Logistics and Supply Chain Technology: WMS: Prompt payback
Seeing little promise of an economic recovery in 2009, WMS providers continue to hone their systems for new verticals and work diligently to shorten payback periods for increasingly anxious users. Here’s where the market stands and how two managers took the plunge.
By Bridget McCrea, Contributing Editor -- Logistics Management, 5/1/2009
Whether they’re buying new warehouse management systems (WMS), upgrading their existing packages, or replacing antiquated solutions, savvy logistics managers nationwide continue to seek out the best ways to automate the warehouse floor despite increased scrutiny on spending—and they’re demanding a quicker payback than ever before.
According to Steve Banker, service director for supply chain management at ARC Advisory Group, the total number of warehouse management systems sold by vendors shrank by 4 percent in 2008 compared to 2007. However, a new Logistics Management (LM) survey found that companies have put WMS at the top of their technology “wish lists” for 2009. How soon that wish may come true is still up in the air.
According to LM’s annual software trend study, 55 percent of respondents told us that they’re currently using WMS, while a surprising 31 percent of current users say they plan to upgrade their WMS this year. Of the 41 percent of shippers who say they’re planning to purchase supply chain management (SCM) software sometime in the next 12 months, the bulk (31 percent) will invest in WMS, with 29 percent interested in TMS. From their WMS investments, the survey reveals that shippers expect to improve their inventory deployment, real-time control, labor management, and slotting functions, to name just a few.
The fact that the WMS market contracted just 4 percent last year—and that it’s leading the pack in the SCM space—is music to the ears of HighJump, Manhattan Associates, and RedPrairie, the “big three” best-of-breed providers. Also claiming their piece of the WMS pie are enterprise resource planning (ERP) vendors SAP and Oracle. “All of these vendors went into 2008 doing pretty well,” says Banker, “but sales cycles started to lengthen in the second and third quarters. By the fourth quarter, they weren’t selling anything.”
Vendors Fight the Trends
To combat the economic-related decrease in sales, WMS providers continue to tweak their solutions and package them in a way that differentiates them in a mature software market. RedPrairie and Manhattan continue to reign as the most functionally-rich solutions available, says Banker, while HighJump promotes its system’s flexibility.
However, all vendors are working to shorten shipper payback periods, which have historically been two years for WMS. “In a recession there’s a natural tendency for customers to look for a quicker payback,” says Banker. “We’re now seeing WMS add-on modules with payback periods of less than 12 months.”
Software providers are also redeploying resources to customer verticals that continue to purchase systems despite the economic conditions. “The retail sector has been clobbered by the recession, but the third-party logistics [3PL] providers are doing okay because their industry is somewhat counter-cyclical,” explains Banker. “That’s because during a recession, many manufacturers start to think about outsourcing to 3PLs when the leases come up on their warehouses.”
The replacement market is another bright spot for WMS providers, according to Greg Aimi, research director at AMR Research, who says that his own research shows that about 50 percent of WMS sales in 2008 fell into that category. “Some of these systems that were installed in the late-1990s have been in place for 10 to 15 years and need to be replaced,” says Aimi.
Other drivers include the need for labor management (for benchmarking employee performance and improving productivity on the warehouse floor, for example) and globalization of the supply chain. “The import and export of inventory overseas is changing the flow,” says Aimi, “and firms are moving their distribution centers and implementing WMS to handle this globalization.”
To help shippers achieve those and other goals, many WMS providers are extending their systems’ functionality beyond the warehouse floor, according to Bob Trebilcock, who covers the technology sector for Modern Materials Handling magazine.
“Manhattan is the largest WMS provider, yet just 50 percent of its revenues come from WMS, and that number is going down all the time,” Trebilcock explains. “Where it—along with HighJump and RedPrairie—differentiates itself is with the applications that handle the functions that come before and after the actual WMS.”
Take HighJump, for example, whose store replenishment system has gained in popularity among customers. A firm that’s delivering Frito Lay snacks to 100 different 7-Eleven stores can use the system to seamlessly replenish from the retail floor, and have that order information fed directly into the distributor’s WMS.
Software developers are also beefing up their systems’ slotting functions to help customers figure out the best possible product placement on retail shelves. They’re also creating more robust route management systems to assist with the picking and packing of orders, as well as the scheduling of the day’s deliveries.
With little promise of an economic recovery in 2009, WMS providers continue to hone their systems and package them in a way that appeals to companies in need of new or improved warehouse automation. Now let’s take a look at two companies that have put their existing WMS to work to help them get smarter and faster in today’s challenging environment.
Cabela’s Multi Channel Challenge
As the largest direct marketer in the U.S. and a leading retailer of hunting, fishing, camping and related outdoor merchandise, Sidney, Neb.-based Cabela’s has a 20-store retail division that draws more than 40 million visitors annually. The company’s three DCs comprise more than 2 million square feet and house 300,000 SKUs from more than 5,000 vendors. The company switched from a manual WMS to Manhattan Associates’ PkMs in 2000 to handle its inbound operations, and in 2006 moved its outbound logistics onto the Manhattan system.
According to Baloo Eledath, Cabela’s director of enterprise business solutions, the new implementation focused on three areas: pre-season planning and purchasing; in-season fulfillment and restocking; and post-season assessment and preparation for the next season. The WMS was installed in three DCs, two return centers and 20 stores. The company uses the system in its retail stores to track inventory location and replenish stock on the floor as sales occur as well as for receiving and returns.
Cabela’s multi-channel strategy requires optimization of people, systems, and capital to meet the complex needs of its diverse customer base, whose preferences vary by geographic region, sporting season, and skill level. The ability to accurately forecast, purchase, and place inventory in advance of demand is essential. The first attempt at WMS automation in 2000 wasn’t easy for Cabela’s, which handled the installation in-house.
“We tried to implement the WMS within our existing methodology and that resulted in operational difficulties,” says Eledath. “We got where we needed to be within a few months, and then started to see significant improvements.”
To avoid running into similar issues, Eledath advises users to “understand their operations well” before getting into the WMS buying process. “And if you haven’t implemented a WMS before,” he adds, “consider enlisting external help to do it.”
In return for its investment, Cabela’s has realized improvements such as increased operational efficiency, cost savings, and enhanced customer service capability. Other benefits include better visibility of information, improved metrics, and the ability to benchmark and make the necessary configuration changes for its multi-channel network. “In the past, configuration changes took days or weeks to complete,” says Eledath. “We now handle them within an hour with our WMS.”
Papyrus Upgrades From Paper
Papyrus may make its money selling paper, but that doesn’t mean it wants a paper-based warehousing system. Founded in 1950, the Fairfield, Calif.-based company’s product lineup includes custom-printed announcements, items for entertaining, greeting cards, gift wrap and bags, stationery, note cards, journals and other unique gifts.
Five years ago the company decided it was time to upgrade its manual warehouse management system, and set out to find a WMS that was flexible (should the company’s product mix change, for example) and independent in nature.
“We didn’t want to be dependent on a vendor,” says Del Duquette, warehouse manager for the firm’s 275,000-square-foot DC in Nashville, who found what he was looking for in a RedPrairie WMS. “I haven’t placed a support call this year.”
Rewind back to 2004 and Duquette says the installation posed significant challenges for the firm, which ships products throughout North America. “We had to figure out everything from scratch,” recalls Duquette. “It took at least six months to marry our distribution practices with the WMS.”
Today, Papyrus uses its WMS for inventory management and order fulfillment and replenishment. The most significant benefits have come in the form of inventory accuracy, says Duquette. “With our paper-based system, our total inventory accuracy never exceeded 85 percent,” he says. “Now, our inventory is always at 99.5 percent or higher.” The company has also eliminated physical inventory events, which in the past required one-week warehouse shutdowns. “Now we just do spot audits,” says Duquette.
Finally, the warehouse manager says company productivity has gone from shipping about 15,000 orders a day to as many as 50,000 a day, with 30,000 orders being the average. “Fulfillment time has also improved,” says Duquette. “Thanks to our WMS, we can process about half of our orders same-day, and get them out the door that day or the next.”
| Currently use | Plan to Purchase Upgrade | Both (NET) | |
| LM’s 7th Annual Software Survey, April 2009 | |||
| Warehouse Management Systems (WMS) | 55% | 31% | 67% |
| Transportation Management System (TMS) | 36% | 29% | 54% |
| Yard Management Systems (YMS) | 14% | 10% | 21% |
| Global Trade Management Software (GTM) | 15% | 13% | 25% |
| Enterprise Resource Planning (ERP) | 44% | 18% | 53% |
| Supply Chain Planning (SCP) | 34% | 23% | 47% |
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