Logistics technology: ARC report says global WMS market to hit $1.8 billion by 2012 

Jeff Berman, Group News Editor -- Logistics Management, 4/8/2008

DEDHAM, Mass.—A recent report from supply chain consultancy ARC Advisory Group notes that the global Warehouse Management Systems (WMS) market is expected to expand at a compounded annual growth rate of 7.5 percent over the next five years.

The new report, entitled “Warehouse Management System Worldwide Outlook,” stated that the global WMS market was nearly $1.3 billion in 2007 and is projected to exceed $1.8 billion by 2012.

A major driver for the sustained growth in the global WMS market, which is seeing year over year double digit growth, is due largely to what ARC Service Director for Supply Chain Management and Report Author Steve Banker calls a “technology refresh” among customers with older systems, coupled with the emergence of WMS in new verticals and parts of the world that have historically not bought into WMS.

This technology refresh has more than one actual meaning, Banker told LM. It can mean the following: a shipper’s supplier that used to offer WMS services is out of business; a supplier that used to offer WMS has been acquired by another company that is not investing much into a WMS platform; or a supplier has WMS and is still in business but has an older system and is putting most of its R&D into newer platforms. The last meaning, explained Banker, means that if a shipper wants to gain access into the newest functionality, it has to switch platforms—and requires a new implementation.

About half of all WMS deals are driven by this ‘technology refresh’—or replacing the core, explained Banker.

“Historically, when people bought a WMS, they were told it was an off the shelf solution, but it can be a lot of money and a lot of pain [to get acclimated and up and running],” he said. “Most companies would keep a WMS for about 11 years and not upgrade it. When it came to the time to think about an upgrade, they would consider it and then say ‘it is going to cost us as much to buy a new WMS so let’s see what is out there.’”

In terms of WMS offerings that are driving growth in the global marketplace, part of the growth is sustained by WMS that are driven by a modern architecture, such as a Software as a Service (SaaS) model. SaaS systems can handle quick upgrades that do not take a lot of time and provide shippers with adaptability and flexibility.

But he added there are also WMS’s that are not functionally rich that are basic systems and very inexpensive, which are driving “huge growth” in Eastern Europe, China, and India.

For a full copy of the ARC report, click here.