The supply chain has changed dramatically over the last 10 years in so many ways that it can be hard for some to keep up with. Increases in freight and transportation have made these costs higher than distribution center labor in many businesses. The cost and quality of labor throughout your supply chain can be challenging. One way to get ahead of this constantly changing landscape is using robust Warehouse Management Systems (WMS). Whether you running an ecommerce site, retail chain or are a manufacturer or distributor, these systems can bring increased controls to labor, inventory and transportation.
Many companies have Order Management System (OMS) or Enterprise Resource Planning (ERP) systems which have basic warehousing functionality to some extent. But based on the platform, companies can outgrow the capabilities offered for their warehousing and distribution functionality.
For many years, small to mid-sized businesses wanted the increased functionality a WMS could provide, but the entry level costs were too high to cost justify. With today’s technology, this investment barrier has been greatly reduced through cloud based platforms that reduce the deployment and operational costs. This article will help identify the warehouse management system benefits that will support your growing company.
Warehouse Management Systems Benefits Versus Traditional OMS and ERP Solutions
A WMS benefits numerous aspects of the supply chain, typically beginning with inbound ASN’s and routing through reverse logistics and returns processing. While OMS and ERP applications have warehousing and distribution functions, they at times lack critical functions like being able to accept ASN’s or be able to manage the inbound receiving docks with functions such as truck scheduling.
For those companies who have multiple distribution centers, the traditional OMS or ERP solution often becomes obsolete because they may not be able to manage multiple warehouse inventories. The same is true when retail companies need small parcel shipping for omnichannel commerce like ship from store or in managing inventory in stockrooms as well as the main warehouse. Most warehouse management systems are built from the ground up with multiple distribution centers or shipping locations in mind.
In addition to managing the activities and functions throughout the warehouse, it will also bring about greater control over managing the labor to gain the highest levels of efficiency. Most OMS, ERP and RMS solutions do not do a good job of reporting employee productivity and throughput by job function, if at all. One of the benefits of being barcoded throughout the DC processes, or using voice technologies, is the capture of work performed by employee by job function. This is one of the greatest warehouse management system benefits that companies gain as the cost of labor increases.
Most OMS or ERP solutions are selected and implemented for the benefits they can deliver to the other departments such as contact center, marketing, accounting, etc. Selecting and implementing a warehouse management system will allow the fulfillment or distribution center organization to grow, control costs, gain efficiency, improve customer service and prolong the useful life of the OMS or ERP.
High-Level Warehouse Management System Benefits and Capabilities
As previously discussed, a WMS controls various departmental warehouse functions such as receiving and quality assurance, put away, replenishment of forward pick storage, picking, packing, shipping, returns and inventory control. We typically see a full-featured warehouse management system benefit companies in the following eight ways:
- Advanced shipping notices, receipt planning, scheduling inbound labor and scheduling transportation appointments;
- Controlling the movement and storage of materials and product (e.g. management of slotting, inventory location control, cube utilization, inventory accuracy, etc.);
- Improved accuracy, timeliness and overall throughput of customer orders throughout the fulfillment processes;
- Improved warehouse labor management through tracking and control including work order controls, productivity reporting at department and employee levels;
- Flexibility in handling different order and product profiles (e.g., ecommerce small orders, case pick to stores or wholesale customers, bulk distribution for manufacturing, etc.);
- Better control of production, assembly and job costing of kits/sets and assembled product;
- Visibility to warehouse activities and access to data (e.g., reporting, analysis and dashboards);
- Interface to Warehouse Control Systems (WCS) for material handling equipment and automation (e.g., conveyors, sortation, etc.).
There are hundreds of warehouse management systems on the market with a wide variety of price tags. Yet, not all of them are created equal. To help narrow down your search it is important to think about what problems or challenges, you are looking for a warehouse management system to address.
- Identify which additional functions will increase productivity, control inventory, improve customer service and reduce warehouse costs. Do these functions require a WMS over and above your current system?
- Identify the ROI and benefits that management will want to see for its investment;
- Use a formal RFP process by writing your user requirements, conducting vendor demonstrations, performing reference calls and visit customer sites of your finalists, etc.
The results of an objective and thorough search, along with proper due diligence, will determine the benefits a WMS brings to your company.
Typical Warehouse Management System Benefits
Receiving, Quality Assurance and Marking
Many warehouse management systems deliver warehouse functions such as Advance Shipping Notices (ASN) and EDI transactions, allowing carrier scheduling of dock appointments, and better scheduling of receiving and put away personnel. Additional functions typically include:
- The capability to record carrier and/or vendor damage claims upon receiving;
- Creating barcode license plates for pallets and carton labels;
- Identifying forward and bulk locations as product is received, and quantity on hand;
- Options for both paper and paperless receiving;
- The ability to identify special processing of product before put away;
- Cross docking from receiving to packing without going through the put away process;
- Status reporting of incoming receipts to warehousing and merchandising staff for resolution.
Quality Assurance (QA)
- Ability to store vendor/product/ SKU sample testing criteria;
- Ability to store product specifications for QA;
- Support for vendor compliance programs and reporting a vendor “scorecard” of key metrics, on-time delivery, errors in shipment and receiving, etc.;
- Status reporting of problem receipts to warehousing and merchandising staff for resolution;
- Marking in retail, direct and wholesale customer print and ticket formats.
Once inventory is received, products need to either be cross docked to packing stations, or shipping, to fill back orders or put away. A warehouse management system will greatly assist with put away tasks by identifying open bin/slot locations, storage type, cubic capacity, and so on, as well as the profile characteristics and cube required. Many warehouse management system will have “directed put away” options based on system rules, storage parameters, product, velocity, etc. – functions that are also available in some smaller WMS solutions.
Replenishment to Forward Pick
A WMS automates replenishment of primary or forward pick storage from bulk before the next wave of orders is sent to the floor for picking. It also eliminates warehouse back order costs and lost time. Sales velocity data in a warehouse management system will help plan the size of the forward pick storage by item to reduce the number of replenishment tasks. A product’s min/max or demand replenishment functions will trigger recommended stock movement in an automated way.
One of the major warehouse management system benefits is the ability of some WMS to assist in slotting product—the process of assigning SKUs to picking locations based on various criteria, such as sales velocity, size, weight and category, among others. Slotting functionality improves productivity by reducing picker travel time and recommend changes in bin/slot size and requiring less replenishment. Velocity reporting allows personnel to re-slot primary locations to gain additional space and/or relocate fast selling items to the “hot pick” bin/slot locations. More advanced operations may use dynamic slotting functionality. Slotting functionality is sometimes available through add-on modules from some WMS vendors at an additional cost.
A variety of warehouse management systems provide various functions including work orders, kitting, assembly control of labor and material costs, inventory control at component and finished good levels, kit within a kit. Other functions typically available are single-level bill of material (BOM) or a multi-level BOM, and the management of assigning the component inventory through a work order process. Tracking inventory usage and sales at the finished kit and component level, track labor usage by work order and assembled product, and work in process reports are also options. ERPs often have comparable function, whereas this is generally not an OMS strength.
Picking is one of the major labor expenses in most warehouses. A WMS will generally expand your picking options. Some alternative picking choices include paper and paperless pick systems, RF directed, pick to list, pick to box or tote, pick and pass, zone picking, batch and wave picks, cluster pick, pick to cart, label pick and confirm, case picking, pallet picking, bulk, carousel, ASRS, robotic, perfect pick, guided picker systems, voice pick, RFID, FIFO, LIFO, lot number and date, pick to light, and put to light. Options also include the ability to view the order queue by various types of orders and profiles; carrier level of service, single line item versus multi-line orders, special handling orders, down to selecting a single specific order. It can also allow more control over “order waves” being released to the floor and picker skill levels. In general, OMS and ERPs have fewer options for the larger, more sophisticated warehouse operations.
Like picking, packing is a major expense in fulfillment of small parcel ecommerce. To gain customer order accuracy of picking and, consequently, customer satisfaction, consider “pack confirm” verification processes in your operations. Missed picks and incorrect order quantities are caught through the pack confirm process and pulled aside for correction. Many warehouse management systems also allow the ability to provide print-on-demand customer documents, assembly directions, shipping labels, and support selective insertion of promotional materials.
Shipping and Manifesting
Determine what shipping and manifesting system options are available from the vendors, as some rely on third party software solutions. Typical functions allow companies to be able to support sophisticated routines such as rate shopping and best way shipping to reduce freight costs. For companies that utilize their own truck fleets, or rely on LTL and TL carriers, many WMS solutions offer modules and add-ons to support transportation management system for truck routing.
For internally developed functions in a warehouse management system, determine if they are they certified for the carriers you use. How well do they interface to your carriers? Determine the options the WMS affords you for supporting different configurations for printing shipping papers, carrier indicia, etc. An enterprise shipping system with high-speed capacity and the ability to manage multi-location from a server can run many pack lines in multiple facilities for large operations. Some systems also allow functionality to rate shop consortiums for LTL and LT.
A WMS gives a company the ability to track inventory location and usage throughout the warehouse operations, in multiple warehouse locations, in multiple distribution centers and stores. The benefits also Include kitting, production and WIP controls, as well as tracking of component and finished goods. WMS functionality will allow you to better utilize cubic space. It also maintains a solid audit trail of every warehouse bin/slot location and items that have been stored from receipt through shipping by transaction type—sales, return, adjustment, etc., as well as the flip side or by product, where has this item been located. All transactions are operator ID, date, and time stamped. Cycle counting without requiring suspending system functions, or after hours counting is typical with RF/wireless based solutions. A warehouse management system will improve warehouse inventory control and accuracy, which has allowed some companies to eliminate expensive and time-consuming year-end inventories.
As previously noted, labor usage and tracking is one area where WMS packages stand out from OMS/ERP. Labor is as much as 70% of the total fulfillment cost per order, when considering all costs excluding outbound shipping. There isn’t space to list the many labor functions that will become computer assisted and the manual operations eliminated. Warehouse management systems track all work performed, who completed the work and how long it took. This level of reporting helps with capturing, reporting and analysis of department and individual hourly productivity, and performance to standards. Add-on systems may be required for labor and budget planning and more advanced analysis beyond typical reporting.
Identifying Which WMS Best Fits Your Business
Here are 10 critical things to deciding which vendor and system is the right system for your company:
- Develop your company’s detail user requirements;
- Identify at a high level which WMS vendors appear to have the functionality your company needs and is in the investment range which is realistic. Keep this vendor short list to no more than 3 or 4;
- From the requirements develop and send a Request For Proposal (RFP) to the vendor short list;
- Analyze the vendor responses to the RFP;
- Invite the two best vendors to demonstrate the system function to the stakeholders;
- Develop the Return on Investment (ROI);
- Understand the implementation tasks and responsibilities as well as the level of professional services required to implement the system internally and by the vendor;
- Develop the total cost of ownership including software, hardware and services. This will vary considerably between on-premise licenses and cloud, hosted or Software as a Service models.
- From all the observations and final pricing, decide which strategic direction and vendor best fits your company. Keep the two finalists in the process until you have successfully negotiated the deal with the selected finalist;
- Begin to discuss with management the project management process and responsibilities. Don’t leave this leadership to the vendors. They will have their project team but they should not have the overall leadership for implementation, scheduling, changing processes, procedures, status reporting, employee training, etc.