Supply Chain Technology: Will WMS take over the world?
October 01, 2012
The warehouse management systems (WMS) market is on a tear. In 2011 it grew by 10 percent over 2010 to nearly $1.3 billion, according to ARC Advisory Group, a leading supply chain management software analyst firm.
That double-digit growth aligns with Logistics Management’s 2012 Software Survey, which identified WMS as the top software choice for 35 percent—the highest percentage across all supply chain software sectors—of the logistics professionals that were in the market for supply chain solutions over the past year.
Clint Reiser, ARC research analyst, credits several forces with driving the impressive WMS market growth. “A demand bottleneck created by the economic recession—and then let loose in 2011 when companies slowly began spending again—was one of the key drivers,” says Reiser.
Also buoying the sector’s impressive increase, according to Reiser, were growth spikes in emerging markets like Latin America and Asia, the introduction of add-on functionalities, as well as the strong growth within the discrete manufacturing sector.
Over the next few pages we’re going to take a deeper look at these key drivers within the WMS market, explore its “cloud” potential, check in on what the big ERPs are up to in the sector, and then examine the market’s potential growth for 2012.
Expanding WMS options
The “warehouse” concept is simple in theory. After all, how difficult can it really be to manage a cavernous space filled with racks, boxes, pallets, and forklifts?
In reality, the task is huge and requires the right mix of people, systems, and solutions to run smoothly. For many logistics professionals, the latter need is filled by a WMS, which is tasked with controlling the movement and storage of materials within an operation and then processing the associated transactions.
As WMS evolved over the years, the number of functionalities that these systems can handle has increased exponentially. Wave and batch picking, task interleaving (mixing dissimilar tasks like putaway and picking), automated data collection (ADC), advanced shipment notifications (ASN), cross docking, and slotting are just a few of the vital warehouse functions that today’s WMS can tackle.
According to Reiser’s research at ARC, the WMS add-on market was one of the sector’s key drivers in 2011. Add-on functionalities like analytics, labor management, and optimization are in high demand as shippers strive to work smarter, better, and faster in today’s competitive business environment.
Joe Vernon, manager of North America supply chain technologies for Capgemini, certainly agrees with Reiser’s assessment. “We’ve seen increased breadth and height within the base of standard WMS products,” says Vernon. “There are so many features that come standard and many more that shippers can pick out and use as they need them. That’s helped more end customers make ‘buy’ decisions.”
Availability of turnkey, ready-to-use systems is also driving demand, says Vernon, who points to RedPrairie’s WMS as a good example of a solution that allows shippers to “purchase a license and go live with a minimal amount of work,” he explains. “Just three or four years ago that would not have been possible due to the need for changes and modifications.”
Business activity in certain geographic markets and across specific industry verticals also stoked WMS sales in 2011, according to ARC.
Reiser says that suppliers noted high levels of growth in the emerging markets of Latin America and Asia, particularly among Tier 2 (companies with revenues ranging from $250 million to $1 billion) and Tier 3 (less than $250 million) customers. Purchase activity also picked up in North American markets, ARC reports, particularly among Tier 1 customers (over $1 billion in revenues).
Dwight Klappich, vice president at Gartner Inc., says that his firm has identified international growth as a key factor in the expansion of the WMS market. According to Klappich, early signs of a spike in international sales originally surfaced in 2007, but were quickly squashed by the economic recession that followed.
“A lot of companies wound up delaying initiatives,” says Klappich. “Now we’re starting to see that interest return—to the point where 25 percent to 35 percent of WMS growth is international in nature.”
On the North American front, several industry verticals played critical roles in WMS growth last year, according to Reiser. Cyclical industries like automotive and electronics—both hit hard by the recession—showed more interest in buying new or upgrading existing warehouse management systems. “Because these cyclical industries themselves are bouncing back,” says Reiser, “there appears to be a correlation to WMS spending by some of these industries.”
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