SCDigest Editorial Staff

The following article is excepted from our recently published SCDigest Letter on Warehouse Management Systems (WMS). An electronic copy of that focused, 16-page newsletter, as well as a variety of other WMS related information, can be found at our WMS Resources site.

There are many different drivers associated with a search for a new Warehouse Management System. Most commonly, SCDigest sees the following factors as leading to WMS adoption, either as a first time effort for a company, or as a replacement initiative.

You may need a new WMS if…

…You are Experiencing Rapid Growth: As companies expand, especially midsize companies that are growing at very high rates, order fulfillment can quickly become an issue. While logistics costs are usually rising faster than sales for companies in this situation, as distribution processes become increasingly inefficient, the even more critical issue is often customer service. High growth companies reach a point where they can no longer fulfill orders predictably without a new infusion of technology in the DC.

...You are Making Significant Logistics Strategy Changes: Sometimes, a company’s business or distribution strategies change in such a way that its existing WMS or other distribution center technology simply is not sufficient for the job.

One example is a merger or acquisition, in which a combined distribution operation emerges with significantly different requirements. Other examples might be moving from plant-based distribution to a consolidated “mixing center” approach, significant changes in distribution channel requirements (such as ecommerce expansion), or significant increase in value-added service requirements/ postponement in the DC.

The key question: Can your current WMS really well support your broader logistics/ supply chain strategies? The DC shouldn’t be the limiting factor, as one major industrial and consumer products company found out several years back when its network strategy temporarily failed when the current WMS couldn’t support the great increase in cross dock requirements.

…You have or are Consolidating Facilities: The ebb and flow of business always means some companies are consolidating distribution facilities. In general, we see an overall trend towards fewer, larger DCs. That trend really picked up during the recession, as dropping volumes and the interest in reducing inventories led to many DC consolidations. If the combined DC is larger, it may present savings opportunities in such areas as task interleaving and other advanced capabilities that can justify a new WMS where it might not be so for the smaller facilities.

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…You Want to Significantly Increase DC Automation: Many companies are looking at really ramping up their levels of automation in the DC to reduce costs, increase throughput from an existing DC, and/or to alleviate labor headaches and other issues. In those cases, a home-grown or second-tier WMS technology is rarely up to the task.

…Distribution Costs are Rising: For any number of factors, including the rapid growth scenario described above, a company may find its distribution costs are rising, as a percent of sales, per unit/case, or other measure. The advanced capabilities of today’s WMS software can often move that cost curve in the downward direction.

… Your Current WMS Technology is Really Old: Many companies are still running Warehouse Management Systems installed years ago – sometimes as far back as the early 1990s. These systems might have been developed in-house, or were purchased from a WMS vendor now long gone and have become “legacy systems” supported internally. At some point, the cost, inflexibility, or challenges of maintaining skills sets to support these systems drive companies to seek a more current software platform.

Many vendors and consultants of course offer assessments that can estimate the potential ROI from a new WMS. SCDigest likes a two-step approach, where there is a very quick and low cost review to see if its seems likely a positive ROI will be found, and then a more detailed analysis if the project passes that first gate.

Do you have any other indicators to add about when you might need a WMS? Which of the above do you think are most common drivers of WMS adoption? Let us know your thoughts at the Feedback button below.

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