The evolution of Warehouse Management Systems (WMS) is very similar to the evolution of many other software solutions. Initially a system to control movement and storage of materials within a warehouse, the role of WMS is expanding to including light manufacturing, transportation management, order management, and complete accounting systems. To use MRP, as a comparison; Material Requirements Planning (MRP) started as a system for planning raw material requirements in a manufacturing environment. Soon MRP evolved into Manufacturing Resources Planning (MRPII), which took the basic MRP system and added scheduling and capacity planning logic, and eventually evolved into Enterprise Resource Planning, incorporating all the MRPII functionality with full financials and customer and vendor management functionality.
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Even though WMS continues to gain added functionality, the initial core functionality of a WMS has not really changed. The primary purpose of a WMS is to control the movement and storage of materials within an operation. Directed picking, directed replenishment, and directed put-away are the key to WMS. The detailed setup and processing within a WMS can vary significantly from one software vendor to another however the basic logic will use a combination of item, location, quantity, unit of measure, and order information to determine where to stock, where to pick, and in what sequence to perform these operations.
1.0. Introduction to Warehouse Management Systems Technology
The majority of the problems that occur in the warehouse occur because of a lack of
control: a lack of inventory control, operational control and/or management control. To become a dynamic, consistent organization, all the operations must be under “control”. In order to achieve this control, all the tools and technology available has to be used to get control and manage the warehouse operations. A control system is a means, mechanism or procedure by which we manage these operations. There are three basic objectives of a control system, either manual or computerized:
To identify and coordinate the work that has to be performed.
To direct the achievement of the work to maximize performance (productivity of warehouse resources and customer satisfaction) and minimize or eliminate human errors.
To report the status of the work that needs to be, or was, done.
A manual control system uses physical, paper-based technology to attempt to optimize warehousing operations. Due to the rate of change, demands for accurate, real-time in-formation, next-day-service mentality and marketplace competition, the use of manual systems in the next millennium will be unrealistic. A computerized warehouse management system (WMS) is the integration of bar coding technology, Radio Frequency (RF) communications equipment, hardware and software. Warehouse management software has the capability to optimize the warehouse and warehouse-related operations. Whereas the sophistication of manual control systems is low, the sophistication of WMS’s can vary from simple stock location control to systems that truly optimize customer service, space, labor and equipment in the warehouse. It is important to note that one should not confuse WMS technology with business systems applications that impact the warehouse. A WMS is an operating tool that is based upon the needs of the warehouse operation and provides tools and information for the management of the warehouse.
2.0. Warehouse Functions
To have a better understanding of the requirements of a warehouse and thus, the benefits of the warehouse management systems we first introduce the basic functions of the warehouse and then we can get into the benefits of having a WMS implemented in the daily operations.
Traditionally a warehouse performs four basic functions: (1) receive product, (2) store product, (3) pick product and (4) ship product.
Receiving.
The basic functions in the receiving area are: the packaging of raw materials from suppliers, finished goods from manufacturers and other sources, and customer returns. Generally, receiving operations have two major needs:
The need to have accurate receipt information with advanced notice, this facilitates the receiving operations by providing accurate and quick information from the sender’s host system directly to a WMS. This system translates receipt information into usable information for dock activity planning, order release and inventory allocation.
The need to reduce the time the product spends in staging. A WMS minimizes the time the product sits in staging due to operator-directed put-away and system-directed put-away and system-directed put-away locations.
Storage.
The basic functions in the storage area are: quality inspection, put-away, product location and lot control and crossdock operations. The typical needs with respect to product storage are:
The need to have adequate identification and tracking of product that are ready for put-away.
The need to have an automatic selection of storage locations for pallets loads, designed to maximize space utilization, picking efficiency and minimize retrieval or put-away labor.
The need for a stock location system that tracks identity and quantity of each SKU by unique storage location (in order to ensure product trace ability to customer).
The real-time update of inventory, locations of lot and stock records to provide timely information. The more real-time update, the greater the reduction in the information lead time.
The ability to cycle count inventory by storage location, as opposed to a physical on-hand inventory count. A WMS, uses cycle counting techniques.
Crossdocking.
A major deficiency in many warehousing operations is the absence of a stock location system. Knowing where and how much of a product is in the warehouse, is a basic fundamental to success of the operation. The absence of a stock location system requires that the inventory accuracy be reliable. Usually this implies counting the entire on-hand inventory for a single SKU. This process is not only labor intensive, but also can be affected by human error. A WMS provides the feature of cycle count by location, record accuracy can be verified by location. The result is a drastic decrease in labor requirements and time and a dramatic increase in inventory accuracy.
Picking
The basic functions in the picking area are: raw material picking, work in progress picking and finished goods picking. The shipping needs of a warehouse typically include:
The need to select specific storage locations for picking based parameters such as lot number, stock rotation, order quantity and pick location.
The need to minimize pick travel distance and multiple handling by pre-route and pre-post customer orders in storage location sequence.
The need to perform case picking and broken case picking.
Again the need for a stock location system is essential, since it provides a the foundation for efficient order picking. The picking functionality provided by a WMS is designed to exploit the existence of the stock location system to further maximize the picking efficiency. The ability of the computerized control system allows to minimize the picker travel time between picks and maximize actual time spend picking during discrete picking.
2.4. Shipping
The typical shipping needs include:
The routing of picked goods to predetermined staging lanes for order control and consolidation from multiple pick zones.
Automatic bill-of-landing generation.
Automatic updating of customer files.
Automatic shipping notification to customer (via EDI [1] ).
The shipping functions are designed to maximize the control of orders moving through packing, checking and loading. In addition, bill-of-landing, packing list, and customer file updating are used to minimize manual clerical tasks to reduce labor and improve accuracy and customer service.
2.5. Other Warehouse Function Capabilities.
There are other functional capabilities required by every warehouse. Some of these need include:
The ability to maintain product data files.
The ability to generate activity reports in order to manage warehouse performance.
The ability to monitor employee performance through transaction activity accumulation.
The creation of an audit trail to facilitate error corrections in warehouse activities.
The ability to track and access order status from order entry through shipping.
The ability to provide access as needed, maintaining data security.
The ability to facilitate efficient material replenishment.
3.0. Warehouse Management Systems Integration
3.1. Real-Time Radio Frequency Communications.
The benefits realized from real-time Radio Frequency (RF) communications are as follows:
Information availability – Real-time status updates of receipts, manufacturing requests and customer orders provides the warehouse with tools to manage the on-going activities. Providing the warehouse with adequate response to the changing needs and allowing management to relocate its labor, equipment and space resources as required to maximize performance.
Material Tracking – Real-time communications allows verification of all transactions which affect material location. This verification updates status records are used in future transactions, are used to eliminate most material transaction errors, and provide immediate solutions to errors that are identified. Real-time communications allows the warehouse to operate more efficiently by providing quick and accurate information about open/empty storage locations for put-away loads, without the necessity of manually searching of the rack.
Labor Pacing – Real-time communications between the system and the operator allows the system to pace the operator from one assignment to the next. The system will provide the operator with the proper task or tasks depending on each operator availability and product requirement. The result is workload management that maximizes task accomplishment and minimizes labor idle time.
Real-time RF communications is a valuable operational investment. The improvement in stock and inventory accuracy, labor management and responsiveness to manufacturing result in tangible cost savings. Most up-to-date WMS packages will support real-time RF communications. It is important to remember that effective real time communications will be depended upon the response time by the control system computer. It is important that the control system does not degrade the response time of existing applications, nor have an excessive response time.
3.2. Bar Coding.
The benefits from bar coding can be classified as follows:
Labor Reduction – Reduces the time required to identify loads and locations to support real-time RF communications transactions.
Data Acquisition Accuracy – Bar code data entry, with a typical error rate of one in one-two million scans is both fast and very accurate. As oppose to keystroke data entry, with typical error of one in three hundred keystrokes, which is both error prone and time consuming. The importance of data accuracy is essential to the success of real-time RF communications, which is provided by bar code data entry.
Compliance Labeling – Bar coding is being consent, even mandated, by customers as standards placed upon product. This enables the customer quick receipt and confirmation of receipt when combined with EDI shipment data.
It can be seen that the most compelling benefit gained from the use of bar coding is the effective support of data collection and real time RF communications. Without the bar code, both data collection and real-time communications (through manual keystroke input) will be full of errors and will slow productivity. Bar coding is a fast and accurate method through which real time communications can provide extremely important benefits.
3.3. Warehouse Management System Software.
The warehouse management system application software, also known as supply chain software for distribution centers of warehouses, facilitates speedy execution of product orders for suppliers and vendors at warehouses. The WMS software is currently mainly used for inventory management.
Most of the companies involved in the industrial, retail and transportation business are looking at this type of software as a solution to their current warehouse operational problems. Even though warehouse operations are not a completely new issue, there is not much information concerning the WMS. What are the top players? What is the global market share? The local market share? What are the vendors doing to keep up with on going market changes? To try and have a more clear picture the WMS an in depth look at the market trend for WMS has been performed and is presented in the following section.
3.3.1. WMS – A Global Market Trend Report
In the current market the software must handle merge-in-transit operations, multi-warehouses inventory visibility, multi-level bill-of-material, synchronized movement of component parts and light assembly and reverse logistics.
WAREHOUSE MANAGEMENT SYSTEMS
Supply Chain Planning Software
Order Management Systems
Management Systems
Inventory Management Systems
Transportation
Management Systems
3.3.1.1. WMS – Market Highlights [2]
Global markets for WMS software is expected to grow to $11 billion by the year 2005 at an average annual growth rate of nearly 32% over the 2000 estimates of $2.8 billion. See Figure 1 in Appendix 1.
The worldwide market for WMS is highly fragmented. It is estimated that the top fifteen supply chain execution software vendors accounted for a meager 32% of the $2.2 billion market in 1999. See Table 3 in Appendix 2.
Most WMS vendors are adapting to provide software that offers web-based graphical user interface for convenient usage by internal users in warehouse, suppliers, customers and service providers.
Greater demand for software that integrates WMS with order management, transport management execution, warehouse optimization or slotting, labor management and yard management, cross docking and reverse logistics.
Implementation of WMS applications is increasingly measured in parameters including order and inventory accuracy, storage use, order fill rates, orders per hour and costs per order.
Success in e-commerce is measured as a parameter of connectivity to trading partners, speed at which an order is executed, adaptability to ever changing customer requirements. These factors are driving the demand for supply chain execution software including WMS.
The WMS market in North America was estimated at $1.1 billion during the year 2000. Market is expected to grow between 29-33% annually, during the period 2001 to 2005. The region accounts for slightly over 40% of the global WMS market. See Figure 2 In Appendix 1.
North America market for WMS was estimated at $885 million in 1999. The industrial manufacturing and retail sector made up more than half the demand for WMS in the region. See Figure 2 in Appendix 3.
3.3.2. WMS – Software Vendors
The worldwide market for WMS is highly fragmented. It is estimated that the top fifteen supply chain execution software vendors accounted for a meager 32% of the $2.2 billion market in 1999. See Table 3 in Appendix 2.
Most WMS vendors are adapting to provide software that offers web-based graphical user interface for convenient usage by internal users in warehouse, suppliers, customers and service providers. Vendors are not only trying to facilitate the acquisition of this technology, but they also are trying to keep up with the distribution dynamics that tend to change at the same pace as the market trends do. See Table 2 in Appendix 2.
The integration of the real-time RF communications, bar coding and the WMS software, provides the proper platform for a computerized warehouse management system to perform the proper operational control in the warehouse. Nevertheless, the thought that WMS is the answer to every warehouse problem is not completely true. Even though the WMS are a necessity in today’s warehouse operations, they still rely on human control, and having the proper team to perform the implementation and every day functions is as essential as choosing the proper system.
3.3.3. WMS Software Functions and Capabilities
3.3.3.1. General System Functions.
Most of the available management system software’s have common functions in their platforms, although the products tend to have its uniqueness feeling attached to each one, the reality is that there is a standard for a typical WMS software. The following are the standard functions of a WMS system:
Appointment Scheduling.
Receiving.
Cross Docking.
Inventory Control.
Put-away.
Replenishment.
Order and Wave Management.
Picking and Packing.
Shipping.
Yard Management.
The capabilities of each function are explained below in more detail.
1. Appointment Scheduling. Provides the tools to collect carrier information and apply it to a calendar for better utilization of dock and warehouse resources.
2. Receiving. Handles all range of receiving possibilities that exist for the distribution operation. The most common capabilities are:
Real-time RF or paper based receiving.
Flexible PO/ASN verification.
Critical data validation.
3. Cross Docking. Tasks are automatically created to locate the product at the receiving dock and move it to the correct shipping lane or storage location.
4. Inventory Control. Provides a feature to manage and control inventory in the warehouse. The most common capabilities perform by this function are:
Inventory ownership tracking.
Item attribute tracking, i.e. lot, shelf life, data code, and serial number.
Inbound and outbound catch-weight capture.
Flexible inventory transfer, moves, and adjustments.
Cycle counting processes.
Wall-to-wall physical counting.
Real time inventory status control and inquiry.
Location and zone configuration.
5. Put-away. Provides put-away features that can be used in the warehouse. The capabilities of this function are:
System directed or assisted put-away.
Configurable put-away strategies to optimize storage and asset utilization.
Configurable generation of put-away tasks (typically put-away algorithm’s).
6. Replenishment. This function provides the process for directing inventory movement from reserve and overflow locations to primary pick locations in real time fashion. The capabilities of this function are:
Automated replenishment task generated and dispatch.
Multiple replenishment options, i.e. split case, case, pallet, etc.
Configurable replenishment strategies.
7. Order and Wave Management. Provides the ability to accept and validate orders from the host’s order entry system, to coordinate picking and shipping activities, and to create waves that will sequence which orders are grouped and released to the warehouse. Waves can be planned based on criteria such as, routes, zones, zip codes, hot orders, carriers, or any other order information. The most common capabilities of this function are:
Extensive wave building criteria.
Configurable allocation strategies and dynamic allocation.
Configurable cartonization.
8. Picking and Packing. Provides several picking and packing capabilities:
Automated picking task generation and dispatch.
Real-time RF and label based picking.
Supports piece, case, and pallet picking.
Multiple picking options: discrete order picking, cluster picking, and batch picking.
System assisted packing.
Outbound container ID generation and tracking.
9. Shipping. The shipping processes ensure that customer order quality and compliance labeling requirements are met. The capabilities of this function are:
Real-time RF loading.
Shipment consolidation and compliance labeling.
Shipping documentation generation.
Shipment loading management.
Shipment verification and close.
Carrier manifest generation.
10. Yard Management. Optimizes the productivity and accuracy in the trailer yard. It also extends customer’s control and visibility deeper in the supply chain by providing real-time access to trailer content early in the distribution process and more comprehensive trailer management inside the yard. Reduces yard labor costs by minimizing manual processes.
3.3.3.2. Additional System Functions.
In addition to the standard functions of the WMS software several companies have constructed their platforms with additional ones. I have compiled a list of the best selling software’s and their added and sometimes unique functions. See Table 1.
Table 1. Functions for various WMS softwares.
Company
WMS Software
Function
EXE Technologies
EXceedTM WMS
Task Management
Value Added Processing
Billing
Optimize [3]
Manhattan Associates
PkMS
Task Management
Third Party Billing
Reverse Logistics (Returns)
Value Added Processing
Foreign Trade Zone
Shipment Staging
Transportation Management Systems3
HK Systems
IristaWarehouseTM
Value Added Processing
Container Management
Reverse Logistics (Returns)
Shipment Staging
Catalyst International
CatalystCommand 9.0
Slotting
International Trade Logistics
Reverse Logistics (Returns)
Transportation Management Systems
Collaboration/EAI Systems
Uniteq/ AquiTec
SCM/400TM
Reverse Logistics (Returns)
Transportation Management Systems
Interleaving/Multitasking
Each function presented in Table 1 is described below in more detail.
Task Management. Provides automatic generation and dispatching of tasks to users for: receiving, put-away, moving inventory, cycle counting, replenishment, picking, loading, and shipping.
Value Added Processing. Provides inbound VAP such as: inspection, repack, and returns, as well as outbound VAP such as: kitting, packing, and inspection, and complex final assembly operations for customer-specific products.
Billing/ Third Party Billing. Captures and invoices charges for storage and labor, enabling accurate and timely customer billing.
Optimize. Models planned and existing facilities to identify cost effective and efficient layouts, product placements, and labor routings.
Reverse Logistics. Provides the functionality needed to handle returns to your facility, either from the customer or the supplier; managing return authorizations, re-fulfillment, repair and other capabilities for the reverse supply chain.
Foreign Trade Zone/ International Trade Logistics. Improves management of the firm by automating global logistics/ delivery operations while coordinating the management of documents and transactions for customer compliance.
Shipment Staging. Provides processes to improve layout and dock utilization by assigning the proper space for picking and retrieving operations.
Slotting. Provides optimized product placement strategies.
Transportation Management Systems. Provides an upgrade to the transportation section by designing efficient networks for the movement of products through shipping confirmation, carrier assignment, schedule coordination, and payment processing.
Collaboration/ EAI Systems. Improves the firm by expanding the supply chain network by synchronizing transactions and data among widely dispersed systems.
Interleaving /Multitasking. Provides the ability to perform move operations across multiple functions.
WMS Software Integration.
WMS software con integrate with vrtually all bussiness applications. Usually most of the softwares include integration products that speed integration to host applications (such as advanced planning and scheduling (APS), transportation Management (TMS), order management (OMS)), ERP systems, radio frequency (RF) data collection devices and material handling equipment.
3.3.5. Benefits from WMS Software.
The benefit from implementing such a system in a company is that enables then to move their product across the supply chain more efficiently, thus, increasing sales, improving fill rates and decreasing costs. Benefits from this type of systems include the following:
Improved inventory accuracy and control.
Improved customer satisfaction.
Increased throughput and productivity.
Minimize labor and material costs, and reduced operating costs.
Efficient use of employees, space and equipment.
Increased order accuracy and fewer selection mistakes.
Increase on-time delivery rates.
Integrate seamlessly witth ERP, APS, OMS and MHE Sytems.
3.3.6. Software Selection and Implementation.
Software selection and implementation services have become major business for the different consulting firms and the software vendors. The importance of selecting the proper software and the proper implementation is never being so evident since the software and implementations failures have become very common in today’s business.
3.3.6.1. Software Selection.
Enterprise software ranges in price from a few thousand dollars to millions. Most of the time a manufacturer with annual revenues of less than 200 million, won’t even be consider a s a potential customer by the top software vendors. Implementation costs are also expected to match or exceed the cost of the software. Unless one is shopping for a very simplistic low-end package it is highly advisable to seek the services of an independent software selection firm. They can not only help to narrow down the list of potential vendors but can also help to prepare you in initial assessments of implementation costs and time frames.
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The most important part of the software selection process is to define the processes within your organization and to determine functionality that is key to your operation. Many times customers get lost in the excitement and forget about their core business functions. If you are a manufacturer, manufacturing is your core business function and you should be looking at packages that have been designed specifically for manufacturers. Don’t buy an accounting package with a manufacturing module tacked on. In addition you should be focusing on the specific type of manufacturing you are conducting. Software designed for make-to-stock manufacturers may not work well for a make-to-order manufacturer. Software designed for electronics manufacturing may not work well in a machine shop. Software designed for discrete manufacturing may not work well for process manufacturing. Most software packages are initially designed with specific customers in mind, asking the vendor about their biggest customers will often give you an idea as to the type of operation the software was designed for. When you look at the detailed functionality of a product it will be important to have listed detailed functionality requirements of your operation. Never assume a software package “must” be capable of handling something you consider a standard business function. Some examples of detailed functional requirements are as follows: Multi-plant demand planning, Outsourcing specific operations, Back-order processing, Lot tracking, Forward pick location replenishment, Shipment consolidation, First-in first-out processing. It’s unlikely that the software package will do everything you wanted it to do, so be prepared to compromise on some of the functionality. A list of some of the most known software’s can be seen in Table 1.
3.3.6.2. Software Implementation.
As with the software selection, the implementation will likely also need outside assistance. Whether you use consultants from the software vendor, a business partner, or an independent firm, the implementation plan will likely be the same. It’s very important to listen to the consultants and be prepared to dedicate the resources outlined in the implementation plan. A common mistake made by companies going through their first major implementation is to underestimate the complexity of their operations, the extent of system setup and testing, and the impact the implementation will have on their operation.
Like most other things the success of a software implementation will be based upon the skill of the people involved, training, and the effort put forth. One should plan to have your most knowledgeable employees heavily involved in the system setup and testing. Even with extensive testing there will still be some issues that won’t be identified until after the system is up and running. Major issues have to be identified prior to implementation to avoid major pitfalls. After the system has been thoroughly tested you need to begin the process of employee training. The training should consist of written procedures for the tasks they must perform and hands on training.
4.0. Warehouse Management Systems Justifications
As mentioned above the savings in a warehouse come from improving our operations. How do we achieve this? By “control”, and this control is achieved by using WMS. Some of the potential savings that can be expected from a WMS are the following:
Reduction in operator key entry labor.
Reduction in safety stock levels.
Reduction in labor associated with not having to do a physical inventory.
Lost sales and back orders due to inaccurate inventory.
Reduction of manufacturing overruns due to inaccurate inventory levels.
Reduction of manufacturing disruptions costs due to material outages.
Reduction in inventory write-offs.
Reduction of operator labor due to decrease time spent searching for a product or open location.
Optimization of picking paths.
The best way to understand the true financial benefits of a WMS is to properly document these savings and the magnitude of the savings. Since different warehouses have different areas of improvement, the savings will differ for each warehouse, but the overall savings that will be reflected/compensate with the investment of a WMS.
6.0. Conclusion.
A key to the success of a company is customer satisfaction. Customer satisfaction is based on the ability to control your warehouse. A WMS not only will allow you to optimize customer satisfaction but also to maximize operati
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