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.