Supply Chain and Logistics Technology: WMS moves toward intelligence

After posting 10 percent growth in 2011, the warehouse management systems (WMS) market continued adding to its $1.3 billion in total sales volume last year and experienced a growth rate of about 6 percent, according to early estimates from analyst firms Gartner and IDC Manufacturing Insights.

Key market drivers for WMS included an economic landscape that continues to improve and push companies to spend more on technology; the ongoing need for more streamlining and visibility in the DC; as well as the fact that many existing solutions are aging and need to be upgraded or replaced.

“Overall, manufacturers are a little more optimistic, and, as a result, are making more investments in WMS and other solutions,” says Simon Ellis, practice director at IDC. “When we talk to the larger WMS vendors right now, they are all seeing reasonably healthy growth in the segment.”

Over the next few pages we’ll examine the current state of the WMS market, explore the key trends that are currently driving the industry, and highlight a few of the new capabilities that are just around the corner for vendors and users.

WMS on cloud nine
Much like its transportation management system (TMS) cousin did about six years ago, WMS has officially moved into the cloud. “We’re seeing a rapid emergence and adoption of cloud-based WMS,” says Dwight Klappich, research vice president for Gartner. “Companies that agonized over whether to keep their data behind a firewall or on the web—or, that were worried about scalability and performance issues in the cloud—have done complete turnarounds.”

Klappich says cloud-based WMS is where TMS was about six years ago, when the cloud was “an option, but not a preference” for most shippers. The movement is gaining momentum, says Klappich, who expects WMS-in-the-cloud to continue growing over the next two years, putting pressure on both the mega-suite vendors and best-of-breed providers to come up with subscription-based solutions.

“At this point, the vendors are kind of holding back in this area,” Klappich points out, “but that’s starting to go away as demand for cloud-based systems grows.”

Rolling out the bells and whistles
WMS may be the granddaddy of the supply chain software lineup, but that doesn’t mean its makers aren’t continually looking for ways to improve upon their offerings.

Driven by users’ wants and needs, WMS innovations come in different shapes and formats. At a very basic level, for example, Ellis says software vendors focus on developing solutions that support functions like cross-docking, bypass shipments, and multiple-manufacturer facilities.

After all, says Ellis, not all warehouses are dedicated to single companies anymore. “There are a lot of facilities out there, in addition to the many 3PL operations, that support multiple manufacturers,” says Ellis. “Oracle, in particular, can support warehouses that are being used by multiple firms under a single roof.”

Vendors are also introducing new functionalities to meet user demand. Workforce management, for example, is one component that some WMS vendors are including in or tying into—in the form of add-ons—their solutions. These systems help warehouse managers assign the right employees with the right skills to the right job at the right time—a mission that’s not always attainable with manual systems.

“There have definitely been some enhancements made around planning and forecasting for warehouse labor,” says Robert Hood, senior manager at IT consultancy Capgemini.

WMS providers are also helping shippers achieve tighter, closer supply chain integration by figuring out how to align the warehouse management’s tactical and operational effectiveness with functions like inventory management, inventory optimization, and even global trade.

“It’s about bringing these capabilities closer together and making them even smarter, as well as connecting transportation with the warehouse and with optimization technology to manage tactical decisions in a more cohesive manner,” says Ellis.

Getting mobile within the four walls
Mobility was infused into the warehouse years ago with the introduction of ruggedized handhelds and other mobile tools. More recently those tools—while robust and able to withstand the physical strain of being used in a warehouse environment—have given way to more advanced tablets and smart phones.

“Ruggedized equipment is worth the money for the warehouse, but there are things that you can do with an iPad that you can’t do with traditional mobile equipment,” says Ellis, who points to inventory performance and workforce management as two functions that a tablet can handle. “All of the major software vendors understand the importance of being able to connect mobile devices into a WMS,” says Ellis.

Klappich points out that at one time, tablet computers and related applications designed for them were not for the blue-collar worker on the warehouse floor, but for the supervisor or manager who received event-based information while seated at his or her desk. With more mobility making its way into the warehouse—and more WMS packages integrating this functionality via app—that same supervisor can cut the wires and operate in a more mobile fashion.

“We’re seeing a lot of WMS vendors piloting first generation tablet apps right now,” says Klappich, “and more shippers using tablets as a result.”

International flair
High demand for WMS isn’t limited to the U.S. According to Klappich, the number of WMS users is also growing in Europe and in various emerging markets, the latter of which tend to be “15 years to 20 years behind the established markets in terms of WMS maturity levels,” says Klappich. “In emerging markets, businesses have evolved to the point where putting in the very rudiments of WMS are getting more and more important.”

As companies in emerging markets strive to pick-and-ship orders on time and as efficiently as possible, Klappich says WMS will gain an even stronger foothold. Concurrently, a number of companies have already figured out how to stay on top of changes in order volumes, but are now looking to operate more efficiently and utilize their resources more effectively.

“We’re expecting a lot more growth internationally for WMS,” says Klappich, “as companies get to the point where manual processes just don’t cut it anymore.”

Not all buyers want luxury
Where international WMS users differ from their U.S. counterparts is that most of them don’t need the advanced functionalities that vendors are incorporating into their solutions.

“These users aren’t looking for best-of-breed solutions, necessarily,” says Klappich. That phenomenon alone will drive notable changes in WMS over the next five years, he says, with mega-suite vendors like SAP and Oracle “beginning to catch up and even outpace the growth of the best-of-breed marketplace.”

Klappich uses an automobile analogy to describe the current landscape: “RedPrairie and Manhattan are the BMWs and Mercedes-Benzs, and Oracle and SAP are the Toyotas and Hondas,” says Klappich. “The latter offer solid, proven, reliable systems that will get you from Point A to Point B, but they don’t have heated bumpers.”

That said, Klappich points out that best-of-breed providers continue to dominate the market for now, but adds that most are doing the “complex, multimillion dollar deals.” For now, the “other” deals seem like small potatoes in the scheme of things, says Klappich, “but in terms of net new customer acquisition, we believe that within five years the mega-suite vendors will command about 50 percent of the marketplace.”

Merging and acquiring
If one piece of news shook up the WMS landscape in 2012 it was the announcement that JDA Software Group and RedPrairie would become one. Wrapped up in December, the merger brought together a supply chain software powerhouse (JDA) and a WMS provider (RedPrairie) that consistently ranked as one of the top players in the best-of-breed space.

The merger could prove to be a double-edged sword for RedPrairie, according to Hood. On one hand the best-of-breed provider will benefit from JDA’s dominance in the industry, but on the other side RedPrairie’s laser focus on the WMS market could be diminished.

“JDA is a demand supply company that has the planning space completely covered up and is less focused on execution,” Hood comments. “Will that cause RedPrairie to get lost in the shuffle? And will that give [competitors] like Manhattan a competitive advantage? Only time will tell.”

ERPs drill down
Large ERP providers like SAP and Oracle continue to claim the lion’s share of sales around supply chain components. Such components are delivered as collections of “modules,” and closely integrated with the ERP in question.

Offerings like SAP’s extended warehouse management (EWM) solution, for example, claim to help shippers “gain control over warehouse efficiency, transform operations, and increase competitiveness.” Hood says shippers are paying attention to these claims.

“Over the last six months we’ve seen a significant uptick in the level of interest and energy around SAP EWM,” says Hood, who adds that some of the momentum is being driven by a handful of successful EWM implementations in Europe. “There was some initial skepticism among WMS practitioners at first—in terms of the solution’s differentiation points over what’s already been done—but we’re deploying EWM in six projects right now and finding it to be more functionally rich than its predecessor.”

Expect to see more WMS vendors stepping up to the plate across all areas mentioned in this article—from mobility and the cloud, to specific functions, and even the kind of mergers or acquisitions that will help make their solutions more valuable for shippers.

“Warehouse management systems have pretty much done the same thing for the last 30 years,” adds Klappich. “But over the next five years we’ll definitely see some functionality improvements in an effort to make the WMS that much more intelligent and useful.”