Years after the publication of Marc Andreesen’s article – Why software is eating the world? lines of code are still revamping industries, generating revenue streams, and completely eliminating the need for physical operations.
Yesterday, instead of reconnecting a DVD player to watch a classic movie, I signed up for yet another streaming service. It was easier, faster, and actually cheaper than getting a new charger to replace the one that malfunctioned.
Yet, what we have easily embraced in our day-to-day lives is not always actively propagated within the business. I have seen a warehouse supporting 40 mln EUR sales that still uses the picking lists printed on paper…
Why is the experience people running this operation have as consumers not driving their B2B expectations and projects?
Why are they not requesting the company leadership to invest in a Warehouse Management System (WMS in short)? Is the leadership not asking them to implement such a solution?
Today, together with Matteo Weindelmayer, Director of Logistics and Warehousing in Expondo, I will explain the why & how of WMS systems. We will share our hands-on experience in warehouse operations.
We are both tech geeks and we believe technology not only can be but must be applied. However, following Simon Sinek’s advice, let us start with the why.
Why invest in Warehouse Management System?
— Adam Sobolewski
I remember the first time I walked through the warehouse floor of an e-commerce giant. I remember how much different it was from what I had seen at the beginning of my professional life in logistics.
When I started, customers’ orders were downloaded once a day and processed in a single never-ending wave. Without regard for their importance, unless an angry regional sales manager called asking “Where is my stuff?”.
As Stefano summarized once his own initial warehouse management experience:
We lived back then in a batchy world.— Stefano Perego, VP of Operations at Amazon EU
I have learned working at Amazon that logistics is not only about the right product at the right place but also at the right time and at the right cost. Furthermore, what I have done right after university as a demand planner was just a prelude to ensure that.
Many people in management think it’s enough to have a reasonably accurate forecast in order to deliver customer orders. However, a forecast is just an idea, and ideas without execution are worth nothing.
In order to execute effectively on the warehouse floor, you need to know not only what needs to be done and by when. You also need to know where the stuff is located and how to (optimally) get it from there.
Furthermore, you need to know what your team is doing and how effectively they perform assigned tasks. You need to know if picking an item takes 28 seconds… or maybe 30 seconds.
The 2 seconds difference…
The more extensive the operation, the more this knowledge is required. What you can easily find and collect at the back of a store or in a small warehouse can be impossible to locate when your storage exceeds a few thousand square meters or several hundred thousand units.
The 2 seconds difference is insignificant when you fulfill a few dozen orders daily. However, when you need to ship 12000 orders on a shift, this translates into a full-time employee equivalent.
Of course, companies operating without a Warehouse Management System can implement many processes and procedures to control their productivity. Especially when they are working at relatively high aggregation levels – storing, picking, and shipping full pallets.
Reworking warehouse layout, optimizing forklift moves by moving most frequently selling items closest to the despatch area. The list of good practices is long.
However, there is a limit to what can be achieved this way. Without real-time insight into the warehouse operation or without the ability to record every activity time-stamp and report equipment, as well as space utilization, everybody, even the manager directly responsible for the warehouse, runs it as a black box.
When to invest in a Warehouse Management System?
— Matteo Weindelmayer
As Adam mentioned, small companies and startups often have no system running in their warehouse. Actually, they don’t have to. Even Amazon started its first warehouse with a simple pen and paper picking system.
I have also run small warehouses on excel sheets and printed picklists. However, when the operation grows, it is not feasible to improve accuracy and speed by continuing to run on paper. This is when many companies start looking for a new Warehouse Management System.
The need for higher accuracy and speed can be driven by both external and internal factors. The first ones being volume growth or customer requirements changes. The other ones include, for example, significant stock losses or low employee productivity.
Moreover, companies that already have a WMS can still get to a point when it is time to change. For example, when a company’s current WMS architecture limits business because it cannot handle new requests.
Another common factor is an increase in execution complexity. When a company requires the system to handle specific functionalities such as value-added service flows, multi-site allocation, serial number traceability, or excise goods.
The technology difference…
A Warehouse Management System is part of an overall company systems architecture. Therefore, it’s not unusual that companies consider WMS review when major changes to IT systems come. For example when implementing a new ERP. The company management may prefer upgrading the WMS if interfacing with the current one is too complicated.
As companies look for more flexibility in their logistics, many WMS vendors are now offering SaaS solutions and modular architectures. Everything to allow their systems to easily adapt to customer requirements. This sometimes also triggers change or implementation of WMS as nowadays it’s much easier than before.
There are so many situations when a company may look for a Warehouse Management System. I have listed some of those I have personally encountered.
Most commonly, it is the growth in volumes that drives the search for more efficient use of resources, and a growth in customer expectations that requires better stock and process controls.
Ultimately, it is up to us – logistics professionals to read the signs in time. We need to start the project before the bottleneck is reached. In fact, a Warehouse Management System implementation is not a quick process. With most implementations taking between 6 to 12 months, it is important to include such plans early in your strategy.
What functions to look for?
Knowing all those reasons and situations when a WMS change or implementation might be needed, you probably still wonder what to look for when deciding upon a new system.
The most important functionalities will be of course specific to your business. Nonetheless, there are 6 main areas you should consider before going into the next stage – Warehouse Management System selection.
Let us guide you through them. You will see why it’s sensible (sometimes even business-critical) to know what you are really searching for.
Master Data & Interfaces
— Adam Sobolewski
Master Data Management and interfaces capabilities are usually not the sexiest part of any system. Warehouse Management System being no exception. However, they are the cornerstone without which many things, including business-critical processes, not only may but surely will fail.
Imagine a project where let-down replenishment has been implemented. However, the WMS was not fed with the correct item size data. Even though it was actually available in the ERP. There was a unit of measure discrepancy and WMS had no data recheck algorithm.
When the process went live, the warehouse team was not able to fit in the base locations. Boxes brought down were bigger than base locations. The new system didn’t calculate correctly the size of the replenished items. When pallets were restacked, cases were stuck in aisles.
Unimaginable? Yet, it really happened at a large luxury retailer. Learn from others’ errors and always double-check what kind of information you have and require.
Warehouse Map & Space Management
— Matteo Weindelmayer
Efficient storage space management can bring cost advantages, helping to build a business case for implementing a Warehouse Management System. The latest WMS can suggest the most efficient stock allocation strategy and ensure fast access to the best SKUs.
However, a planner should control stock location optimization. Most WMS work on historical data and therefore independently cannot account for promotions, campaigns, or other external factors which could influence specific changes in demand. When used effectively, I have seen a new WMS reduce the pick circuit of a warehouse in half thanks to more efficient location mapping and sizing.
On the quality side, a WMS can ensure that items are always stored in appropriate locations away from possible contaminants (ex. food items), or where protections are greater (ex. fire protection for flammable items or bunding for chemicals). You can set the system to enforce 100% adherence, ensuring legal compliance and traceability.
Pick & Pack Process Optimization
— Adam Sobolewski
Even with the best warehouse layout, and perfectly managed space, the picking & packing can contribute even up to 45% of total work time. Being the 2 most laborious processes in many Fulfillment & Distribution Centers.
Therefore, the Warehouse Management System you are looking for should optimize those movements. Whether it will be pallet retrieval coupled with pallet put-away or the possibility to switch picking strategies (cluster, batch, or any other). This simply needs to happen on the fly.
Otherwise, you may end with a process I have seen in many warehouses I visited. For example, a large specialty retailer (3 warehouses, 1000+ stores, and e-commerce) was fulfilling B2C orders following the picker-to-goods approach.
Not a state-of-the-art process, but without investing in automation, not a bad approach. Unless you are not able to group single-item orders and are forced to collect each separately because the WMS was designed for store orders only.
Remember, optimization must be business process specific. You may need different operations for various sales channels.
Reporting Productivity & Quality
— Adam Sobolewski
The ability to report (real-time) productivity, as well as the quality of work done by each warehouse team member, is another often searched-for WMS functionality. Especially when the operation becomes rather complicated as for many e-commerce businesses nowadays.
When we didn’t need to handle numerous types of picking – piece, case, pallet picking, and various process paths – single item, multiple items, virtual bundle orders packing, it was still reasonable to use a performance standard calculated periodically.
However, when the process forks and you need to effectively manage, let’s say,1200 associates on a single shift (as I did during my times at Amazon), believe me, labor management functionalities become paramount.
At this scale, even a 15-minute lack of visibility on throughput may lead to man-days production loss. At a fulfillment center time literally means money. And what can you do about it?
Alternatively, instead of investing in Warehouse Management System with strong labor-management options, you can change your strategy completely. Companies that make their process highly uniform or invest in goods-to-picker automation can have other requirements.
— Matteo Weindelmayer
The accuracy of a warehouse inventory is not simply good for accounting. Knowing exactly what is in stock ensures your customer orders are fulfilled in full as the picker can always find the stock where expected. A WMS ensures your stock is accurate by tracking the goods across their journey in the warehouse and validating the physical/system alignment via stock checks.
WMS “stocktaking” functionality covers the validation of picking & put-away processes accuracy. As a minimum, your WMS should be able to allow a user to go and take a physical count of a location at any time and report any discrepancy. Some systems even generate counting tasks automatically. Using fill levels (ex. the location is empty or it has less than a specified percentage of stock) or regular intervals for given location counting (perpetual inventory).
You must consider exactly how the system will work and whether stocktaking will be something you will want to undertake at the same time as your normal operation or not. The main risk of an inventory count functionality is in the way you can manage exceptions.
Most Warehouse Management Systems block locations when a discrepancy occurs. Then it remains blocked until a warehouse worker re-counts the stock.
You can also check inventory during picking. Best WMS will enable such a process within a timeframe that will not impact your productivity.
However, I would like to offer a word of caution. A large FMCG manufacturer almost ground its pick operation to a halt by too hastily implementing a system where its pickers had to confirm the amount of stock left in location after each pick. The locations blocked for re-count quickly piled up as the pickers were rushing their counts to hit their productivity targets!
— Matteo Weindelmayer
As a strategic investment, the way you look at Warehouse Management System should be not using today´s business processes. It is the supply chain in 10 years that you will be preparing to support with today´s investment and, by all accounts, that supply chain will include robotics and other automation technologies.
Today, we already have a large amount of automation in our warehouses. Even the most basic WMS implementation will require low-level automation via scanners and printers. State-of-the-art automated warehouses will include storage and retrieval systems (AS/RS), picking and packing robots, automated container unloading systems, AGV & conveyors moving goods around the warehouse, and even drones performing cycle counts. These and even more exciting technologies that will come in the future will be seen as today´s scanners, so you will want your WMS to integrate with them.
Some WMS offer direct integration with automation technologies such as voice or AR pick solutions, but many will not integrate directly with more complex solutions such as AS/RS or conveyor systems, which normally need a warehouse control system (WCS) as middleware. The important thing to consider when selecting your WMS is how flexible it is to integrate with different vendors’ WCSs, whether you have already one or are only thinking to implement them in the future.
Next steps (into the known)
— Adam Sobolewski
Today, every successful company is in a way a software company. Even if its core business requires physical operations, such as sourcing, manufacturing, storing, distributing, and shipping products across the world.
Successful companies have a software strategy. They are not always creating the software by themselves. However, their leadership knows that software can replace or significantly augment physical operations.
In both mine and Matteo´s view, warehouse operations generate more and more data thus encompassing optimization possibilities specifically because they are repetitive and with scale and complexity.
We have seen this over and over again in companies where we lead logistics.
After reading this article, if you run a business where the warehouse plays a role, you will see the reasons for investing in a system to manage it. Next time, I will write how to choose a Warehouse Management System.
In the meantime, in case you want to check whether it’s the right moment to change the way your warehouse works, feel free to reach out to us. We are both eager to share experiences and help. You can reach me through the contact page and Matteo is available via his LinkedIn profile.
You can also sign up for the ‘Logistics Simply’ newsletter. From time to time, I share supply chain & logistics know-how that can support your business and professional development.
See you next time!