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July 26 2006 11:39 AM

Warehouse management systems (WMS) are basic, tactical systems essential to effective supply chain execution and order fulfillment management. Any warehouse/fulfillment operation of moderate size and/or complexity will benefit from the installation of a WMS. Improvements in speed of response/fulfillment, order filling accuracy, inventory accuracy and warehouse productivity are all reasonable expectations. A WMS is no longer considered leading-edge technology, but at the same time, this system is not a trivial application to install. Careful planning and implementation management with operational discipline is your key to project success.
 
Capabilities to Expect
Warehouse management systems can be divided up into three levels differentiated by the level of control they offer. Level 1 Systems comprise data collection systems that are focused primarily on automating an inventory transaction between the warehouse and the customer�s purchase order systems. While these systems serve specific purposes, enterprises should not expect them to manage complex warehouse operations. Level 2 systems add greater breadth and depth of functionality, and they are better able to support operations in mid- and large-sized warehouses. Only the largest and most complex warehouse environments (typically including fixed material handling automation systems) can benefit from the expanded capabilities of a Level 3 WMS.
 
Receiving � In a Level 1 system, receiving operations will record quantities received against specific purchase orders. In addition, a more-complex Level 1 system allows multiple operators to receive against the same purchase orders simultaneously. The Level 2 system provides more robust validation and quantity-received checking as well as research capabilities to help ensure the operator can easily identify the appropriate purchase order against which to receive.
 
Put Away � The Level 1 system usually verifies where material has been placed; the Level 2 system provides put-away algorithms that tell the operator where the material should be stored. Level 1 allows operators to create pallet loads in any configuration they wish; Level 2 gives operators advice as to how loads should be configured (based on SKU, vendor, unit of measure or quality control requirements).
Picking � Level 1 systems are typically �order pick� systems, and they will not support complex picking logic (e.g., walk aisle sequence or batch picking by wave, based on carrier loading plans). The Level 2 system also sizes cartons or pallets. The Level 1 system only allows for �pick logic� to be based on the set of rules it supports (i.e., Z picking or U picking).
 
Replenishment � Level 1 warehouse packages do not allow users to maintain complex replenishment rules. These packages support a simple minimum-level/maximum-level algorithm used for forward-picking locations. The Level 2 system supports planned replenishment waves, manual replenishment requests or �hot/demand� replenishments. In addition, they may support the automatic release of replenishment waves at specific times of the day. The timing of replenishment is critical to forward-pick-based operations.
 
Work Queue Management � Level 1 packages do not dispatch work activities between workers and equipment. In medium-volume and high-volume facilities, warehouse systems must not only identify where a product should be stored or moved but also which worker and piece of equipment is best suited for the task. Level 1 systems cannot do these tasks.
 
Fixed Automation Integration � Level 3 warehouse systems can interact with numerous material-handling devices. These systems have been designed to interoperate with sorting equipment, automatic guided vehicles, conveyors and automatic storage and retrieval systems. Level 3 systems have device drivers and queuing subsystems that allow the exchange of data and workflows in real time. Level 1 systems cannot interoperate with these devices because they are batch-oriented and have not been designed to support device-oriented workflow and the corresponding dispatch of work assignments.
 
Benefits to Expect
Savings from a WMS implementation can be generated from eight possible categories. The benefits expectation should take a holistic view of each category and exhaust all opportunities within that area. Recognition must also be given to a high level of interdependence between the categories. For example, �If I reduce four fork truck drivers, I will probably eliminate a similar amount of equipment.� As you work through your benefits, look for the linkages. These categories are: labor reduction/avoidance; equipment reductions/cost reductions; space utilization; inventory reductions; transportation savings; information systems cost reductions; employee related benefits; and customer service improvements.
 
Figure 1 provides additional details and examples of benefits to be realized in each of these categories.
 
Technology and System Issues
Most technologically conservative enterprises should avoid �unproven or experimental� technologies. Unproven or experimental technologies are defined by the vendor�s experience, not just industry norms. For instance, client/server applications are proven in the industry, but enterprises should avoid being the first customer of a vendor or application that uses client/server technology. Web services are another example of a technology that is just gaining some acceptance but does not have an established track record in the WMS arena. Use these unproven or experimental technologies only when willing to accept the risks and start-up difficulties associated with these technologies and only when these technologies are consistent with the enterprise�s future IT plans. Technologically aggressive clients are willing to take these risks. When using unproven or experimental technologies, negotiate pricing discounts to mitigate the implementation risks and to provide compensation for the additional disruption such start ups entail.
 
Enterprises must be able to size their warehouse systems accurately. Prepare detailed histograms of all key performance demands to determine peak-hour requirements for the target year. Seek a vendor that has sizing tools that translate these peak-hour demands into specific hardware requirements, and insist that the vendor guarantee it will deliver a system that meets these requirements for the lifecycle of the installed system, not just the start up. Many systems are initially undersized because there was no solid requirements analysis or because sizing decisions were based on averaged data.
 
Vendor Issues
Vendor success may be the customer�s demise. In purchase contracts, the client should require the vendor to provide specific �involvement details� (effort over time for the duration of the project) that it will guarantee as minimum involvement for each senior manager required (i.e., the vendor relationship manager, project manager and software modification team leader). Many warehouse system vendors are growing quickly, but high growth often means new project managers, scarce resources and an inability to manage schedule slips. Develop close personal relationships with each senior manager of the team the vendor assigns. These people will play a large role in making the project successful. Both sides benefit when these relationships are cultivated.
 
Vendors are not the only contributors to a stable project team environment. Enterprises should assign their own staff to the project team for the full duration of the project (i.e., vendor selection through project start up).
 
Project Management Issues
Do not allow the project�s scope to �creep.� Before selecting a vendor, insist on an itemized list of modifications. Most clients use the functional specification process to better define the product modifications required to meet the business needs. This often opens the door to �nice to have� functions and mod-ifications, and it helps define the anticipated modifications in greater detail. By having a list before choosing a vendor, the client can make an educated decision as to what has changed since the vendor was selected. The enterprise can then require the vendor to provide updated cost and schedule information that reflects the changes. Then, the enterprise can select the specific modifications needed to accomplish the business requirements and stick to that list.
 
It is important to manage schedules. Implementation projects are being driven by warehouse operations organizations, not information system organizations. Neither customers nor vendors are good at managing all aspects of an implementation project. The vendors focus on software development, not project implementation. The customers are inexperienced in software development and implementation. As a result, customers must manage the vendors and the project. Insist on detailed project plans from the vendor, with weekly or biweekly updates. Prepare detailed plans for the enterprise�s own activities, and integrate them with the vendor�s timetable. Synchronize the enterprise�s efforts with those of the vendor. A simple schedule slip by the vendor or customer may not be a linear event. A one-week slip may grow into a five-week or six-week delay because resources are unavailable or because successor tasks are delayed in a �domino effect.� If the vendor and customer schedules are not integrated, updated regularly, monitored and managed, the project will slip.
 
Do not sacrifice testing and phased start ups to compensate for schedule slips. Our implementation experience notes that many enterprises take short cuts to fix schedule slips and then later realize these short cuts led to a lot of the difficulties encountered during start up. Conduct a �go versus no go� assessment prior to trusting the business to the new systems. Test functionality incrementally by module (e.g., receiving, put away, order management, picking and then shipping) and incrementally by volume within each functional grouping before rolling the project out across all warehouse functions.
 
Give yourself control. Enterprises that have simpler functional needs or that are not overwhelmed by the physical metrics of their warehouses should consider using a Level 1 system to automate receiving, put away, picking and packing within a warehouse. Level 2 systems are better for enterprises that have physically imposing operations, broader functional requirements in general or complex requirements within one or more functional areas. Benefits can be received in some or all of the eight categories with actions taken in any one area generating benefits in multiple categories. WMS implementations with rates of return in the 20% to 40% range are realistic. By the same note, WMS implementations that fail to prepare each facility involved prior to the implementation, fail to adequately test the new combined software and methods/process and fail to properly train the warehouse staff will fail, producing a negative rate of return. Taken seriously, WMS implementations will give you the ultimate state of control.
 
Thomas K. Ryan is the director of System Integration Services of ESYNC. For more information, he can be reached by e-mail at tom.ryan@esync.com or phone at 630-876-0607.
 

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