Guest Commentary: Is Cloud-Based WMS a Real Option for Complex Distribution Centers?

Three years ago, I thought the probability of using an outsourced warehouse management system (WMS) to run a complex distribution center was low. Today, my perspective on this topic has dramatically changed. The pervasiveness of virtualization technologies, which now enable infrastructure-as-a-service (IaaS), has ushered in a new computing platform, “the cloud,” which is perfect for WMS deployment.

A few years ago, SaaS transportation management systems (TMS) were emerging as a credible option for enterprises of all sizes, and industry experts wondered if the same could be true for WMS. SaaS TMS has the benefit of a user constituency of desktop PC users. These users are able to access the TMS through a Web browser and the browser is a sufficient way for them to interact with the application. WMS, on the other hand, is primarily used by people who are not tied to a desktop. These users typically interact with the application via mobile computers that may include bar code, RFID and voice interaction capabilities. Additionally, speed and response of the user interface are paramount for many warehouse tasks. And most importantly, WMS is one of the most customized applications in the enterprise. Three years ago, it just did not seem possible that any outsourced model could provide the flexibility required for most WMS users. Today, the outlook is considerably changed.

Defining SaaS and Cloud
The terminology around this new method for delivering application software can be quite confusing. Microsoft’s television advertisements would have you believe that “cloud” is a new way to watch television shows when stranded at the airport (see commercial).

SaaS, Cloud and Hosted are often used interchangeably; however, there are technical differences. In most cases, SaaS refers to a system that is single instance, multi-tenant. A single instance, multi-tenant model is one where every enterprise (tenant) using the system is running the exact same version (instance) of the software. Cloud and Hosted are similar in that each customer runs a version of the software that can be personalized to their specific needs. Hosted and Cloud solutions typically provide the same personalization capabilities as an on-premise system. The primary difference between Hosted and Cloud is that Cloud uses emerging server virtualization technology to quickly and inexpensively add computing resources. Traditional Hosted solutions typically have high hardware costs because there is dedicated hardware infrastructure for each customer.

“One Size Fits All” Does Not Fit Most Distribution Centers
I have been in many distribution centers. Frankly, they almost all look the same for the first five minutes I am there. They all typically have racking, fork trucks, and some type of automated material handling equipment. However, after five minutes, it becomes obvious that no two distribution centers work the same way. There are unique product handling requirements, building layout considerations, and even local workforce customs that drive specialized processes in many distribution centers. The key for a successful WMS adoption is being able to flex to meet these unique requirements.

WMS business processes are highly integrated between the physical handling and movement of products and the interactions with the software. Unlike the TMS model, where the physical movement of trucks is not integral to the TMS processes, WMS processes are tightly linked to the employee and the physical movement of products. Due to this tight linkage (and opportunity for improving the processes using industrial engineering), WMS processes are not a “one size fits all” situation.

Because WMS cannot be a “one size fits all” application, deploying a WMS as a traditional SaaS application can be problematic. Traditional single instance, multi-tenant SaaS is just not flexible enough to meet the unique processes required by a complex distribution center.

A cloud-based application has all the benefits of SaaS but provides the flexibility you would expect with an on-premise WMS. For distribution centers with unique processes, or processes that change frequently, a cloud-based WMS may provide increased flexibility over a traditional SaaS WMS.

Automated Material Handling Equipment Integration
A common objection I hear to cloud-based WMS is its ability to integrate with complex material handling equipment such as conveyor sortation systems, pick-to-light, carousel and automated storage and retrieval systems (ASRS). While the integration to this equipment must be carefully tested, it is possible to accomplish this integration with a cloud-based system (we are currently installing a cloud-based WMS for a customer using complex pick-to-light, automated picking and conveyor sortation). I certainly do not see technology barriers to integrating automated material handling equipment with a cloud-based WMS.

The Cloud vs. On-Premise
From a technology perspective, a cloud-based WMS can provide all the flexibility of an on-premise solution. So what are some considerations for a deploying via the cloud vs. on-premise? Here are few additional considerations to help with the decision.

Economic Model: Cloud-based deployments are priced based on subscription, which can minimize up-front capital expenditures for perpetual software licenses and server infrastructure.

Technology Management Competency: Many organizations are focusing on their core competencies and outsourcing tasks that are not within this scope. In many cases, technology infrastructure can be managed more effectively by the engineers who created the technology rather than your own IT organization.

Cost of Upgrades: WMS upgrades are often expensive and complex because of customization done to the WMS. With a cloud-based WMS, the software upgrades and updates are managed as part of the service by the technology provider. This can significantly reduce the cost and complexity of a WMS upgrade.

Summing it Up
Much has changed in the past three years. Cloud-based WMS is a viable option for even complex distribution centers. Unlike traditional SaaS approaches that have limited flexibility, cloud-based applications provide the flexibility and personalization of an on-premise solution with all the benefits of a fully managed solution. While cloud-based WMS may not be the right choice for every complex distribution center, it is certainly an option worth considering.

Chad Collins is Vice President of Marketing and Strategy at HighJump Software. He joined the company in 2002 and has more than 12 years of experience using technology to deliver innovative supply chain solutions. Prior to HighJump Software, he was in the supply chain practice of Cap Gemini Ernst and Young Consulting, where he managed supply chain technology projects for the world’s leading manufacturers. Mr. Collins holds a Bachelor of Science degree in electrical and computer engineering from Marquette University and an MBA in supply chain management from the University of Minnesota’s Carlson School of Management.


  1. Many organizations have for years ran applications hosted on a “Corporate Server”, including WMS apps with links to local servers for Warehouse Control and RF devices.

    These organizations should see no theoretical difference between thier current approach, and a “Cloud” based approach. Really, it just a matter of where the server is and who owns / is responsible for it.

    Certainly there are considerations with this approach, but they are not related to the capabilities of technology. Many global organizations run off a single central instance of their ERP for example.

    Sadly, I think that by the time “Cloud” becomes a well regarded means of providing IT services, somebody will conjure up a new term to confuse the users. We have already lived through “Service Bureau”, “Application Service Provider (ASP)”, “Software as a Service (SaaS)”, “IT Hosting”, “IT Outsourcing” as a few of the terms which essentially describe the same thing – letting a 3rd party be responsible for your systems.

    Yes, technology advances have provided a platform which can be accessed and used reliability on a global scale, but folks have been running apps remotely and successfully for a long, long time.

    Steve Murray
    Principal & Chief Researcher
    Supply Chain Visions

  2. Putting your WMS in the cloud is a good idea whether you are upgrading to a new WMS or simply reworking your corporate infrastructure. However, if you think about it, the movement to the cloud really addresses the commodity part of the WMS solution. Not really giant savings and as stated above, a restatement of previous models.

    Real innovation and significant savings occur when a SaaS WMS solution confronts the traditional cash cow of customizations and long implementations. Traditional WMS solutions make most of their revenue on these services. SaaS solutions designing flexibility through process models and business rules engines can dramatically reduce if not eliminate the need for WMS customizations for most DC’s. That is really game changing.

    You can’t do it by moving a traditional solution to the cloud. You need a new architecture and a commitment to driving down the cost of services.

    Companies buying a new WMS should do a real comparison. There are robust SaaS solutions that can do the job. Look under the covers any you will see where the meaningful innovation is.

  3. Saas works pretty well when your WMS has less complicated, striaght out-of -the-box, simple processes. But if you have implemented a complicated MHE, say a conveyor system, the equation changes.

    Let me demonstrate with a example. Suppose during a weight check on a carton moving on a conveyor (after all the items for the order are picked and placed on the carton) results in rejection of the carton, the next process would be scanning of the carton barcode, the WMS would read it and instruct the conveyor (ofcourse via the PLC) to move the carton to the rejection lane. This works perfectly well when the WMS is deployed on premise.

    However, when on a cloud, the WMS will have to wait for the response from the cloud to move the carton to the rejection lane. Since the conveyor is constantly moving, if there is delay in response from the server on the cloud, the rejected carton will move into the accepted carton lane, thus leading to shipment errors. On the same lines we can have error with sorters as well, when there are large volumes transactions taking place.

    MHE integration on the cloud would face technological barriers as this is the area where extensive trials need to be carried out and proven before it becomes commerically acccepted in the warehousing space.

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