First Thoughts
  By Dan Gilmore - Editor-in-Chief  
  September 10, 2009  

Supply Chain News: Warehouse Management to the Rescue for Retail Out-of-Stocks?



This may be one of the oddest columns I have ever written, but I think Warehouse Management Systems (WMS), or at least one of the core concepts, could solve some problems in retail stores and – believe it or not – in our healthcare system.


As some of you know, I have quite a bit of experience in the WMS area, and must confess to having a soft spot in my heart for this type of software – as challenging as WMS implementations often can be.


Central to the operation of a modern WMS is the concept of “task management,” in which the WMS understands the work that needs to be performed, what operators are capable of doing it, and where they are. It then doles out the work electronically (radio frequency terminal, voice system) to the best worker for the task, and receives confirmation that the work was performed. Then, it’s on to the next task. This is happening across dozens or even hundreds of workers simultaneously in a building.


Those next tasks can also be “interleaved,” meaning that different types of tasks can be combined to optimize efficiency. Do another task next to one you just finished, for example, rather than travelling a distance to repeat the same type of task.


Gilmore Says:


A task management engine would simply bring order to the chaos.

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So, I am thinking about the retail “out of stock” problem, and how some huge percent of the time, the goods are actually in the back room when the customer finds no product on the shelf.


The industry, in large part, has lately viewed RFID as the answer to this particular problem, and Wal-Mart made a run at it with its program. There is both the general issue of shelf-level stock outs and the frequent failure to execute promotional displays effectively (on-time, where they should be, etc.). Earlier this year, Procter & Gamble famously ended its pilot with Wal-Mart on tagging displays after calling it a clear success – with the implication that Wal-Mart was just not acting on the data.


There is, in fact, a growing form of “task management” in retail, but it is at a much higher level of granularity, but even that apparently is paying big dividends, according to reports. There, it is tied to employee scheduling to optimize what staff is needed where and when, based on sales history and other factors. I believe it can also direct staff at a high level to do some tasks – say receiving in the back room, or cycle counting. But not at the level of real individual tasks – more like as “blocks” of work.


Last time I looked, most decent sized retailers had lots of RF terminals lying around in their stores – and I mean literally lying around. They simply do not appear to be used very effectively or consistently, from what I see. That’s a management issue.


Could we not largely solve the out-of-stock problem by leveraging these under-utilized devices and adding a type of task management system, maybe morphed from a WMS, to direct workers to get product on the shelves?


What it would take is:

  • A perpetual inventory (PI) system at the store level (largely in place);
  • A basic inventory location system in the back room (sometimes in place);
  • Wireless terminals (largely in place); and
  • The task management engine, integrated with the other pieces (or maybe all from one source).

Retailer Target said early on in the RFID saga that it has a light form of this – its system generates a type of “pick list” for shelf replenishment, based on POS. But that is a paper-based system, and not really capable of dealing at a specific task level (or so I think – haven’t really seen it).


Pretty simple – the PI says a location needs replenished (at whatever level is set for that SKU), and a specific task is set for the move. It goes into the queue, and is prioritized based on other variables (just for example, perhaps high-margin items generally go to the top of the queue); if more units of that SKU are sold, meaning it is increasingly in danger of going to zero at the shelf, the task rises in the queue.


Stock personnel don’t have to wonder what to do – their terminal tells them exactly what to do, and they confirm it is done electronically. By the way, they could be asked to do a cycle count when they do the shelf replenishment.  If they see an empty shelf or peg, they could also do a cycle count, and/or check to see if a replenishment is on the way.


We did a story awhile back on how outdoor retailer Cabela’s had implemented a light version of their DC WMS inside their sprawling retail stores. The drivers there were physical store size, the huge amount of SKUs they carried, and the fact that often there were just 1-2 items of a SKU on the floor. Made perfect sense. (See Cabela's Uses WMS to Drive DC Efficiency across Distribution Channels.)


I don’t know if a true “WMS” is really needed, but the basic, highly-proven concept of the WMS task management engine certainly could be. The wireless terminals are largely in place. The bar codes are largely in place. A location management system in the back is often in place, and easy enough to develop if not.


Integrating the PI may take some effort, but I don’t think especially that much.


Early on in the EPC story, Jeff Woods, an analyst at Gartner, saw the best fit for RFID versus bar codes was in “chaotic” environments, without much process discipline. He cited a battlefield or military theater, for example – and RFID has done much to improve material flow there. Interestingly, he also cited a retail back room as another area of often chaotic processes.


Dick Cantwell, then of Procter & Gamble, made much the same point in his famous interview with me about the failure, to that point in time, of any approach to getting displays to the floor on time and correctly.


Is this how it really has to be?


A task management engine would simply bring order to the chaos. It does for material movement in thousands of DCs across the US and the world.


Certainly, a task management engine could work with RFID, and indeed the vision even for the displays was that the RFID data would generate tasks of some sort. What system would manage that was not clear.


But WMS already has a model and technology that could solve the problem quite well, with bar codes or RFID, without re-inventing the wheel.


The WMS would need to be much slimmed down, and I am sure some changes made versus the DC variety to have the right fit.


I am out of space, but, believe it or not, I think the same basic task management concept could improve efficiency and quality in our hospitals. I say that after having visited someone in the hospital this summer, and seeing how uncoordinated and informal the execution of work seems to be. I am not proposing a robotic task management system for everything there, and will admit that I am not clear how the task requirements would be generated, but I have no doubt that someday we will see something like this in healthcare.


Am I nuts on the retail thing? Shouldn’t more retailers be looking at this? Couldn’t we take a big chunk out of the overstock problem at shelf right away, without a whole other industry program that never seems to work?


If any retailers out there are interested in exploring this, I would be happy to help them take a look.


What do you think of the idea of real task management, maybe even light WMS, in retail? Could it solve the out-of-stock problem, at least for those items with inventory in the back room? Have more taken this approach than we know about? Let us know your thoughts at the Feedback button below.

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