WMS Archives

Revisiting the “Best-of-Breed vs. ERP” Debate in WMS

Food & Beverage Industry | By Steve Banker • 03/04/2009

I hate multi-tasking. Give me one task at a time, and sufficient time to accomplish it, and I’m fairly happy. But that rarely happens. Even so, my work life has to be easier than a warehouse manager’s. Their main job, of course, is to make sure that customer orders are fulfilled accurately and on-time every day. This alone is more than a full time job. But consider all the other things they are often called upon to do: hire and layoff employees; create daily work schedules; ensure that workers are properly trained and that safety procedures are enforced; make sure that all equipment is properly maintained; ensure that the facility is in compliance with all regulatory and environmental regulations; and, if it is near the end of the fiscal year, work on next year’s budget.

I firmly believe all distribution centers should use Warehouse Management Systems (WMS). But many warehouse managers accomplish the tasks I described above with a combination of word processing, spreadsheets, calculators, a calendar, and a filing cabinet. And in many cases, this approach is good enough. In contrast, large companies tend to have Enterprise Resource Planning (ERP) solutions that include Human Capital Management (HCM), Enterprise Asset Management (EAM), Environmental Health and Safety (EH&S), and budgeting applications that could be used to standardize and automate these tasks. But should these applications be used? Do they fit the needs of the warehouse?

Sometimes they do, and sometimes they don’t.

Consider a warehouse with forklifts. You probably wouldn’t want to use an enterprise-class EAM solution to make sure those forklifts are getting preventive maintenance. It would be too “heavy” a solution and not worth the cost of acquiring extra licenses. On the other hand, if you have extensive material handling equipment in your DC, an enterprise-strength EAM solution might be very appropriate.

When does it make sense to use a best-of-breed’s WMS platform that includes light HCM/EAM/EHS/etc. functionality (i.e., “WMS as ERP”) versus using a WMS that is part of an extended ERP solution? In recent weeks, I’ve talked to product managers at Oracle and SAP (the ERP behemoths) and Manhattan Associates, the largest best-of-breed logistics software vendor.

Let’s first consider “WMS as ERP”. Manhattan Associates has probably gone further down this path than any other best-of-breed Supply Chain Execution vendor. Their labor management solution is starting to look a lot like a Human Capital Management application designed specifically for the warehouse environment. Their LMS is based on engineered standards, so it measures worker productivity, both what workers achieved and what they reasonably should have achieved. It also has functionality that allows incentives (rewards) to be paid for workers that exceed standard work targets. Companies can also track whether training activities, or closer supervision of workers, results in improved worker productivity. Manhattan has also added functionality that allows warehouse managers to look at historical WMS data, combine it with a granular understanding of their warehouse labor productivity, and create budgets that more accurately forecast labor costs for the coming quarter or year. In the latest release, the solution combines its granular understanding of labor productivity with advanced math to greatly improve weekly scheduling of workers. In short, Manhattan’s labor management solution is in no way a complete HCM application, but it looks to be just what a manager running a complex DC needs to efficiently and cost effectively run their warehouse.

Now let us look at WMS as part of an extended ERP solution. SAP is getting good traction, particularly in the food and beverage industry, with their new WMS solution, EWM. SAP claims that EWM has 80 percent more functionality than their old solution, but a big reason they are winning deals in food & beverage has to do with their other solutions. F&B companies want total traceability and need to ensure that they are in compliance with health regulations. Functionality in EHS and across a variety of other logistics and manufacturing applications help them achieve these goals.

Oracle, for example, has won deals in a new vertical for the WMS market, service firms that perform maintenance on planes. Tighter integration to Oracle’s EAM application, and other aerospace and defense functionality, has helped drive these wins. EAM workflows such as work requests, material requests, and scheduling can trigger warehouse activities like picking service parts and delivering them to the right location.

When does “WMS as ERP” make more sense than WMS as part of an extended ERP solution? As is so often the case, the answer is “it depends”. But it’s clear that the old “best-of-breed versus ERP” debate is too simple. It is not just a question of deep functionality versus Total Cost of Ownership; there’s another question that needs to be answered: Where should a particular type of functionality reside?

Video Game Technology Comes to Warehouse Management Systems (WMS) Market

Logistics Software Vendors | By Steve Banker • 02/18/2009

Video game visualization technology has come to the Warehouse Management Systems (WMS) market. These new products and modules are not merely “slick” packages that are “nice to have” additions to a WMS solution. Whenever a software solution’s usability improves, new forms of productivity are enabled. The personal computer revolution, after all, was based as much on improved user interfaces as it was on increased computing power. These new video game-like graphical user interfaces are apt to lead to improvements in slotting, warehouse congestion detection, and error prevention.

Next View Software was first vendor to introduce visualization technology to the WMS market. When I first saw this technology demonstrated, it struck me as one of the most innovative solutions I have seen in logistics software industry over the past several years. Interestingly, Next View was not the only software vendor with this idea. In recent weeks, I’ve seen very similar solutions from Consafe Logistics and Accellos.

In fact, the folks at Consafe told me they were upset when they the read the report I wrote last September about Next View (available to ARC clients only). They had conceived this kind of solution four years ago, but the visualization engine they were attempting to use was not up to the job. It was not until about a year and a half ago, when Microsoft opened up its gaming technology interfaces, that they could begin serious development.

Similarly, top executives at Accellos told me they started developing their solution about a year ago. They had to wait for their gaming engine supplier to make substantial enhancements to their engine (which was completed in September) before they could finalize their development work. Accellos did not actually see Next View’s solution until their Visualize product was near completion.

So, three different WMS vendors came up with the same idea independently, and they developed products that are strikingly similar and coming to market within months of each other. The Next View solution is already available and the company is in discussions with several potential customers (but no deals have been closed yet). The Accellos product goes into beta testing on March 1st, with general availability beginning on April 3rd. Consafe’s solution will come to market in the second half of 2009.

So, why all the fuss? Why do I find this type of product so exciting?

As the screen shots below show, these solutions provide you with a three dimensional, virtual tour of your warehouse layout. By moving the cursor, you can “walk the aisles” or get a bird’s eye view of your facility. And if you double click on a rack location, you can get information on the inventory stored there (e.g., source, SKUs, age of inventory, etc.).

Video Game tech comes to WMS — Screen shot from Accellos’ solution

Screen shot of Consafe Logistics' solution — Screen shot of Consafe Logistics’ solution

The power of this type of system will come when it is used to detect and act upon current events or problems. For example, if you have an “aged inventory” alert, the system does not print out tabular data that could cause your eyes to glaze over. Instead, you execute a query, the warehouse and yard 3D layouts are displayed, and every location with aged inventory lights up and begins to blink. You can then zoom in on particular pallet locations and look at that inventory. At this point, you might tell a supervisor to immediately unload the trailers with aged inventory and move them to a priority use location. Similarly, aged inventory in the warehouse could be re-slotted into forward pick zones to be consumed more quickly.

Other queries that can be “visualized” include partial pallets in full pallet locations, high-velocity product in slots that should contain slow-moving inventory, and consigned inventory by customer. Of course, some of these queries can be automated with a traditional WMS reporting tool, but reporting tools can be difficult to use. Slotting is currently an add-on module that several WMS companies offer. What we may see in the future is that some forms of advanced functionality, like slotting, are not necessary when robust visualization tools exist.

In summary, I love the look and feel of these innovative products, and I believe their intuitiveness and ease of use will increase a manager’s productivity. Also, the fact that three different WMS companies came up with the same idea and developed similar products leads me to believe that visualization technology will ultimately become standard in WMS.

Supply Chain Practices and Technologies to Improve Cash Flow

Logistics Technologies | By Steve Banker • 02/11/2009

In a recession, cash is king. What can your supply chain team do to improve cash flow? What processes and technologies can help?

The most obvious action is to lengthen payment terms with key suppliers. Finance may do this without informing supply chain managers, but this works against the mantra of establishing an adaptive, demand-driven supply chain. An adaptive supply chain can efficiently respond to unexpected surges in demand. You will have a hard time responding to these surges if you are not a preferred customer. And if you screw your key suppliers today, they’ll remember for a long time after the recession ends.

Your suppliers are apt to see supplier inventory management programs as being a fairer alternative. One way this can work is that while suppliers may still deliver raw materials or components to a factory warehouse in large quantities, they are not actually paid until the materials or parts are scanned out of the warehouse and used in the production of finished goods. Similarly, lean processes that allow a manufacturer to receive goods in smaller quantities on a just-in-time basis will reduce outlays for raw material inventories.

That is the supplier side of the equation. On the customer side, you can segment your customers and provide the best deals and service levels to “preferred customers”-e.g., profitable customers that pay their bills on time. The Sales and Operations Planning (S&OP) process has begun to merge with Integrated Business Planning processes. In some companies, S&OP is chaired by the finance group. In addition to looking at demand forecasts and supply plans, the executive S&OP team also reviews the profitability of key customers and products. This profitability analysis is based on activity-based costing or theory of constraints costing so that true profitability by customer and by product is understood. In balancing supply with demand, the most profitable customers get preference.

Just as the supply chain team may end up with action items based on the executive S&OP meeting, the sales team should as well. For example, if a preferred customer starts to delay payments or takes other actions that negatively impact their profitability, the account manager should engage with the customer to take corrective action.

From a technology perspective, any solution that facilitates achieving the perfect order metric (i.e., the right goods, in the right quantities and undamaged, delivered on time, and billed accurately) will improve cash flows. Resolving order fulfillment disputes is not only costly, it also prevents timely payments.

A new generation of very low priced Warehouse Management Systems (WMS) has emerged. Traditional WMS solutions have a considerable amount of functionality designed to maximize labor efficiency in the warehouse. In contrast, these very low cost WMS solutions have limited labor efficiency capabilities, but they provide substantial improvements in inventory visibility and delivery accuracy. In many cases, companies that use paper-based pick lists and do not use AutoID to confirm pick locations will improve their pick accuracy from about 92 percent to over 99 percent. Another payback bucket is not ordering inventory that is already present in the warehouse but put-away accidently in the wrong location.

Higher end WMS solutions have functionality that help ensure Value Added Services (VAS) are performed correctly. This prevents charge backs by large retail customers, as well as lengthened payments cycles due to disputes.

Proof-of-delivery solutions allow electronic signature capture, which confirms shipment receipt and could automatically trigger the financial settlement process. Also, a variety of Supply Chain Execution (SCE) solutions now use AutoID devices capable of taking digital pictures. These images, which might show, for example, that a pallet was delivered undamaged, can then be associated with the delivery record in the SCE system.

In international trade, bonded warehouses should be used where possible. A bonded warehouse is a warehouse in which the duties on the goods remain unpaid until they are actually shipped out of the warehouse to a customer. Leading Logistics Service Providers offer these services.

In conclusion, cash is king in a recession. But you don’t want take actions today that constrain future profitability when the economy recovers.

New Distribution Optimization Software Solutions

Logistics Technologies | By Steve Banker • 01/27/2009

I recently completed a study of the Supply Chain Planning (SCP)software market. In doing this study, I came across solutions that could not be cleanly classified as either Supply Chain Planning or Supply Chain Execution.

First, a quick background on supply chain planning and execution solutions. SCP solutions are typically based on optimization algorithms. I will spare you a detailed definition of optimization (it might make your eyes glaze over), but in the simplest terms, think of optimization as being very advanced math. By definition, Supply Chain Planning solutions focus on a “planning horizon”-i.e., on putting together optimal and feasible plans to be executed in the coming weeks and months. The primary way companies save money using SCP solutions is through reduced inventory (e.g., reductions in raw materials, work-in-process, or finished goods inventories).

Two types of Supply Chain Execution (SCE) solutions are Warehouse Management Systems (WMS) and Manufacturing Execution Systems (MES). Both are, in some ways, the opposite of SCP solutions. While some WMS solutions have math associated with them (e.g., labor management and slotting), they are not true optimization solutions. WMS and MES operate in an “execution” time frame, focusing on what needs to get done today, in the next few hours, or even in the next few minutes, to operate the warehouse or factory efficiently. The primary payback of high-end WMS and MES comes in the form of improved labor efficiencies.

“Demand sensing” solutions are an emerging hybrid solution that are part SCP, part SCE. One such solution is offered by Terra Technology. Terra is a private company with several consumer goods and food and beverage manufacturing clients. Like SCP, their solution is based on advanced optimization. Terra’s demand sensing solution is designed to take daily orders and shipment data, combine it with the weekly shipment forecast, and then create daily SKU forecasts at the DC level. The daily forecasts extend out over 40 days and are refreshed daily. These short-term forecasts are considerably more accurate than what is generated by demand planning solutions. Further, like SCP solutions, the payback is based on reducing inventory. Procter & Gamble (P&G), for example, publicly stated that its short-term forecasts were improved by over 30 percent, allowing it to reduce DC safety stock by more than 10 percent.

This solution, however, is used in an execution time frame. The primary users of this solution are replenishment planners that plan shipments from the factory to the DC. The planners are not part of the demand planning staff. This solution is generally not used to change the demand forecast, but to improve replenishment processes that occur several times a week, an execution time horizon.

Procter & Gamble also uses a company called Transportation Warehouse Optimization (TWO) that offers another hybrid optimization/execution style solution. TWO’s solutions take the retail DC orders and delivery schedule and create a lean/pull type environment that is used to facilitate both full truckload shipments and efficient labor utilization in the warehouse.

First, advanced math (but not true optimization) is used to build mixed-SKU pallets and to efficiently build truck loads that respect weigh out, cube out, and stop sequencing constraints. In building the mixed SKU pallets, logic is utilized to insure that case picking proceeds efficiently. In other words, you don’t want your pickers moving from one side of the DC to the other to build a particular pallet. The pallet-building logic needs to respect weight/size/crush constraints, while not resulting in excessive travel time for pickers. Finally, the solution has Distributed Order Management style functionality that looks at orders daily, or in near real time, to determine which DC makes the most sense to ship from.

Thus, like supply chain planning, this type of solution contains very advanced math that could be loosely labeled “optimization.” But it can also be labeled an execution solution because it operates in an execution time frame and one of its main payback buckets is efficient labor utilization in the DC.

Transportation Management Systems (TMS) have long been labeled a supply chain execution solution, but they’re really hybrid applications that contain elements of optimization occurring in “execution” timeframes. Now, new SCE solutions that that involve distribution operations have emerged with the same characteristics.

We traditionally believed that you could not optimize across both warehousing and transportation operations simultaneously (at least not in practice). Most companies typically optimize their transportation operations first, and then “sub-optimize” their warehousing operations, instead of conducting a “holistic” optimization that jointly considers both transportation and warehousing constraints to arrive at an optimal plan. In other words, we argued that WMS integrated to TMS did not mean you were achieving true logistics optimization. That argument is starting to breaking down.

A complete analysis of logistics trends, technologies, and services

Archives

Login