Future of WMS mapped out in Oracle Forecast
The economic indicators certainly suggest that a fulfillment economy has already begun.
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Editor’s Note: Diego Pantoja-Navajas, Founder of LogFire and VP of product strategy for Oracle Warehouse Management Cloud. In an exclusive interview with Supply Chain Management Review, he shares his views and forecast for Cloud-based technology.
Supply Chain Management Review: What are your projections for the WMS market?
Diego Pantoja-Navajas: According to The New York Times, manufacturing has not driven the US economy since 1953. That was the year of manufacturing’s zenith – when it represented 28 percent of GDP and employed 16 million people. However, over the half-century that followed, the US economy transitioned toward services. Today, half of US GDP is service oriented, and according to Fortune, 8.5 percent of US GDP is directly related to a $1.3 trillion dollar logistics industry that continues to grow.
What this means is that a total value of $1.3 trillion dollars and 8.5 percent of the total value of the United States economy revolves in some way around inventory fulfillment and distribution. At some point soon, we will be able to state that we have left a manufacturing economy behind and have begun a new fulfillment economy. The economic indicators certainly suggest that a fulfillment economy has already begun.
When you boil that down to the solutions that power the new fulfillment economy, Forrester research reports that the total cloud market value is expected to top $241 billion dollars by 2020, and Transparency Market Research reports the Cloud Warehouse Management Solution market is expected to expand from US $1.2 billion in 2015 to US $4.1 billion by 2024. Those numbers support the premise that cloud-based warehouse management is poised to be the newest solution to drive the new fulfillment economy.
SCMR: What will the impact of cloud have on this growing market?
Pantoja-Navajas: Yesterday’s traditional on-premises fulfillment and warehousing infrastructure has outlived its use. Businesses using traditional supply chains lack the flexibility to keep up with consumers who are able to instantaneously place orders across a variety of channels, and who expect to receive their purchases from a variety of places.
More and more often, businesses attempt to meet the challenge of digital fulfillment by throwing bodies at it or by further customizing their on-premises legacy systems. These business choices prove themselves inefficient and expensive. Companies running legacy warehouse management systems (WMS) will struggle to serve the needs of 5 billion, mobile-connected consumers without a connected solution of their own.
Cloud-based WMS introduces a new paradigm in supply chain execution solutions – robust warehouse management functionality at an outstanding value. With innovative product features, mobile solutions and an easy to use interface, cloud-based WMS solutions are dynamic and easily configurable for rapid, cost effective implementation.
Here are some of the top benefits of cloud-based WMS:
Faster Implementation Times - For businesses looking to stand supply chains up quickly, moving to the cloud optimizes implementation times and helps ensure logistics capabilities are available in weeks as opposed to months. This is possible because all required infrastructure is in the cloud.
No More Upgrades – With cloud-based WMS, companies don’t have upgrades…they enjoy updates. Software-as-a-service (SaaS) pricing means there are no upgrade fees – and no IT infrastructure costs. It’s all the cloud and your solution provider takes care of it for you. Cloud-based solutions update similarly to apps on mobile phones -meaning customers have the latest codebase at work on their behalf.
Control - Moving to the cloud doesn’t mean giving up control of your business. How you control your WMS may change from what you are accustomed to, but what you control will only add business value. The control businesses enjoy with a cloud-based system is unlike anything an on-premise solution can offer. Cloud technology ties directly to business needs. For example, server capacity can be ramped up during high season to react to volume changes based on market activity.
Lower Up-front Costs - One of the major benefits of moving to the cloud is that cloud-based solutions generally have a near immediate return on investment and a lower total cost of ownership. Cloud technology eliminates the need for hardware, software, and specialists and comes ready to integrate with multiple systems. For example, taken over a five-year period, customers who have been on a legacy WMS have likely paid for several customizations and modifications. Those changes handcuff clients to antiquated systems and when it is time to upgrade to a newer version, that is—in reality—a total reinstallation and configuration.
Integration not Isolation – Cloud-based WMS is built for integration, unlike on-premise solutions that are built for isolation. For third party solutions, integration is architecturally built into the solution, offering support integration with host enterprise resource planning (ERP), merchandising (MMS), and supply chain management (SCM) solutions, as well as integrated data from trading partners throughout an extended enterprise network.
Scale with Ease- With a cloud strategy and a robust cloud solution in place, businesses can quickly and easily react to market conditions. Legacy systems have a hard-enough time reacting to shifts in the market—let alone high seasons. With a legacy on-premise system in place, it is next to impossible to react to the market day to day, and it is impossible to guess what your next holiday will be like. However, using a cloud WMS, businesses can scale up server capacity as needed. High-seasons or changes in the market no longer have to be a burden because a cloud solution means businesses are ready for whatever the market brings.
Flexibility - A truly optimized supply chain can dynamically react to market conditions and leverage the modern technology of an on-demand cloud application. This is the value of Software as a Service (SaaS) – the ability to react to a dynamic marketplace.
SCMR: How should supply chain managers prepare for this trend?
Pantoja-Navajas: For those companies who are evaluating their transition to the cloud, now’s the time.
With that in mind, we have a few tips on how you and your organization can prepare to move to the cloud:
Take Advantage of the Downtime Following the Holiday Rush - There’s a reason the most industry conferences are held during the springtime. For most industries, at the beginning of the year, there’s a small window of time during which many companies experience the downtime needed to realign and adjust their market strategy. Major operational changes are easier to implement during this time of year since supply chain operations are typically at their slowest.
Look at the Big IT Picture - You should also look to make the transition to the cloud in tandem with other system updates or new service offerings. This allows you to better integrate those tasks with your new software and real-time visibility capabilities, and to ensure you’re getting the most from cloud-based management. Transportation management, packing, and shipping, etc., are all areas where proper integration and implementation can improve profitability and logistics. New service offerings, such as “Buy Online/Store Pickup” or “Same Day Delivery,” naturally fit with cloud-based systems.
Time the Transition with Any Strategic Shifts - Finally, look to make the transition alongside any major business shifts, as well. If you’re in the process of enabling omni-channel support for your business, or if you’re looking to cut back operational costs, a shift to the cloud can make things easier and more profit-focused. This also applies if you find yourself having trouble filling orders or dealing with troublesome on-premises technology providers.
In 2016, we saw a surge in both interest in and investment in cloud-based systems from IT providers and large corporations worldwide. The cloud is quickly becoming an operational necessity for companies looking to remain at the top of their industries. Those supply chain management companies who’ve already made the move have a substantial lead and competitive advantage compared to those still evaluating the shift.
If you’re one of those companies still in “evaluation” mode, we can say with confidence that your old infrastructure is holding you back. There’s simply no way you can compete with providers who can, at any moment in time, deliver real-time information regarding virtually anything of importance to their customers and clients.
This year, you can take that next step and bring your systems up to the most competitive and cost-effective level possible. Leveraging modern cloud-based technology will put your company at the top of its game. There will never be a better time.
About the AuthorPatrick Burnson, Executive Editor Patrick Burnson is executive editor for Logistics Management and Supply Chain Management Review magazines and web sites. Patrick is a widely-published writer and editor who has spent most of his career covering international trade, global logistics, and supply chain management. He lives and works in San Francisco, providing readers with a Pacific Rim perspective on industry trends and forecasts. You can reach him directly at [email protected]
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