Warehouse management: integrating the missing link

Like most of the IT universe, the world of warehouse management systems (WMS) is changing rapidly. WMS may have started as systems for controlling the storage and movement of inventory within the warehouse (directed picking, replenishment, directed putaway) but nowadays they’re much more than that. They’re expanding to include transportation management, logistics, financials, manufacturing, sales order management and supply chain execution. In fact, the overlap in functionality between WMSs, ERP (enterprise resource planning) systems, supply chain planning, APS (advanced planning and scheduling) and the rest is simply increasing the confusion amongst firms looking for the right software for their operations. And WMSs on their own are typically large, complex data-intensive applications that require a lot of initial set-up, lots of system resources to run and quite a lot of data management to keep it all running. So one word of warning. Whilst many vendors claim that implementing WMS will bring benefits such as increased storage capacity, reduced stock levels, reduced labour costs, better inventory accuracy and improved customer service, the reality is somewhat less startling. Expectations of stock reduction and increased storage capacity are unrealistic for most manufacturers. And while increased accuracy and efficiencies in the receiving process may well reduce your safety stock levels, the impact of this reduction is likely to be very small in overall inventory levels. For most firms, other factors like lot sizing, lead times and demand variations will have more of an impact here. So why do companies want to install WMSs? The reasons are often associated with the need to do something to service the customer that the current system doesn’t support - like automated pick replenishment, automated data collection, first-in-first-out, wave picking and cross-docking (unloading parts from an incoming trailer and immediately loading these parts onto trailers or rail cars negating the need for warehousing space and storage). According to analyst ARC’s Simon Bragg, there are three generations of WMS: “The first is all about where inventory is situated and how to get at it when you need it, either for customer fulfilment or internal works orders. The technology here tends to be provided by the ERP vendors. Costs are typically less than £100k for some kind of add-on warehouse management module. “The next generation is about efficiency,” he continues. “Space utilisation, picks and putaways per operator, that type of stuff. Usually there’s fully automated warehousing systems, barcoding, scanning and a separate server to run it all on. Most WMS specialists [he mentions Manhatten Associates, EXE Technologies, Swisslog and ATMS] can help here and costs start from around £350k upwards.” And the third generation? Bragg says its about, “Expanding the whole concept out to the supply chain. Collaborating with customers and partners is the key. And it means business-to-business integration, bill of material (BoM) functionality and export documentation.” But all this is no trivial task for any business. “The more enlightened manufacturing companies started in the late 90s by integrating their WMS and ERP, but have since gone further by integrating this with their transport management and logistics systems,” he adds. “True supply chain e-fulfilment means integrating all this and more [he identifies online configurators, supply chain alerts, workflow management, capable-to-promise and business intelligence software as examples] in order to get full visibility and control of your supply chain.” According to research from ARC, users must beware of the amount of consolidation currently going on in the WMS marketplace, so ‘caution’ is the message here. ARC identifies 80 global WMS suppliers in total, putting EXE Technologies and Manhatten Associates top of the world’s market share list with more than 10% each. However, there are specific UK-focussed vendors such as ATMS and Microlise which would perhaps argue that they better serve the UK SME manufacturing sector than the other larger suppliers. Adequate ERP functionality? It gets more complicated for the user though. Most ERP vendors now provide some sort of warehouse management offering as part of their overall suite. SAP, SSI and Frontstep for example all have impressive WMS offerings that may well satisfy most companies’ requirements. Paul Grace, supply chain execution product manager for ERP supplier Intentia boldly states, “Our version 12 software has most of the functionality that best-of-breed WMSs have. It has all the functionality our customers need – transport management, capacity planning, putaway, inventory management, cross-docking and joint delivery rules … WMS are big on peoples’ radar at the moment and they see it as a critical part of their supply chain strategy.” Nigel Montgomery, industry analyst for AMR Research, suggests there’s also a growing trend for manufacturing firms to outsource their supply chain execution (including warehousing, transportation and logistics). “We interviewed 200-plus large European companies earlier this year, across manufacturing and distribution. 46% had already outsourced their transportation management responsibility to a third party, while 10% were planning to do so in the next 12 months; 26% had already outsourced their warehouse management, but another 12% were planning to do this in the next 12 months… Firms are outsourcing their non-core activities to a third party logistics provider and are looking for software that supports this... All this makes integrating WMS with other enterprise systems more crucial than ever.” ATMS is a £3 million turnover, UK-focussed WMS supplier with an impressive list of customers, including the likes of Walkers Snack Foods, Gillette UK and Pilkington Special Glass. Stephen Cross, the company’s md, says that one of his clients, Field Packaging, a £400 million turnover business, has successfully integrated its ERP system with ATMS’ WMS product. Field First Carton is a £60m a year turnover busidivision of the Field Packakging group, with three UK sites at Newcastle, Manchester and Birmingham. The division manufactures a variety of cartons and containers, mainly for high street retailers such as Marks & Spencer, Tesco and Nestle. Field First buys in the raw material for the cartons, the customer’s carton batch (usually high volume stuff) then goes through a variety of manufacturing processes – from printing presses to cut-and-crease machining, right through to the finishing and gluing stages – resulting in despatch to the warehouse. Finally, it leaves the factory to go to the auto-filler (ie. the company that fills the containers with food such as fish, chocolate, soup or curry). The three sites all use the group’s corporate standard ERP software system – Pecas – supplied by US software firm Radius Solutions. Although Field First has been using ATMS’ WMS (as a standalone system) for more than four years, the company is now realising the benefits of moving to an integrated ERP and WMS environment. Divisional supply chain manager Tony Hardy explains: “We already had a warehousing element within Pecas [the ERP] but it simply wasn’t up to scratch. It wasn’t versatile enough for our business needs and we needed software that was configurable.” The three UK sites all use the complete ATMS software suite, which includes stock control, sales order processing, purchase order processing, EDI, quality control, shop floor data collection, WIP tracking and the warehouse management module. “It only took us six weeks to integrate ATMS’ warehouse management software with Pecas. It’s a two-way interface. Works orders are passed from the ERP system to the warehouse software, and the warehouse system passes stock status in the other direction.” But how painful was the integration work? Hardy advises other companies embarking on similar integration projects to, “Make sure they know what they want to achieve from it ... Appoint a strong project manager to ‘sit’ between the two vendors [the ERP vendor and the warehouse system provider], otherwise the whole project runs over while each of them blames any problems on the other vendor ... You need a man in the middle with some technical skills who can sort out these kinds of issues. That was key for us really. “But most important of all,” he says, “you need to make the vendor [in this case, ATMS] part of your business – a true partnership I suppose.” And the benefits so far? While Hardy cannot place actual figures on the project’s overall success, he does say that the business is now starting to see the rewards. “As a standalone warehouse management system initially, ATMS on its own gave us improved stock accuracy, a slicker and more efficient warehouse and it negated the need for annual stock checks. But it didn’t give us the required visibility to enable us to make better business decisions. “Now we’ve integrated with Pecas, I can start doing the job I’m supposed to be doing of breaking down compartmentalisation in our supply chain and removing waste holistically from it. We’re already seeing reduced WIP levels in the factory although we’re not yet seeing this in our levels of finished goods, but it will come soon. “We want to get to the point where we can confidently switch manufacturing from one site to another in order to respond faster to fulfil a customer order.” Another best-of-breed WMS provider, Microlise, a £16million turnover company, does the majority of its business in the UK manufacturing sector (mainly in the food, drinks, automotive and FMCG markets). Ian Taylor, the firm’s special projects director, comments: “WMS used to be about interfacing with other functions inside the four walls, like sales order processing, purchasing and manufacturing works orders. Our more progressive customers view the supply chain as a network of hubs or warehouses and they want visibility of it all. The problem is, each of the different warehouse systems is supplied by a different vendor at all the various locations within that supply chain … there’s a discontinuity of information as a result of this.” Open standards are key So what’s the solution? Taylor suggests that standards are the key and that vendors should provide their customers with ‘open’ software (eg. XML interfaces and common databases). But he also warns that integrating the WMS with the firm’s own ERP system is usually the “largest slice of the project.” “We differentiate ourselves by being able to integrate with any type of ERP software – SAP, Baan, BPCS or people’s own legacy systems. In fact more than half of our customers use their own legacy ERP system.” He warns that many companies undertaking an ERP-WMS integration project fail to understand the boundaries between the two systems. “You need to think about things like quality management. Perhaps both systems had their own quality processes built-in. If the two are integrated, which system controls all the quality stuff? ... Most people are good at the physical side of warehousing like racking and forklifts, but leave the decision to buy software to run all this too late in the day.” Taylor cites the benefits of an integrated WMS as, “Common information in both systems, in synch, which means people only have to use one application to get at the information. That means: less time is wasted, higher efficiency, administrative costs come down, there’s less reconciliation, less manual errors and you get good visibility across your networks.” Michael Bennett, vp marketing at Swisslog, another best-of-breed WMS supplier that has 160 UK clients (20% of which are manufacturers), says there’s one key factor that users need to consider before buying WMS. “ERP is still in its infancy when it comes to warehousing. We’ve got the benefit of years of experience in this area working in many industries each with their own unique implementation characteristics – not all sectors have or need the same functionality. The important thing is to buy configurable, modular software. We integrate to any ERP system, we talk the client’s language and we can project manage the whole implementation. There’s no competition really?”