2011 Market Trends Report: Warehouse Management Systemsby From the Top on 2011-02-10
Software vendors are offering enhanced products for logistics executives looking at new Warehouse Management Systems (WMS). These systems feature inventory and labor management applications, and further integrate warehouse, distribution, and transportation operations. As efficient logistics operations become more specialized and essential to profitability, executives will look to upgrade or replace their WMS software to remain competitive.
Here’s what I’m seeing for WMS software in 2011.
Economic Recovery is Improving Demand
Market spending is not at the level seen before the recession, but it is rising. “You can only wait so long before you need to spend money on improvements,” says Phil Obal, President at IDII. Buyers spent less on Supply Chain Management (SCM) software in the first three quarters of 2009, but began to rebound in Q4 2009 and 2010. You should expect that trend to continue into 2011 for two reasons.
First, an improved economy is giving buyers confidence to tackle long-postponed logistics upgrades. Companies will soon have the capital to either upgrade their outdated systems or invest in WMS software for the first time.
Second, other companies are on schedule to upgrade their systems in the next few years, especially those who invested right before the recession.
Small and Medium Businesses are Driving WMS Purchases
Small and medium businesses make more WMS purchases than larger corporations. “Small businesses are being a little more aggressive than larger ones, perhaps because their purchasing decisions are more predicated on their current earnings,” says Terry Harris, Managing Partner at Chicago Consulting.
As the economy improves, SMBs are investing profits into logistics to gain a competitive advantage. Large businesses are likely to follow, but their longer purchasing cycles leave them six to twelve months behind.
Many smaller businesses are also outgrowing their current systems, or their abilities to operate without one, and need WMS solutions urgently. Warehouse managers need to act urgently to stop their operations from foundering, which means buying WMS solutions right now.
Cloud-based WMS systems (described in more detail below) are a great option for many smaller operations. A lot of SMBs are choosing WMS software in the Cloud because it requires little IT assistance, and an attractive payment model.
Increased Demand for Labor Management
Many organizations using WMS software to accurately track inventory are now turning their attention to labor management features. These increase warehouse productivity by letting the operator manage each worker more efficiently.
Labor management applications let managers measure the time cost of warehouse activities, such as the time it takes to unload a truck or pack a container. These systems can also create a list of tasks for a worker as he enters the warehouse. So in one trip, he can complete multiple types of work: put away a palette, move a container, and drop off a forklift for another worker.
“When you start interleaving and measuring people, you are driving out a lot of inefficiencies. You’re maximizing your labor that is already there in the warehouse,” says Obal.
These applications can send key performance indicator (KPI) updates to a manager’s computer or a worker’s mobile device. The most efficient and accurate employees can be rewarded, and those not meeting standards can be told exactly where they need to improve.
Increased Demand for Integrated Supply Chain Execution
Integration of WMS and Transportation Management System (TMS) software is becoming a popular way to do seamless and efficient business processes in warehouse distribution
Integrated systems can notify an incoming truck to cross-dock its contents onto an outgoing truck, while at the same time coordinate warehouse labor to position stored containers for loading onto the same vehicle. “It’s business integration. It’s ‘integration-between-the-ears,’” says Don Benson, Partner at Warehouse Management System Support.
Integrating WMS and TMS means better coordination between warehousing and shipping, which reduces costs. The shipping destinations of containers can be changed as they arrive, containers going to the same location can be easily spotted and combined, and less-than-truckloads (LTLs) can be reduced.
Growth of 3PLs Creates New WMS Requirements
The rapid growth in third-party logistics (3PL) providers is forcing WMS vendors to consider developing multi-tenant architectures. Any software complication is magnified in 3PL operations. A single problem becomes an issue for multiple users, and providing a quick fix for one site may limit another.
The nature of logistics outsourcing requires that WMS systems used by 3PLs have multi-tenant interfaces to account for distribution centers with multiple clients. And many of those distribution centers are one of many. All in all, modified and extended WMS software often becomes too rigid. It can’t meet the needs of rapidly changing 3PL operations.
3PLs also handle large amounts of inventory, which is irregularly accessed, frequently moved between locations, and is therefore haphazardly crossing paths with similar and dissimilar products every day. WMS software must be able to handle these stock volumes, and be exceptionally particular in how they track and manage it.
“There’s about 75, maybe 80 [vendors] now that have a WMS for 3PLs. Providers have done a good job with their functionality, but it’s a lot of work to do a 3PL and do it right,” says Obal.
Outsourced distribution and warehousing will remain important in 2011.
RFID Fails to Live Up to the Hype, Thus Far
The excitement around radio-frequency identification (RFID) has subsided in recent years. Despite Walmart’s 2005 mandate that its suppliers adopt this emerging technology, I feel that RFID is only now rising out of its elevated hype.
There was a lot of hype for the future of RFID technology in the supply chain, but our expectations were too lofty for this emerging technology. “It was super-hyped, in my opinion. It’s at a moderate, more reasonable level now,” says Terry Harris.
Why has the technology not materialized as expected? While Walmart probably did more for technology than any other commercial operation, they equally hindered it by not supporting their suppliers’ adoption?
Walmart required its top suppliers to adopt RFID, and issued per-palette penalties for suppliers not using the tags – but gave nearly no financial support to help suppliers invest in the technology. Similar lack of support from other large corporations is hindering the widespread adoption of RFID in the supply chain. The end result is the technology has yet to become a standard across the industry.
While the number and variety of RFID products from vendors in increasing, the cost of ownership is stopping many logistics managers from buying them. As with most technology, look for more widespread adoption of RFID as the cost drops.
Voice and Mobile Applications are in Demand
Warehouses are embracing voice and mobile technologies, as they help improve efficiency and make tasks easier for warehouse staff. The original WMS systems which used voice-recognition were limited to picking. Thanks to modern processors, computers can now use voice technology in multiple worker activities: picking, putaway, replenishment, shipping. And the days of using software to control your voice-recognition add-ons are disappearing – most vendors offer a voice-capable product out of the box.
Mobile technologies are also in demand in many business operations, and the warehouse is no exception. With the ability to access software on the go via an iPad, tablet PC, or smart phone, mobile systems are becoming popular with both managers and floor workers. More and more systems are being designed with applications built to live in a mobile world.
New features like mobile alerting have changed how productivity is monitored in the warehouse: if a picker is taking longer to complete a task than he should, he can get a mobile alert on his iPad, tablet PC, or smart phone.
“Instead of people being reactive, they are being proactive,” says Paul Schweet, Senior VP at TZA Consulting. Mobile software will help increase the visibility of warehouse operations among workers, and make efficiency standards easier to achieve.
Warehouses are Late to the Cloud Party
Cloud-based WMSs offer an effective solution for buyers with limited IT resources; but logistics managers have been slow adopting this new software deployment model. Cloud-based WMS systems have had trouble penetrating the warehouse market for a couple of reasons.
First, warehouse managers generally are late adopters, and would rather see others test new technology before adopting it themselves.
Second, the perceived security issues of hosting off-site are a deal-breaker for many. Says Schweet: “If I have critical data, I don’t want that sitting out in the Cloud, where other people can get to it or a competitor is on the same network. It’s about protecting my data.”
WMS buyers will accept the Cloud, but only after witnessing successful deployments elsewhere in their organizations. Indeed, Cloud-based systems are rapidly gaining acceptance in many enterprise functions such as CRM and email.
ERP Vendors Gaining Ground in the Warehouse
Enterprise resource planning (ERP) vendors are gaining ground in the warehouse by using exisiting executive relationships and increasingly functional WMS offerings. Businesses running simpler warehouse operations are choosing ERP solutions for the simple convenience of integrating a WMS with their other business enterprise software.
ERP vendors are offering strong enough WMS systems that their account control is tipping many buying decisions their way. “We often hear of businesses replacing a best-of-breed for an ERP solution that has very similar features. They often leave because of the relationship,” says Don Benson. Businesses often choose an ERP for the comfort it provides.
More complex operations are choosing feature-rich best-of-breed systems and integrating them with their ERP suites. If a warehouse operation wants more advanced features like cross-docking, interleaving, advanced labor standards, or advanced technology integration, those features may not be offered by their ERP.
In response to the ERP penetration of the logistics market, many best-of-breed WMS vendors are expanding their systems’ functionality to address a broader range of enterprise processes. These “WMS as ERP” options offer the advanced capabilities of best-of-breeds with the business functionality of an ERP. More and more software companies are taking this approach, and it provides an attractive option for many buyers.
2011 and Beyond…
Warehouses are the backbone of successful logistics operations. Each warehouse operation is unique to the business it supports, and a WMS software decision must reflect these nuances. What features are important to you? Will you choose an ERP solution, or go with a best-of-breed system in your warehouse? Do you feel comfortable in the Cloud? Add your thoughts to the comments below.