ARC Advisory Group has been conducting an annual analysis of the global warehouse management systems (WMS) market for the last 20 years. The process involves an analysis of large amounts of information and interviews with executives from numerous WMS software companies; and concludes with the publication of ARC’s WMS Global Market Research Study.
Omni-Channel is Still King
Last year I published an article (Omni-Channel Fulfillment Drives WMS Adoption) on LogisticsViewpoints that discussed the prevailing factors affecting the market. As you may expect, investments to support e-commerce and omni-channel fulfillment is still the predominant dynamic stimulating WMS market growth. WMS vendors are responding to this fulfillment trend with features and functionality to support their customers’ evolving requirements. As I stated last year, multi-channel warehouses require new logic to manage e-commerce waves, put-wall processes, and shipment documentation. Other increasingly important e-commerce related WMS functionality includes high-frequency order batching and robust returns management to handle the high volume of returns typical to an e-commerce environment. For example, JDA recently added the ability to match returns to the original order within the WMS system. This small enhancement is critical for retailers that receive returns from multiple sources, as it enables the WMS to match the return to the appropriate customer, triggering the company’s back-end financial system to process refunds. Beyond the trend of e-commerce, there are a number of less pervasive, but still very important factors and trends influencing the WMS market landscape.
Solution Footprints Extend to the Consumer
The traditional best-of-breed WMS vendors that historically focused exclusively on supply chain processes are extending their solution footprints out to the store and into order management processes. Retailers and brand manufacturing companies with a retail presence are dealing with increased complexity from managing multiple channels. In response, many retailers are adopting in-store inventory and fulfillment solutions to enable the integration of online with brick and mortar channels. In fact, it took only two years for there to be as many retail locations using Manhattan Associates’ in-store fulfillment solution as there are warehouses using the company’s WMS. HighJump also recently launched its in-store WMS that supports in-store inventory management, picking, and fulfillment processes.
Over the last 12 months both Manhattan Associates and HighJump expanded their solutions to include mobile customer facing technology. Manhattan Associates acquired the assets of Global Bay Technologies last summer. Global Bay offers in-store clienteling and mobile point-of-sale capabilities, both of which are sets of in-store software that bridge the gap between physical retail and online capabilities. More recently, HighJump acquired Nexternal, an e-commerce platform provider that offers mobile order management capabilities.
Modernized WMS User Experience
The WMS user experience is improving as well. WMS providers are updating the underlying technology on which the systems are built. These modernization initiatives are heralding user improvements-vsuch as JDA’s new role-based user configurations that provide information and workflows relevant to the given user’s responsibilities. Meanwhile, HighJump and Manhattan Associates are modernizing their solutions to allow users to leverage modern mobile devices. For example, HighJump is developing a platform that leverages HTML 5 and provides greater support for mobile devices. At the same time, Manhattan Associates is investing in its mobile capabilities. As an example, Manhattan now offers a mobile application designed for warehouse managers that runs on tablets and brings together capabilities from WMS and Labor Management.
The SaaS Model Isn’t Catching On….Why?
Many segments of the enterprise software market have experienced substantial transitions from perpetual licensing to the software as a service (SaaS) model. Similarly, our research shows that SaaS adoption is wide-spread in the transportation management systems (TMS) and global trade management (GTM) systems markets. However, SaaS adoption of WMS still remains limited. Why? In my option, SaaS deployments of GTM (and TMS to a lesser degree) can provide trading partner network benefits to users and their partners. This benefit is not of high relevance to WMS customers. At the same time, SaaS solutions offer financial risk reduction benefits, as the solutions are financed with periodic payments rather than capital purchases with large upfront costs. However, there is a general view that SaaS applications often allow for less configuration and customization than their on-premise competitors. I believe that many WMS customers prefer to have a real-time WMS system on-premise and owned outright so they have greater control over the structure and execution of the processes that WMS support. The potential total cost of ownership benefits from SaaS deployments offer promise, but they need to overcome the relative benefits offered by a perpetual license and a traditional deployment.
Although the WMS market is a mature enterprise software market, it continues to progress and evolve. Much of the market’s growth is driven by the e-commerce boom and the omni-channel paradigm shift. ARC’s recent research on omni-channel fulfillment shows that e-commerce sales grew at an average of 40 percent over the last 5 years, and survey respondents expect similar growth over the next five years. WMS will remain a critical application in the support of online order fulfillment and the integration of fulfillment channels. And WMS users will continue to invest in the technology to meet the increasingly labor-intensive fulfillment requirements.
WMS vendors are extending their solution footprints to connect retail locations with warehouse fulfillment processes. These same vendors are connecting the fulfillment process to the order management process as well. Additionally, the WMS applications themselves are evolving to offer more modern user experiences and to support modern mobility. A more detailed discussion of the factors affecting the global WMS market and a 5 year forecast of the market and market segments will be included in the soon to be published update of ARC’s WMS Global Market Research Study.