Supply Chain Technology: Will WMS take over the world?

Buoyed by emerging market growth, demand for add-on functionalities, and its certain move to the cloud, the warehouse management systems market is posting double-digit growth. But is this just a post-recession bounce?

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Moving into the cloud
When Software-as-a-Service (SaaS) options reared their heads within the transportation management systems (TMS) space a few years ago, little thought was given to whether WMSs could be delivered in a similar fashion.

Now more commonly known as “cloud computing” (despite the fact that SaaS and cloud aren’t technically synonymous), any type of web-based delivery has become ubiquitous across most software sectors—WMS included. In fact, of the $2.3 billion that Gartner forecasts will be spent on supply chain execution software in 2013, a full 18 percent of that spending will be on cloud-type solutions.

“SaaS started gaining traction last year and is now becoming more viable and popular within the WMS space,” says Klappich, who points to the TMS sector—where SaaS is currently more of a preference than an option—as a role model for WMS and other supply chain solutions.

And while we’re not quite at the point where the first words out of a logistics professional’s mouth are, “We’re looking for a SaaS-based WMS,” Klappich says that could become a reality within the next 12 months based on the overall growth of cloud computing.

“Just a year ago many shippers would run for the hills if I mentioned a cloud-based WMS to them,” says Klappich. “Now they’re considering it.”

As WMS vendors expand their cloud-based offerings, smaller companies also win. In fact, Vernon says cloud-based WMS offerings have also put computing power into the hands of companies that may not have invested in a full-blown software package.

“The cloud allows smaller businesses to get into the space and basically ‘rent’ the software from month to month for a cheaper cost versus owning the software,” Vernon explains. “This is a very good argument in favor of hosted software and a win for small businesses.”

ERPs keep pushing
With vendors like Oracle and SAP integrating heartier warehouse solutions into their enterprise resource planning (ERP) offerings, Klappich says WMS adoption could continue to expand in 2012, both in established markets like North America and Western Europe as well as in emerging markets. 

Add best-of-breed players like Red Prairie and Manhattan—both of which are continually expanding their solutions’ functionalities—and the likelihood that the market will post positive growth for 2012 becomes even more realistic.

Those best-of-breed companies may have to step up their games over the next few years in order to compete with the ERPs. “We’re seeing that for some companies the WMS offered by their ERP vendor is more than good enough…it satisfies the majority of the shipper’s requirements,” says Klappich.

In fact, Klappich takes it one step further and predicts that ERP vendors will “take over dominance within the WMS market place” within the next five to 10 years. “This won’t happen at the highest, most sophisticated warehouse management level, but for the typical shipper an ERP-based WMS will do the trick,” he says.

Looking head 
All of our analysts agree that we should expect to see more growth and innovation within the WMS space in 2013. With shippers demanding more functionality and optimization, and with vendors answering the call with a steady stream of new options, the space is sure to experience more innovation.

Vernon says more Java programming language (to allow for quick and efficient computer code changes) and expanded mobile options (more iPads in the warehouse, for example) are both in store for WMS over the next few months.

As the WMS continues to mature, Klappich says that the age-old challenge of trying to justify the investment—particularly for full-blown purchase-and-install options—continues to confound shippers. Where it’s easy to identify the $8 million savings per year (on $100 million in transportation spend) that a new TMS provides, the results produced by a WMS aren’t as clear-cut.
“Companies tend to struggle with the business case for WMS,” says Klappich. “I just worked with a firm that got through the software contract negotiations and then had the initiative derailed when the final capital appropriation was presented and killed.”

The fact that many shippers don’t use their WMSs to their fullest capacities contributes to the ROI challenge. “They get the systems up and running and say, ‘now what?’ Then, they feel like they didn’t get what they hoped to reap from their investments,” says Klappich. “In some cases vendors are visiting the companies and helping them exploit their WMS to their fullest potential.”

As WMS vendors work to resolve those issues, and as shippers increasingly turn to technology to create efficiencies within their operations, the warehouse management market will hold its ground as one of the darlings of the supply chain software sector.

But don’t expect another year of double-digit growth in 2012, cautions Reiser, who doesn’t see the sector posting a repeat performance this year.

“Going forward, we expect strong growth in food and beverage due to traceability requirements and retail due to adaptation to the ecommerce fulfillment requirement,” says Reiser. “But we don’t expect growth to remain as strong as we experienced last year. We believe that growth was enhanced by the post-recession rebound.”

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About the Author

Bridget McCrea, Editor
Bridget McCrea is a Contributing Editor for Logistics Management based in Clearwater, Fla. She has covered the transportation and supply chain space since 1996, and has covered all aspects of the industry for Logistics Management and Supply Chain Management Review. She can be reached at [email protected]

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