Warehouse Management Systems| WMS

Warehouse Management Systems (WMS)

A warehouse management system (WMS) is typically a standalone system or a bolt-on system to an Enterprise Resource Planning (ERP) or business system that provides a greater level of management of your inventory and warehouse operations within a distribution center or manufacturing environment.

A WMS is used because the current business system such as an ERP, accounting system or a legacy business system of some kind, is not managing the inventory and operations in a fashion that is required. Maybe the business has outgrown those capabilities, maybe the SKU base is more complex, maybe fulfillment volumes have increased substantially, and they just don’t have the functionality necessary in the warehouse or shop floor to optimize their operational accuracies and increase efficiencies and lower labor cost. Being able to operate in a productive and accurate fashion in manufacturing and distribution is mission critical to most businesses.


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Warehouses can benefit from a better WMS system or enhanced system integrated to their ERP system when they see a disproportionate increase in labor costs relative to volume increases. Many distribution businesses are growing substantially but their labor costs are growing disproportionately. Another key identifier for an enhanced warehouse management system is operational accuracy, as inventory accuracy and/or order picking accuracy can be fairly significant issues. Distribution and manufacturing become very challenging when a company is growing their business but their labor is increasing disproportionately while at the same time, they’re not able to maintain very good inventory accuracy or order accuracy.

There are many areas of complexity in a warehouse that an enterprise resource planning (ERP) system may not cover adequately where a warehouse management system (WMS) can substantially improve productivity and accuracy. One area that many ERP systems struggle with is multiple locations for items, forward pick locations and overstock locations. ERP systems have difficulty managing inventory by location and tracking all the necessary operations that occur between forward locations and overstock locations.

A WMS system can track forward pick locations, overstock locations and have the capability of creating dynamic and random locations where ERPs tend to struggle here. ERP systems tend to be more manual data entry intensive, as opposed to directed operations that generally executed with a good warehouse management system. With ERP systems the operator is performing many manual steps. They might be doing it on paper, they might be doing it on a mobile device, but it’s not real-time, it’s not directed, and it’s not efficient or accurate compared to an efficient WMS.

A business can benefit from a WMS if the inventory accuracy is below 99.5% by absolute variance, not by dollar value. Oftentimes, if you’re in the 99% range for inventory accuracy, the other area for review is the labor cost associated with maintaining that accuracy. So, either inventory accuracy is a key performance indicator, or the labor costs relative to maintain that level of inventory accuracy is a key indicator.

WMS can improve order fill rate and order picking accuracy, and these impacts of that can be substantial depending on the industry. E-commerce order accuracy is critical as it doesn’t take more than one or two errors to lose customers in an E-commerce environment. In other environments, it can be very impactful. Picking accuracy in manufacturing can be extremely important and have large impacts in product quality, rework, and customer satisfaction. Over 60% of warehouse labor can often be associated with travel time for picking.

To develop a business case for a warehouse management system, it’s critical to define the current business challenges and also review future possible trends. If it’s distribution, perhaps E-commerce distribution or retail distribution, then oftentimes in an E-commerce B2C environment, the capabilities in a WMS to manage a large number of small orders are required. So, E-commerce is typically a one order point multiplied by the average lines per order, so WMS capabilities in that environment are significantly different than in wholesale distribution or manufacturing. Items such as order profiling, order management and release, batch, cluster, zone, pick and pass, parallel picking, and capabilities like that to be able to configure those things with an E-commerce operation are very important.

Another thing that’s often challenging in ERP systems is a real lack of good management of multiple units of major and conversion factors, so being able to track by the each, by the case, by the pallet, while efficiently and seamlessly manage operations and goods flow can be critical.

Wholesale distribution and manufacturing can represent a very different set of requirements. Manufacturing poses a different set of challenges that often involve workflow, automation and accuracy related. Whether you are picking raw materials, components, work in process (WIP), finished product, returns and repairs, the ability to customize workflows to manage the flow of all the necessary component parts to the right place at the right time in the manufacturing environment is critical.

Another manufacturing area that’s pretty significant is with the entire inventory accuracy, not only just the inventory on the shelves. If inventory accuracy is off in the manufacturing environment, then you can sometimes manufacture too much of the wrong thing or not enough of the right thing. Depending on the manufacturing environment, you can have increased setup and switchover costs. While setting up for a certain manufacturing run and the business is short on other items to be able to produce that particular line of product. Now, if you’re short on inventory then you have to reset up and run something else. Ultimately, business inefficiencies lead to increased cost and reduced competitiveness.

A warehouse management system (WMS) needs to be able to address the challenges of the business today and also be scalable for its future needs. Having demonstrated success addressing the operational challenges while satisfying the ERP integration needs is paramount. Many WMS systems can reflect ERP functionality but come up short creating true measurable impacts at the warehouse operation level. Identifying a WMS that can do both well is important and being able to identify demonstrated success is an ideal attribute in the evaluation process of both the software and its company.

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