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Supply Chain News: The Nine Drivers of New WMS Adoption


From New Business Models to Interest in WMS in the Cloud, the Top Factors Driving Strong WMS Adoption

Nov. 26, 2018
SCDigest Editorial Staff

Warehouse Management Systems (WMS) were one of the first supply chain software applications to be developed, with most citing examples of the first real-time WMS solutions – meaning use of wireless terminals to deliver tasks to workers and confirming their activities – being deployed at about 1975.

But despite that maturity, the WMS market still remains very strong, with companies of all sizes implementing new WMS technology.

What is driving the strong adoption of WMS? There are a number of factors, as summarized below:

Supply Chain Digest Says...

This is sort of WMS driver 101 – distribution costs in a DC are rising as a percent of sales or similar metric.

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New Distribution Center Construction: As real estate firms such as CBRE and JLL have been reporting for many years now, developers have been putting up distribution center space at near record rates, on continuing strong demand from shipper.

Today, all these new DCs will be outfitted with a WMS, driving market growth. And while often a shipper moving into a new facility will deploy the WMS it may be using at existing DCs, each new DC is in a sense an opportunity to reconsider what WMS system and vendor will be used.

Rapid Volume Growth: The economy has been strong, and many companies are seeing solid growth. The inability of existing warehouse systems to cost effectively get rising volumes of products out the door may be the top reason companies adopt new WMS technology.

In this scenario, WMS cost justification often takes on a different tenor: it’s not so much about how much labor in the DC can be reduced, but rather what the impact of deteriorating customer service in terms of late shipments and other issues is likely to be. As such, a new WMS becomes really a requirement to remain competitive.

Significant Logistics Strategy Changes: Obviously, sometimes companies make major changes to their logistics operations to meet evolving business needs, and the existing WMS may not well support those changing processes.

One such change is of course the need to support ecommerce fulfillment (see below) but there are many other examples, such as companies that decide to do a significant amount of postponement work as part of the distribution process, or a operation moving from mostly pallet picking to heavy case or even piece picking, among many potential examples

Facility Consolidation: Any time facilities are being consolidated, whether for strategic or cost reasons, it can present the opportunity to re-evaluate existing WMS support.

Consolidation can result in larger, more complex operations that require more advanced WMS support. Or, the consolidation may bring together different business units or product lines that have unique needs and were supported by different systems in their own facilities.

A Significant Increase in DC Automation:
Whether as part of a greenfield site or as a retrofit to an existing DC, a major increase in materials handling automation often leads to the need for a new WMS.

Many existing WMS, especially of the "legacy" type, are simply not capable of advanced automaton support. And the landscape here is changing, with the rise of so-called Warehouse Execution Systems (WES), used for control of a variety of materials handlng systems. Some WMS providers have WES functionality as part of their WMS solutions while others do not.

Regardless, new automated systems require new WMS capabilities. Also interesting to note, in this scenario sometimes there is no need to separately cost justify the WMS – the cost justification is against the total project, automation and WMS combined.

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Distribution Costs are Rising: This is sort of WMS driver 101 – distribution costs in a DC are rising as a percent of sales or similar metric. If that DC is using very manual processes and/or has very weak WMS support, it can obviously drive the need for replacement with something more modern and automated that will reverse the direction of distribution costs.

Can a new WMS provide payback by reducing costs? That becomes the primary question in this scenario.

"Burning" Technology Platform: A surprising number of companies are still running extremely old WMS systems, sometime still on original hardware that itself is very hard to maintain.

The problems with a burning platform can range from extreme difficulty in making changes needed to support evolving operational requirements to challenges in finding workers that can still code in languages like COBOL.

At some point, a company decides enough is enough, and the decision is made to implement a new WMS before the burning platform is totally ablaze.

New Omnichannel Requirements: As discussed above, needed support for omnichannel fulfillment requirements is really just one form of distribution strategy change, but it is such an important driver of new WMS activity today it is well worth a mention on its own.

Many companies simply lack WMS support for B2C processes, especially the pick, pack and ship requirements for individual customer orders. And with the tremendous growth in ecommerce volumes, getting this right is a critical challenge, causing many companies to adopt new WMS systems.

Moving to the Cloud:
As with every other form of software, many companies are interested in moving to a Cloud-based Warehouse Management System. While that may mean simply to a Cloud version from an existing WMS provider, that may not be a choice for many older WMS’s, and may trigger a company to take a look at Cloud WMS alternatives even if they have a more modern system.

While WMS was a bit late to the Cloud game, for a variety of reasons, it is in full throttle now, at the same time many companies are looking to reduce their system maintenance requirements and moving to WMS in the Cloud.

So there you have it: nine drivers of the continued strong demand for Warehouse Management Systems. Do any of these look similar to the situation in your company?

It could be time to look seriously at new WMS technology.




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