tracking
- Backorder management
- Inventory consolidation
- Hazmat management
- QC functions (receiving, picking, packIng)
- Manifest interfaces
- Rate shopping
- Packing list, shipping label options
- Logistics management, carrier interfaces
- Shipment tracking
- Returns handling
- Item disposition, return to vendor
- Productivity analysis
- Activity-based costing
- Reporting tools and flexibility
Many warehouse management system applications offer the option of a browser interface, which allows you to support authorized access to the system from remote locations. This can add significant value to the WMS investment.