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Supply Chain News: The 10 Most Common Drivers of a New Warehouse Management System


Market for WMS Remains Vibrant Nearly 50 Years after First Deployment

June 11, 2024


SCDigest Editorial Staff

Warehouse Management Systems (WMS) are one of the most mature categories of supply chain software. Most track with the first real WMS - defined as warehouse software that used real-time mobile wireless terminals and system directed task assignment - having been installed in 1975, now just short of 50 years ago.

Supply Chain Digest Says...

Many companies are looking at really ramping up their levels of automation in the DC to reduce costs, increase throughput an existing DC, and/or to alleviate labor headaches and other issues. A home-grown or second-tier WMS technology is rarely up to the task.

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Yet the WMS market remains vibrant despute its maturity. WMS continues to drive value, and distribution trends such as increased operational complexity, the desire to expand the use of materials handling automation and more drive the need for more robust WMS functionality the a company currently has currently.

What are the 10 most common business drivers for a company to start the process to look for a new WMS? See our list below:

(1) 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.

(2) A New DC: Obviously, if you are opening a new distribution facility, that building will need some kind of WMS to help operate it. Because of that, the new building offers an opportunity to consider whether it is time to look at a potential new WMS provider versus whatever system is the incumbent solution at other company facilities. This would be doubly true if the new DC will operate significantly differently, for example in terms of automation, versus existing DCs.

(3) 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 or an increase in value-added service requirements/ postponement in the DC.

The key question: Can your current WMS really well support these new 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 crossdock requirements.

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(4) Facilities Consolidation: The ebb and flow of business always means some companies are consolidating distribution facilities. 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 provide the ROI for smaller facilities. Sometimes, the existing WMS does not well support the operatonal requirements of one of the businesses being consolidated. Similar to the "new DC" driver cited above.


(5) Significantly Increase in DC Automation: Many companies are looking at really ramping up their levels of automation in the DC to reduce costs, increase throughput 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.

(6) 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.

(7) 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.

(8) New Omnichannel Fulfillment Requirements: Omnichannel fulfillment is disrupting DC operations at retailers, consumer goods companies and more, often driving companies into heavy piece picking operations for the first time. All this, perhaps with new value-added service requirements, may simply exceed what a company's current WMS can enable efficiently, or result in lack of needed throughput.

(9) Preference for a Cloud-based WMS: This factor is connected to the point about having really old WMS technology above, but worthy of standing on its own. Cloud-base systems can substantially reduce the internal IT support resources required to maintain traditionally deployed WMS systems, perhaps to the point it is a catalyst for making the move to a new Cloud-based WMS on its own.

(10) WMS Platform Standardization Globally: Obviously this is a driver only for large multinationals, but many companies in the past were content to have a hodgepodge of WMS systems in facilities across the world. That might mean best-of-breed in the US, SAP in Europe, more local systems in other parts of the globe - or maybe hardly any technology support in those DCs at all. That scenario makes it difficult if not impossible to standardize practices worldwide, compare performance across facilities, and to roll out new changes in DC processes on a global basis. A number of companies have made the move to replace those different systems with a single global WMS, though that changeover usually takes years.

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 thing you would add to our list of WMS catalysts? Let us know your thoughts at the Feedback button below (email) or in the Feedback section.




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