Warehouse Management Systems (WMS).
The evolution of warehouse management systems (WMS) is very similar tothat of many other software solutions. Initially a system to control movement and storage of materials within awarehouse, the role of WMS is expanding to including light manufacturing,transportation management, order management, and complete accountingsystems. To use the grandfather ofoperations-related software, MRP, as a comparison, material requirementsplanning (MRP) started as a system for planning raw material requirements in amanufacturing environment. Soon MRPevolved into manufacturing resource planning (MRPII), which took the basic MRPsystem and added scheduling and capacity planning logic. Eventually MRPIIevolved into enterprise resource planning (ERP), incorporating all the MRPIIfunctionality with full financials and customer and vendor management functionality. Now, whether WMS evolving into awarehouse-focused ERP system is a good thing or not is up to debate. What is clear is that the expansion of theoverlap in functionality between Warehouse Management Systems, EnterpriseResource Planning, Distribution Requirements Planning, TransportationManagement Systems, Supply Chain Planning, Advanced Planning and Scheduling,and Manufacturing Execution Systems will only increase the level of confusionamong companies looking for software solutions for their operations.
Even though WMS continues to gain added functionality, the initial corefunctionality of a WMS has not really changed. The primary purpose of a WMS is to control the movement and storage ofmaterials within an operation and process the associated transactions. Directed picking, directed replenishment, anddirected put away are the key to WMS. The detailed setup and processing within a WMS can vary significantlyfrom one software vendor to another, however the basic logic will use acombination of item, location, quantity, unit of measure, and order informationto determine where to stock, where to pick, and in what sequence to performthese operations.
| At a bare minimum, a WMS should:
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Do You ReallyNeed WMS?
Not every warehouse needs a WMS. Certainly any warehouse could benefit from some of the functionality butis the benefit great enough to justify the initial and ongoing costs associatedwith WMS? Warehouse Management Systemsare big, complex, data intensive, applications. They tend to require a lot of initial setup, a lot of system resourcesto run, and a lot of ongoing data management to continue to run. That’s right, you need to "manage"your warehouse "management" system. Often times, large operations will end up creating a new IS departmentwith the sole responsibility of managing the WMS.
The Claims:
WMS will reduce inventory!
WMS will reduce labor costs!
WMS will increase storage capacity!
WMS will increase customer service!
WMS will increase inventory accuracy!
The Reality:
The implementation of a WMS along with automated data collection willlikely give you increases in accuracy, reduction in labor costs (provided thelabor required to maintain the system is less than the labor saved on thewarehouse floor), and a greater ability to service the customer by reducingcycle times. Expectations of inventoryreduction and increased storage capacity are less likely. While increased accuracy and efficiencies inthe receiving process may reduce the level ofsafety stock required, theimpact of this reduction will likely be negligible in comparison to overallinventory levels. The predominant factors that control inventory levels are lot sizing,lead times, and demand variability. Itis unlikely that a WMS will have a significant impact on any of these factors.And while a WMS certainly provides the tools for more organized storage whichmay result in increased storage capacity, this improvement will be relative tojust how sloppy your pre-WMS processes were.
Beyondlabor efficiencies, the determining factors in deciding to implement a WMS tendto be more often associated with the need to do something to service yourcustomers that your current system does not support (or does not support well)such as first-in-first-out, cross-docking, automated pick replenishment, wavepicking, lot tracking, yard management, automated data collection, automatedmaterial handling equipment, etc.
Setup
The setup requirements of WMS can be extensive. The characteristics ofeach item and location must be maintained either at the detail level or bygrouping similar items and locations into categories. An example of item characteristics at thedetail level would include exact dimensions and weight of each item in eachunit of measure the item is stocked (each, cases, pallets, etc) as well asinformation such as whether it can be mixed with other items in a location,whether it is rack able, max stack height, max quantity per location, hazardclassifications, finished goods or raw material, fast versus slow mover, etc. Although some operations will need to set upeach item this way, most operations will benefit by creating groups of similarproducts. For example, if you are adistributor of music CDs you would create groups for single CDs, and doubleCDs, maintaining the detailed dimension and weight information at the grouplevel and only needing to attach the group code to each item. You would likely need to maintain detailedinformation on special items such as boxed sets or CDs in special packaging. You would also create groups for thedifferent types of locations within your warehouse. An example would be tocreate three different groups (P1, P2, P3) for the three different sizedforward picking locations you use for your CD picking. You then set up the quantity of single CDsthat will fit in a P1, P2, and P3 location, quantity of double CDs that fit ina P1, P2, P3 location etc. You wouldlikely also be setting up case quantities, and pallet quantities of each CDgroup and quantities of cases and pallets per each reserve storage locationgroup.
If this sounds simple, it is…well… sort of. In reality most operationshave a much more diverse product mix and will require much more systemsetup. And setting up the physicalcharacteristics of the product and locations is only part of the picture. You have set up enough so that the systemknows where a product can fit and how many will fit in that location. You now need to set up the information neededto let the system decide exactly which location to pick from, replenishfrom/to, and put away to, and in what sequence these events should occur(remember WMS is all about “directed” movement). You do this by assigning specific logic tothe various combinations of item/order/quantity/location information that willoccur.
Below I have listed some of the logic used in determining actual locationsand sequences.
Location Sequence. This is the simplest logic; you simply definea flow through your warehouse and assign a sequence number to eachlocation. In order picking this is usedto sequence your picks to flow through the warehouse, in put away the logicwould look for the first location in the sequence in which the product wouldfit.
Zone Logic. By breaking down your storage locations intozones you can direct picking, put away, or replenishment to or from specificareas of your warehouse. Since zonelogic only designates an area, you will need to combine this with some othertype of logic to determine exact location within the zone.
Fixed Location. Logic uses predetermined fixed locations peritem in picking, put away, and replenishment. Fixed locations are most often used as the primary picking location inpiece pick and case-pick operations, however, they can also be used forsecondary storage.
Random Location. Since computers cannot be truly random (norwould you want them to be) the term random location is a littlemisleading. Random locations generallyrefer to areas where products are not stored in designated fixed locations. Like zone logic, you will need someadditional logic to determine exact locations.
First-in-first-out (FIFO). Directs picking from the oldest inventoryfirst.
Last-in-first-out (LIFO). Opposite of FIFO. I didn't think there wereany real applications for this logic until a visitor to my site sent an emaildescribing their operation that distributes perishable goods domestically andoverseas. They use LIFO for their overseas customers (because of longerin-transit times) and FIFO for their domestic customers.
Pick-to-clear. Logic directs picking to the locations withthe smallest quantities on hand. Thislogic is great for space utilization.
Reserved Locations. This is used when you want to predeterminespecific locations to put away to or pick from. An application for reserved locations would be cross-docking, where youmay specify certain quantities of an inbound shipment be moved to specificoutbound staging locations or directly to an awaiting outbound trailer.
Maximize Cube. Cube logic is found in most WMS systemshowever it is seldom used. Cube logicbasically uses unit dimensions to calculate cube (cubic inches per unit) andthen compares this to the cube capacity of the location to determine how muchwill fit. Now if the units are capableof being stacked into the location in a manner that fills every cubic inch ofspace in the location, cube logic will work. Since this rarely happens in the real world, cube logic tends to beimpractical.
Consolidate. Looks to see if there is already a location with the same product storedin it with available capacity. May alsocreate additional moves to consolidate like product stored in multiplelocations.
Lot Sequence. Used for picking or replenishment, this will use the lot number or lotdate to determine locations to pick from or replenish from.
It’s very common to combine multiple logic methods to determine the bestlocation. For example you may chose touse pick-to-clear logic within first-in-first-out logic when there are multiplelocations with the same receipt date. You also may change the logic based upon current workload. During busy periods you may chose logic thatoptimizes productivity while during slower periods you switch to logic thatoptimizes space utilization.
OtherFunctionality/Considerations
Wave Picking/Batch Picking/Zone Picking. Support for various picking methods variesfrom one system to another. Inhigh-volume fulfillment operations, picking logic can be a critical factor inWMS selection. See my article onOrderPicking for more info on these methods.
Task Interleaving. Task interleaving describes functionalitythat mixes dissimilar tasks such as picking and put away to obtain maximumproductivity. Used primarily infull-pallet-load operations, task interleaving will direct a lift truckoperator to put away a pallet on his/her way to the next pick. In large warehouses this can greatly reducetravel time, not only increasing productivity, but also reducing wear on thelift trucks and saving on energy costs by reducing lift truck fuel consumption.Task interleaving is also used with cycle counting programs to coordinate acycle count with a picking or put away task.
Integration with Automated Material Handling Equipment. Ifyou are planning on using automated material handling equipment such ascarousels, ASRS units, AGNS, pick-to-light systems, or separation systems,you’ll want to consider this during the software selection process. Since these types of automation are veryexpensive and are usually a core component of your warehouse, you may find thatthe equipment will drive the selection of the WMS. As with automated data collection, you shouldbe working closely with the equipment manufacturers during the software selectionprocess.
Advanced Shipment Notifications (ASN). If your vendors are capable of sendingadvanced shipment notifications (preferably electronically) and attachingcompliance labels to the shipments you will want to make sure that the WMS canuse this to automate your receiving process. In addition, if you haverequirements to provide ASNs for customers, you will also want to verify thisfunctionality.
Yard Management. Yard management describes the function ofmanaging the contents (inventory) of trailers parked outside the warehouse, orthe empty trailers themselves. Yardmanagement is generally associated with cross docking operations and mayinclude the management of both inbound and outbound trailers.
Labor Tracking/Capacity Planning. Some WMS systems provide functionality relatedto labor reporting and capacity planning. Anyone that has worked in manufacturing should be familiar with thistype of logic. Basically, you set upstandard labor hours and machine (usually lift trucks) hours per task and setthe available labor and machine hours per shift. The WMS system will use thisinfo to determine capacity and load. Manufacturing has been using capacity planning for decades with mixedresults. The need to factor inefficiency and utilization to determine rated capacity is an example of theshortcomings of this process. Not thatI’m necessarily against capacity planning in warehousing, I just think mostoperations don’t really need it and can avoid the disappointment of trying tomake it work. I am, however, a bigadvocate of labor tracking for individual productivity measurement. Most WMS maintain enough data to createproductivity reporting. Sinceproductivity is measured differently from one operation to another you canassume you will have to do some minor modifications here (usually in the formof custom reporting).
Integration with existing accounting/ERP systems. Unless the WMS vendor has alreadycreated a specific interface with your accounting/ERP system (such as thoseprovided by an approved business partner) you can expect to spend somesignificant programming dollars here. While we are all hoping that integration issues will be magicallyresolved someday by a standardized interface, we isn’t there yet. Ideally you’ll want an integrator that hasalready integrated the WMS you chose with the business software you areusing. Since this is not always possibleyou at least want an integrator that is very familiar with one of the systems.
WMS + everything else = ? As I mentioned at the beginning ofthis article, a lot of other modules are being added to WMS packages. Thesewould include full financials, light manufacturing, transportation management,purchasing, and sales order management. Using ERP systems as a point ofreference, it is unlikely that this add-on functionality will match thefunctionality of best-of-breed applications available separately. If warehousing/distribution is your corebusiness function and you don’t want to have to deal with the integrationissues of incorporating separate financials, order processing, etc. you mayfind these WMS based business systems are a good fit.
ImplementationTips
Outside of the standard “don’t underestimate”, “thoroughly test”, “train,train, train” implementation tips thatapply to any business software installation ,it’s important to emphasize thatWMS are very data dependent and restrictive by design. That is, you need to have all of the variousdata elements in place for the system to function properly. And, when they arein place, you must operate within the set parameters.
When implementing a WMS, you are adding an additional layer of technologyonto your system. And with each layer of technology there is additionaloverhead and additional sources of potential problems. Coming from awarehousing background I definitely appreciate the functionality WMS have tooffer, and, in many warehouses, this functionality is essential to theirability to serve their customers and remain competitive. It’s justimportant to note that every solution has its downsides and having a goodunderstanding of the potential implications will allow managers to make betterdecisions related to the levels of technology that best suits their uniqueenvironment.