Which way for integrated warehouse management?

Here's the problem: you've got systems for financial management, sales order processing, inventory and production control etc, ideally (although not necessarily) integrated under some kind of ERP system – and then there's warehousing and distribution. How are you managing that? Are we talking about manual systems: re-keying and a paper chase of receipts, picking, packing and shipping lists? Are location and routing knowledge basically in operators' heads? Or is it more advanced, but still not flexible or efficient enough, and you've just got to do better? Fact is, with ongoing pressure on costs and a requirement on us all also to improve customer service, we can't afford any aspect of our supply chains – including our warehouses (owned or third party) – to be operating sub-optimally. So there are several issues. We're likely to need to improve information visibility, so that means better links from the warehouse management system (WMS) into transportation planning at one end, and production and packaging at the other, as well as the rest of the business. We also need better warehouse operations management, probably to make better use of space, reduce pick and put-away times and deal more efficiently with all the transactions. We may also need to support facilities like cross-docking or sortation systems. And we might also be facing RFID initiatives with all that those entail. If any of those are the case – and they're bound to be – one of your dilemmas is likely to be, who should I turn to for my WMS improvement? Should you use a local IT company to write some additional code for the existing systems, or do much the same in house? Should you use your main IT supplier – usually the ERP software vendor? Or should you be looking at a WMS specialist? And the answer is, it depends! Worth talking to some in the business. Alex Mills, marketing director with WMS vendor Chess Logistics, unsurprisingly, argues for the specialist approach and warns against placing your faith elsewhere. "The reason specialists exist in any field is that, in most cases, they have been doing the job long enough to become so… In short they have earned all the badges." He describes the pitfalls thus: "First, and most dangerous is any suggestion that a WMS should be written using a local IT company. To create such a product from scratch with no experience is inviting trouble… Down the line, sometimes years later, there is often nothing in place that even resembles the kind of solution. Rights and wrongs? "More common is the incumbent supplier – usually the ERP vendor. A line I have heard often is 'our current ERP solution provider can provide a bolt-on for the warehouse.' This is still a flawed alternative… With respect, almost none of them is a WMS specialist and their bolt-ons often fall short of a competent solution." He suggests the result is, "a painful period in which costs escalate, having started at around the same, while successive iterations of software which lack the key functionality of most best-of-breed products are handed down to an ever hopeful logistics department." Sounds plausible? Real experience out there suggests it's not so black and white; that in fact there are few rights or wrongs. It's down to diligence, context and how ready you are follow your instinct. And, of course, what else needs to be done, what else is at stake and the shape and success of the rest of your IT infrastructure. One company that chose the ERP supplier route, and has nothing but praise for it, is £40m Denby Pottery, which last year went for the WMS extension to its existing Oracle E-Business extended ERP suite. IT manager Mark Allcock says the firm originally went for Oracle not least because it wanted a system comprehensive enough to provide for all its foreseeable requirements. He adds that, contrary to popular opinion, that choice wasn't expensive – in fact, he claims it was cheaper all-up than some of the SME ERP offerings. And he says that as a result he's now got fully integrated warehouse management with several key benefits. Denby's WMS requirement was indeed to provide better visibility. Says Allcock: "This initiative wasn't about reducing costs or inventory; we needed to underpin better customer service." Department stores were getting more demanding, wanting faster turnaround and more information about how items had been packed, with configuration and freight details. "For example, they wanted EDI despatch notes, with which items are in what boxes, and how many boxes – and they wanted that within an hour." It's a common enough requirement, but with all that information still maintained in different legacy systems or on paper, Denby couldn't cope. And hence the WMS module, which Allcock says has also integrated information for labelling and the rest, and also effectively cut costs by making better use of space. "We don't need logical locations any more; the system flexes and optimises our warehouse space. Without it, we'd have built another warehouse and had to staff it by now," adds Allcock. His verdict: "There are several good benefits with an ERP extension. First, there's support – it's just more of our existing Oracle system so there are no new systems, technologies, or interfaces to worry about, nothing more to learn. And for a small IT team keeping costs down, that's important." He also points out that there are no problems around synchronising upgrades. "And the thing about tight native integration, rather than interfaces, is there's no validation, no testing to worry about. It's just the same data being re-used." Absolutely true. And it's worth noting that, because all data is served from the one database, customer-facing staff can see additional detail too. "They can see what stage an order is at, for example; whether it's in production, at pick release, being picked now, in packing, or it's been despatched. Next we'll also be linking into the 3PL provider so they can see where product is – even that it's been delivered to the store." As for functionality, Allcock says he didn't want to pay for what he didn't need. His view: if it's primarily put-away and picking rules, stock allocation, automatic routings for pick walks and the rest – and that's as far as you're likely to go – why go to a specialist? So that's one set of arguments. Here's another company that went the opposite route. Kitchenware supplier Meyer Prestige originally selected a Chess WMS back in 1995, and has stuck with it despite corporate moves to push it towards an integrated ERP environment – and indeed the arrival of SSA BPCS ERP with Meyer's Prestige acquisition in 1997. Sophistication or integration Operations director Martin Ball says that at the time the company's Radius accounts system needed replacing, so he and his team had been examining ERP systems for financials, sales order processing and so on, including JD Edwards, which was running Meyer's much bigger operation in the US. "But with Prestige having BPCS, that decision was made for us." The issue then was what to do about warehouse management, which needed upgrading. "In our research we'd found that the ERP WMS modules varied dramatically – and none of them were suited to our needs. None could handle, for example, 3D management, looking for free space, zoning and dual cycling. We needed the system to be able to isolate product quickly and recognise a number of SKU levels so that we could reduce operatives' travelling distance and improve productivity, speed and utilisation." Ball says the team tried valiantly to make BPCS WMS work in a dummy environment for several months. "IT would have loved us to go for that solution, but I had to say no; it wasn't up to our plans." Which were about providing a foundation system capable of running a much bigger warehouse, and with facilities to dynamically optimise space and location utilisation, and operators' time on replenishment, put-aways, picking and so on. The company was also looking to implement RF technology for receipts and picks, as well as an automated PLC-driven sortation system. So it went back to Chess, upgraded and integrated with BPCS. In fact, integration in this case was via DC Exchange, from the ERP vendor (although now marketed as DC Gateway, and under Iworks' ownership). Ball says that has always performed well and transparently, with BPCS essentially providing 'required by' data to Chess, and logistics planners working from there, according to transport type, packaging and customer. Chess now generates labels on printers (dedicated to fast- or slow-moving items) throughout the warehouse in pick sequence (in place of picking lists), also driving the sortation system. Scanned data is fed back via Chess to the ERP system "so that we can keep customers informed of their orders – at pick release, in the loading bay, wherever they are." Horses for courses It's worth noting that Meyer Prestige's investment did meet its objectives: "In the old warehouse, an operator averaged 870m to pick an order, but here the maximum is 70m. It was a huge increase in productivity." So it's about sophistication. If the scale of your warehouse operations means you need to be more intelligent about managing people, processes, scheduling and so forth – and employ newer automation technologies – there's merit in best-of-breed. Or so you might think. But here are another couple of examples that show there simply isn't a hard and fast rule. The first is Dutch wine merchant Baarsma Dranken which has a 10,000sqm warehouse carrying up to 6 million bottles of 2,000 varieties, and turning over 42 million bottles per year, buying, storing and selling wine to the big retail businesses. It chose the specialist WMS software route, not for any advanced functionality, but because it was happy with its existing ERP – and that didn't have a WMS module. Says logistics manager Brant Visser: "We needed to improve stock accuracy, picking efficiency, management intelligence and reports. We didn't want to change ERP just to get that, so we opted for a stand-alone system so we only had to worry about the interface." The requirement: "We needed to manage incoming goods, handle storage and outgoing goods on a first-in, first-out (FIFO)?basis and provide history analysis. We also wanted RF and eventually a paperless system, and we wanted it to run on our AS/400. We also didn't want to spend thousands of euros!" The firm selected SSA's Warehouse Boss. "Other WMS software vendors offered so many features – 80% we would never use," says Visser. "Why pay for that?" And the choice is working. "Our order picking efficiency has gone up 15% because the system knows in advance what's at the picking face and what has to be replenished, so it can direct forklift drivers without wasting time." And he confirms that errors have also reduced and stock accuracy risen from 95% to 99%. OK, but Boughey Distribution – the £18m grocery logistics firm with customers like Princes, Tesco, Sainsbury and Safeway, and warehouse management central to its business – chose an ERP system when it needed to upgrade, instead of a WMS! Financial director Keith Forster says: "We had been using a specialised system, so first we looked at other WMS specialists." But then the firm's accounting package provider Sage "persuaded" the directors to look at an ERP alternative, with a view to getting one system to manage warehousing, distribution and the business. One thing led to another, and when Microsoft Business Solutions and its partner Sense Enterprise Solutions presented their capabilities, Forster says they were impressed. "They said they could get rid of all the other databases and systems, and enable us to carry on working the way we work." Which was important: Boughey has a 30 acre site with 12 warehouses (one large, modern; the rest smaller) plus another off-site large modern warehouse, and Forster describes the firm as "compressed" between its customers and its customers' customers (the retailers). Getting service right, with right goods at the right place in the right format at the right time, is the company's USP. Sounds like meat and drink for the WMS boys, but Microsoft/Sense won because they addressed the bigger picture business requirements. "In a sense, I guess it was a more risky path [than going for a WMS specialist]. But it was backed by Microsoft, and if one of their partners fell over, another would pick it up." As for what's been achieved, beyond native integration, Forster paints a picture of sophistication, not only dealing with warehouse issues – freeform zones for types and weights of pallets, fast/slow moving goods, optimised picking routes, cross-docking, FIFO – but providing flexibility, traceability and visibility. Customers, for example, can see stock holdings seamlessly, and the system provides for predictive analysis to ensure that their orders are fulfilled without over-stocking. Another case of 'horses for courses' – but you might want to swap them around a bit.