The WMS market has matured, but its not getting stodgy it cant afford to. There are a few trends to expect in the coming year. Users can expect increased functionality for existing applications and add-on components. Additionally, the consolidation trend continues within the industry (Red Prairie recently acquired Marc Global). There will also be the following pressures:
ERP vendors encroaching on traditional WMS market space
WMS vendors encroaching on traditional ERP functions
Increased competition between best-of-breed WMS and lower-tier WMS vendors
Increased Functionality
Increased demands by the user community have resulted in enhancements to WMS functionality that would have been expensive modifications just a couple years ago. This trend is particularly beneficial to companies embarking on a WMS project for the first time.
Users are becoming more demanding about the functionality and capabilities technology can provide. They and their customers want integrated systems and integrated supply chains. This means many users are looking to optimize their existing software applications or invest in newer versions of their aging technology.
Therefore, vendors must continuously enhance their existing applications to offer more functionality and value, including easily configurable reports and communication with host systems to show work in progress, metrics for labor productivity and operational performance.
Gartners recent Market Trends report states, North American midsize businesses will experience the most growth in IT investments of any company size sector through 2009. ERP and supply chain management continue to rank among most companies top-10 initiatives. More midsize businesses are starting to invest in automation and want more out of warehouse management applications without significant cost barriers. For this reason, expect to see vendors giving more attention to service-oriented architecture (SOA) in their new releases of their WMS.
SOA refers to the required standards that allow an assortment of disparate applications to communicate with each other. This approach enables more integration, flexibility and practical uses of supply chain execution technology.
ARC Research reports RFID solutions did serve to boost sales in the WMS market, but not as much as many suppliers had hoped. Although ARC forecasts growth for RFID modules, they say add-on components to WMS, such as labor, optimization and transportation, are actually poised to grow faster than RFID.
Last year, the WMS market grew faster than it had in several years, yet it is estimated that a considerably high percentage of the WMS potential market remains untouched. The majority of current WMS activity tends to focus on upgrades to existing programs. WMS suppliers are continually looking for opportunities to grow their revenues and market shares by offering new features, which often take the form of enhancements. Valuable areas that vendors should focus on include increased flexibility, improved reporting, problem management and Web-based system capabilities.
ARC Research classifies WMS suppliers in three categories: best-of-breed WMS suppliers, ERP suppliers who sell add on WMS modules that are built on the same code base and data model as their larger ERP solution and suppliers who differentiate themselves based on their knowledge of material handling. Competition is increasing across the categories as each continues to add capabilities. ERP vendors are encroaching on the WMS arena, best-of-breed WMS are moving in on the ERP space and tier two WMS vendors are beefing up their value relative to functionality as an alternative to both.
ERP Vendors Encroaching on Traditional WMS Market Space
Even with the consolidation of ERP applications (i.e. JDE with Peoplesoft and then Peoplesoft with Oracle), the ERP vendors still must seek competitive opportunities. The ERP vendors see the WMS market as a means to further capture market share for their applications. However, the ERP vendors are faced with a dilemma. They want to offer WMS functionality under their ERP application umbrella, but they do not have the history of development that traditional best-of-breed WMS applications offer. Their dilemma is that they also must provide easy interfaces between their ERP application and the best-of-breed WMS applications in order to maintain marketability to users of the best-of-breed WMS applications. This is particularly apparent with SAP, which has recently transitioned from pushing an SAP-only WMS approach to creating standard interfaces to allow their ERP applications to communicate with other WMS applications.
Although the ERP vendors offer basic warehouse management functionality available from all WMS vendors, they fall short when required to perform some of the more specific WMS-based functions such as carton cubing for shipments, inventory replenishment and task interleaving. But the ERP vendors are working to address these areas, which strengthens their position in the competitive landscape.
WMS Vendors Encroaching on Traditional ERP Functions
The best-of-breed WMS vendors have watched the ERP vendors add capabilities to their applications in order to capture consumers and market share from the traditional WMS customer base. In order to survive and thrive, they have adopted a best defense is a good offense approach. Therefore, the ERP applications now must not only try to add WMS functions to their applications, but they must contend with the WMS vendors migrating into their manufacturing applications marketplace. The tier one WMS vendors now offer modules that can support basic manufacturing functions traditionally owned by the ERP application vendors. The WMS applications now offer functions such as manufacturing scheduling, raw materials allocations and materials consumption accounting (backflushing).
Increased Competition Between Best-of-breed WMS and Lower-tier WMS Vendors
Another competitive force confronting the tier one WMS vendors is the increased functionality available from tier two vendors at a more competitive price point. The enhancements in technology (i.e. faster application platforms, more powerful and robust functionality in database applications) have enabled tier two WMS vendors to develop more sophisticated application functionality at a lower development cost than what the tier one vendors faced during their development cycles a few years ago. As a result, those customers who are comfortable with a vendor without a long application development history can take advantage of lower-cost tier two vendors who offer functionality equal to what can be provided by a tier one vendor.
What does this mean for those who are looking at implementing a WMS or upgrading their existing applications?
1. If you are also implementing an ERP application or an ERP application upgrade, you must investigate what options are available from your ERP vendor and evaluate if they are sufficient to fully address your WMS requirements.
2. If you are implementing a WMS application or upgrading your existing WMS application without any changes to your existing ERP application, you should look at what the tier two WMS vendors offer compared to tier one WMS vendors.
It is currently a competitive market with three strong players, which means that buyers are at an advantage. Tier one WMS vendors are facing competition at a more intense level than in the past. They face encroachment on functionality from the ERP vendors and price pressure from the tier two vendors. The key here is that customers who are looking for a good deal on a WMS application will find it.
With the breadth of options available to choose from, customers should look to experienced partners who can assist with their WMS integration projects. Whether choosing an ERP WMS module, a tier one WMS or tier two WMS vendor, the most important aspect of WMS integration is to develop a detailed, comprehensive requirements specification document that can ensure customers requirements are fully addressed and their distribution and business processes are fully supported.
Bill Tyng is a systems consultant with FORTE, a consulting engineering and systems integration firm located in Cincinnati,
