Warehouse Management Systems Archives

Retailers’ secret advantage for lightning-fast order deliveries

Guest Commentary | By Roger Falkenstein • 06/23/2016

How and when an order is delivered plays a huge role in the experience of an omnichannel retail consumer. Particularly in an industry where retailers offer most of the same items at similar prices, the speed of delivery can be a customer’s deciding factor.

The need for speed and convenience in our lives – combined with shorter and shorter delivery promises by online giants like Amazon – have helped shift expectations from multi-day deliveries to one day or even one hour. This can seem like a nearly impossible expectation for brick-and-mortar stores, but it turns out that these retailers already have an important advantage.

Rather than a cost burden, a brick-and-mortar storefront can actually be a differentiator that helps drive one-hour delivery times. Unlike the larger online retailers that depend on warehouses located in metropolitan areas, you have a built-in launching pad for lightning-fast delivery.

Let’s examine how in-store order fulfillment can help meet the demand for one-hour delivery times.

Logistics considerations
Here’s what needs to happen: Upon completion of the online order, it’s transferred from your eCommerce system to a work queue that triggers a task for a store associate to pick and pack the order. The system should direct the associate on the optimal pick path through the store to locate the inventory. Then the associate uses a mobile device to locate the item, verify it’s what the customer ordered, confirm the pick, and stage it for delivery while giving the driver enough time to meet the delivery deadline.

No problem, right?

To achieve fast in-store order fulfillment processes that support a one-hour delivery promise, your store operations have been set up strategically and with flexible processes. Consider:

Pick times: Picking processes are critical for minimizing travel time throughout the store, which is the most significant time expended when picking orders. Some retailers use one store associate to pick multiple orders, while others rely on a zone method that assigns particular employees to pick particular areas of a store. Either way, your systems should direct pickers on a logical path and sequence to minimize fulfillment times.

Resource management: Manage store resources like you would in a warehouse. Look at the schedules and ensure you have the associates to support your delivery promises. Consider using labor metrics to determine how you are progressing against your customer promises, how individual employees are performing and how you are managing priorities.

Customer communications: Expect that your customers want real-time information at every step of their order. By leveraging a direct interface through your web store, you can send an instant communication to your customer when the order is fulfilled, on the delivery truck, and when it has been delivered.

How will you complete the last mile?
Retailers are using different delivery models depending on their store needs, resources, and delivery radius. Here are some of the most common:

Dedicated fleets: In this scenario, a retailer has a fleet of vehicles with the sole responsibility of delivering items from the store to the customer. They often employ sophisticated routing tools to make sure deliveries are made at the right time and within a logical, minimal-mile path.

Dedicated individuals: Think of it like the pizza delivery concept: You have one employee who makes very local deliveries to your customers, perhaps within just a few miles of your store. This can keep delivery costs low and delivery times very short.

Customer pick up: This can be an efficient and positive experience for you and the customer if you’re strategic about shaping the right experience. Think about whether you want customers coming into the store or driving to a pick-up window to get their order, how much time you want a store employee interacting with a customer, and so on.

Storage lockers: These are convenient pick-up sites located in your customers’ neighborhoods. After an online order is picked, the store delivers it to a storage locker. The customer, equipped with a unique code to open the locker, can arrive whenever it’s convenient to retrieve the items.

The right technology is essential
Putting together a patchwork of systems and processes may seem like a faster and more inexpensive approach, but it’s not sustainable and there’s simply too much at stake. A flexible breed of technology is essential for offering a consistent and positive delivery experience.

In-store fulfillment platform: Gain all of the tools you need to set up an in-store fulfillment operation, including order capture, order management, store mapping, work queue management, wave planning, real-time inventory tracking, and automated shipping processes for delivery services.

Web store: Drive sales with a convenient and brand-right shopping experience for consumers that accurately quotes shipping and sales tax rates upfront, upsells additional products, allows customers to specify delivery times, and more.

Real-time inventory visibility: Implement a single pool of inventory per product to which all channels have access, and introduce fulfillment prioritization rules among online, home delivery and store requirements.

Integration with other retail systems: Ensure your store systems are integrated. This includes store point-of-sale, planograms, order management, transportation, and ERP systems to maximize efficiencies.

With a storefront, you have an immediate advantage for meeting a one-hour delivery promise. But that depends heavily on orchestrating your logistics processes strategically and employing flexible store technology. With those tools, you can meet customer demands in a way that’s profitable, scalable, and that gives you a competitive edge.

Roger Falkenstein, HighJump Territory Manager, has been engaged in consultative sales and territory management with HighJump for over 28 years. As a seasoned innovator, Roger is leading the strategies to deploy the HighJump supply chain execution platform in support of retailers’ continuously evolving omni-channel requirements. He holds an engineering degree and nearly 40 years of experience in the supply chain industry.

Ten Years of Logistics Technology Trends

Statistics | By Clint Reiser • 06/22/2016

Last week I read the Logistics Viewpoints guest post by Chainalytics discussing the pitfalls of decision-marking biases. Although the Chainalytics article focuses on supply chain decision making, these biases can apply to business forecasting as well. Reading this article made me interested in my own potential decision-making biases. I chose to take time on Friday to review some of the research I have conducted during my ten years as an analyst at ARC Advisory Group. Hopefully this review would provide me with insight into my past forecasting performance and the accuracy of my predictions. Ultimately, I believe that greater self-awareness will improve my feel for the dynamics of the supply chain technology markets and also improve my future forecasts.

Logistics Viewpoints articles typically discuss topics that are current and top of mind, as they should. But an occasional examination of the past can deliver interesting insights, so I decided to discuss my historical analyses of the the supply chain planning (SCP) software market and the warehouse management systems (WMS) market in this blog post.

WMS Market 2010 to Today
The year 2011 was the first time I conducted analysis on the global WMS market. I did this with Steve Banker, who had been researching the WMS market for almost 15 years by that time. The recent global economic downturn made forecasting of software sales particularly difficult at this time. The WMS market had for the first time contracted substantially in the previous year (2009). It returned to growth in 2010, but the growth was negligible compared to the previous year’s contraction (in essence, the downturn erased the four previous years of growth).

For the 2011 -2015 WMS forecast, Steve and I gathered and analyzed a wide range of data including vendors’ aggregate views on growth potential, past WMS and other SCM technology market growth rates, and past relationships between GDP growth and technology spending. We concluded that the WMS market would experience above average growth in the near future and then gradually revert back toward the long-term historical growth rate. Unfortunately (but fortunately for WMS software vendors) we underestimated the pent-up demand that built during the recession and therefore underestimated the spending bounce that would occur in 2011. It turns out that the WMS market grew by about 14 percent that year, almost twice as much as we had forecast. This underestimation had lasting effects on the difference between our forecast market size through 2015 and our future base-year estimates of the market’s size for each of the following years (ARC updates the global WMS study annually. Our forecast growth rates were largely in-line with actual growth going forward). In addition, I also underestimated the increased demand for WMS solutions that would be driven by the rapid and ongoing increase in e-commerce fulfillment. I expected e-commerce growth, but the degree to which it stimulated WMS sales far surpassed my expectations.

SCP Market 2006 to Today
I mentioned in an LV post last September that the 2005 supply chain planning (SCP) study was the first market study I developed as an ARC analyst. Needless to say, the SCP market has experienced substantial changes over the last ten years. In 2006 multi-echelon inventory optimization (MEIO) start-ups were “the next big thing” and the ERP vs. Best-of-breed debate was raging strong. As JDA noted in a recent LV guest post, the best-of-breed vs. ERP argument is largely history because today’s marketplace is much more dynamic and complex than it was in the past. Not to mention that best-of-breed suppliers have developed platforms that provide the integration and visibility benefits of an ERP system, and ERP vendors have improved the features and functionality of their supply chain solutions to better compete with best of breed vendors. And to bring it all together, today’s best-of-breed SCP and ERP vendors have acquired most of those MEIO vendors to augment their SCP solution footprints with more advanced optimization capabilities.

My forecast growth rate for the SCP market fell short of the actual growth rate, similar to my forecast for the WMS market. However, the factors behind the forecast to actual variance differed greatly. In 2006, it appeared that ERP vendors would successfully displace much of the best of breed market share through pricing pressures and integration benefits. Although some ERP vendors did make substantial market share gains, the results were more subtle than I initially expected. In addition, S&OP processes continued to grow in popularity and those processes relied heavily on SCP applications. Finally, the improvement in computing power allowed for real-time supply chain scenario analysis and the ability to analyze data at a more granular level, thereby expanding the value proposition and ROI of many SCP solutions.

Lessons Learned
I am a firm believer in the golden rule of forecasting, to be conservative. However, the review of my past WMS and SCP market forecasts shows that even the golden rule of forecasting can be over weighted. In the case of the WMS and SCP market, I believe that I also over weighted the recent developments and trends in the market and under estimated the ability for markets to enter new growth phases driven by unforeseen factors. I believe my prior market forecasts were approximately correct but also realize that my new found awareness of underestimating future growth has helped me recognize my own decision-making biases and will hopefully contribute to improvements in my future logistics market forecasts.

Global Warehouse Investment Driven by Secular Trends

Warehouse Automation | By Clint Reiser • 08/19/2015

Earlier this month, I published a Logistics Viewpoints article discussing the prevalent factors affecting the global WMS market. I mentioned that the research process leading to the publication of ARC’s WMS Global Market Research Study includes interviews with executives from numerous WMS software companies. However, the interviews are only one part of the data gathering process. We also utilize trends from our many years conducting this research and complementary ARC research such as our Warehouse Automation & Control study. Finally, there is much third-party research that provides valuable context for our analysis. This includes macroeconomic data and research on complementary markets. Warehouse and logistics property investment is among the most complementary to the WMS and warehouse automation markets. CBRE and Prologis are global organizations that publish insightful logistics property research for regions across the globe. I find trends in this market to be especially effective at providing color to the developments in warehouse technology markets.

Globalization and International Trade
Prologis recently published a paper on logistics property obsolescence, the causes, and the implications of the process. This report provides useful insight into property dynamics and points out structural shifts in the global demand for warehouse capacity. For example, Japan’s economic transition from manufacturer to large importer of goods has led to insufficient quantities of institutional distribution warehousing to support imports. Prologis quotes CBRE research that estimates the Japanese institutional logistics market grew almost 200 percent, or an annual rate of over 10 percent, from 2006 through 2014. So, although the Japanese economy is growing slowly, this shift in supply chain networks and distribution patterns is supportive for warehouse and distribution investments and I believe it will likely spur investment in warehouse automation as well. Similarly, European trade growth has been substantially higher than the region’s GDP growth. This growth has led to warehouse property development in northern European port areas and inland hubs such as Lyon France and areas of Poland.

The E-Commerce Impact
CBRE has identified “technology” as one of three long-term structural shifts affecting industrial property markets (the others are globalization and demographics). The firm published a report discussing results from polls and discussions about technology’s impact on industrial property. The results, obtained from its Power of Three conference in Paris, show that e-commerce and online retailing is the factor expected to have the greatest impact on logistics occupancy decisions in the near future (50% choosing it as the technology likely to have the greatest impact). This is consistent with ARC’s research on the WMS and Warehouse Automation markets, showing that investments to support e-commerce and omni-channel fulfillment is still the predominant dynamic stimulating growth of these markets as well.

CBRE also publishes quarterly Marketview reports that provide updates on the regional industrial real estate markets. In its US Industrial Q2 2015 report, CBRE further notes that the structural changes of omni-channel retail and e-commerce will drive logistics facilities investment in markets of all sizes to enable quick delivery access to as many customers as possible. The growing demand for warehouse space in secondary markets in the US is partially driven by this e-commerce competition to deliver orders same day or next day. Amazon’s fulfillment center expansion into smaller facilities closer to population centers is probably the most frequently noted example.

The strength of the US dollar was noted a transitional factor. I agree, as exchange rates typically adjust over time unless they’re constantly pegged in a similar manner to China’s policies in the past. In contrast to US logistics property demands, Canada is coming off a situation-specific downturn in logistics property demand resulting from Target’s former facilities coming onto the market after the company’s retreat from Canada. Target Canada’s warehouse automation stock is likely to affect the warehouse automation market in Canada and the US as well.

CBRE’s recently published Asia Pacific Market Outlook noted much of the same factors impacting that region, stating that demand for logistics warehousing space will remain strong due to organized retail in emerging markets and strong growth of e-commerce. Similar to the US, e-commerce providers in China, India, and Japan are also locating fulfillment properties closer to population centers to reduce delivery times. Other factors positively impacting the region include increased use of 3PLs to achieve efficiency improvements and China’s gradual transition to increased consumption. Notable exceptions to the region’s growth include Thailand, due to political instability, and Singapore, due to labor shortages.

Conclusion
ARC’s ongoing research on the global WMS market recorded a post-recession uptick in WMS revenue growth. Although signs of this rebound appear to be moderating, numerous secular changes are contributing to ongoing investment in WMS and warehouse automation. Since the warehouse technology markets are clearly complementary to warehouse property, it is useful to monitor developments in this segment of real estate. The structural changes impacting the global industrial real estate market are consistent with the major contributors to growth in warehouse technology adoption. These changes, notably globalization and e-commerce, are contributing to warehouse space and technology growth rates above those of global GDP.

Global currency fluctuations have impacted trade and financial markets significantly over the last year. However, these foreign exchange rate effects typically have only temporary impacts on global imports and exports. Regardless, the logistics sector is likely to obtain a net benefit from increased outsourcing and trade. Meanwhile, investments in logistics technologies are also likely to increase as planning tools will be required for distribution network planning and facility reconfiguration will stimulate additional investment in WMS software and warehouse automation.

WMS Market Continues to Evolve and Grow

Omni-channel logistics | By Clint Reiser • 08/05/2015

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.

Conclusion
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.

How Genco’s Labor Management Project Uncovered Extensive Opportunities

Warehouse Management Systems | By Clint Reiser • 05/27/2015

Last month I attended JDA Focus, the company’s annual user conference. My favorite presentation from the event was that by Tony Simmons, an Operations Analyst from Genco. The presentation discussed Genco’s application of JDA Warehouse Labor Management (JDA WLM) to manage and ultimately reengineer its business processes. I found it to be a great example of how perceptive individuals, when digging into a project, can yield insights and performance improvements beyond the original intent. This warehouse operations case would also be a good example of “real options” in the finance world.

Genco manages a number of warehouses for a large US-based food producer. A few years ago, Genco ran a time study at a greenfield distribution center. The workers were not informed of the study taking place, assumedly to arrive at unbiased results. Subsequently, management informed the workers of the ongoing employee performance and reporting process. Thereafter, performance improved by 60 percent, likely due to the presence of the labor tracking and management. This alone is a notable efficiency improvement. However, the following results are what I found most interesting.

After a short time, performance improvements flat lined. Genco then decided to group data by operation (as opposed to grouping by worker) in JDA WLM to analyze the efficiency of the various tasks and jobs, including indirect labor time. This data was coupled with warehouse layout parameters such as travel distances. The analysis uncovered that workers were “performing inefficient work, efficiently.” Specifically, workers were traveling too far from pick-up to deposit, and deposit to next pick-up. They were also traveling excessively between areas. This information, along with further analysis regarding forklift mobility, led to a new travel sequence and warehouse layout that reduced pick-up to deposit travel times and downtime. To reduce time from deposit to the next pick-up (deadhead flow), Genco decreased the size of work zones within the facilities and prioritized job sequencing to those in the same work zone. This process change also decreased congestion and waiting during peak hours. Finally, Genco adjusted its product placement by placing greater emphasis on shipping tasks and more closely storing items that often ship together. This adjustment reduced travel for picking and put-away and enabled workers to turn staging lanes more quickly.

Tony wrapped up his presentation by categorizing the obtained insights into those expected at the project inception – employee accountability and performance visibility; and those that were discovered during the process –warehouse layout, operator flow, and product placement improvement options. However, I see the discoveries as an example of improvement options that come to light from a better understanding of one’s business processes and a motivation to improve.

Achieving Fast Payback from Warehouse Optimization

Inventory Management | By Clint Reiser • 06/25/2014

I had the pleasure of attending Manhattan Associates’ user conference last month. This conference included a number of presentations by Manhattan’s customers, partners, and employees. I considered the presentation by Howard Turner to be highly informative and full of practical insights that Logistics Viewpoints readers would find interesting and applicable to their own business.

Howard and others at his company, a tier 1 automotive parts supplier (“Tier 1 Auto”), made a decision to move forward with a supply chain transformation project that would utilize Manhattan Associates’ systems to support its warehouse operations. Tier 1 Auto’s planned warehouse system footprint included Manhattan WMS (WMOS) as well as labor management and slotting optimization to be implemented across several global sites. The internal complexities surrounding the WMOS pilot project delayed subsequent steps in the implementation process and threatened the overall project’s time to value. In response, Tier 1 Auto evaluated the project schedule, its steps, and the sources of potential productivity improvements. They determined that with some added effort, the labor management system (LMS) and slotting optimization software could be implemented independently from the core WMS system. This flexibility offered the opportunity to achieve some small wins that could jumpstart positive momentum, reinforce the project’s value to the company, and speed up the payback for the project as a whole.

Labor Management Provides Savings
The Tier 1 Auto team decided to accelerate the installation of LMS at two sites and slotting at two others prior to the completion of the WMS pilot project. The sites chosen for LMS were between 300,000 and 600,000 square-feet and staffed by 250 to 500 employees. A consulting company was hired to assist in the evaluation of labor processes and the establishment of labor standards for numerous direct and indirect tasks. To obtain additional savings in the future, Tier 1 Auto acquired smartphone applications to allow their industrial engineers to internally develop warehouse task time studies for use in subsequent LMS implementations. The deployments took about 6 months to complete. For each site, the company achieved approximately 15 percent improvement in receiving metrics and a 25 percent improvement in shipping metrics, with estimated long term efficiency gains of up to 35 percent. Annual savings amounted to $700,000 at site 1 and $800,000 at site 2. They’re also planning to expand LMS engineered standards to additional processes and locations within the warehouses. This is expected to provide additional savings.

Slotting Optimization Provides Instant ROI
Tier 1 Auto chose to implement slotting optimization at two sites. One site was a 200,000 square-foot heavy duty parts center and the other was a 500,000 square-foot site that managed smaller replacement parts and utilized warehouse automation. At the time, both sites utilized legacy WMS. The slotting optimization process involved minor reconfiguration of the facilities in preparation for a new season based on demand forecasts and historical data. The parameters included item movement history, item and slot attributes, and item movement forecasts. The implementations took approximately three months to complete. The goal of the slotting projects was to realize short term labor cost reductions. This was achieved with a one year payback period for these projects.

Conclusion
Tier 1 Auto understood that the WMS solution was the central software system to its supply chain transformation project. When presented with chronological set-backs, management did not think statically. Instead, they thought creatively and evaluated the project interdependencies and overall objectives. They determined that fast-tracking LMS and slotting optimization prior to WMS implementation would accelerate productivity improvements, speed up the project’s payback, deliver positive momentum, and provide the team with exposure to Manhattan Associates products.

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