What they dont tell you about warehouse management systems

Here are guidelines to help distributors navigate the sea of WMS vendors, exaggerated claims and unsuccessful installations.

by Lance Devereaux

Software designed exclusively for warehouse management systems (WMS) has become popular. But there are vital questions to ask before jumping on the WMS bandwagon. Do you know what they are? The answers can be crucial in todays competitive market.

WMS packages can cost as much as $1.5 million to $2 million, and the software and hardware is only 25 to 30 percent of the price. This means it is crucial to navigate successfully through the choppy seas of competing vendors, hyped-up claims and unsuccessful installations.

It is important to determine real needs, establish budget priorities before implementation and not allow the new software to bend operating procedures. The difference in profit margins from an unworkable or problematic installation can affect the success of the entire operation. Lets look at some principles to keep in mind.

The WMS appeal
One reason many distributors rush into WMS implementation is to tap into the advantages that access to Internet technology offers.

Inventory accuracy is the key to maintaining an efficient warehouse, says Jim Majure of Majure Data Inc., based in Atlanta. The real-time information provided by a WMS lets customers track order status, whether its picked, packed or shipped.

Other benefits from effective software and hardware implementation include promises of reduced errors, reduced paperwork, more efficient space utilization and better workload control.

The WMS appeal is built around information systems that offer flexible, scalable products that are easy to support and maintain and that facilitate continuous improvement on the warehouse floor. But this technology can also be a big detour.

The ideal situation is to buy a system that does not force the warehouse to conform to the software, says John Delsasso, vice president of distribution for Lawson Products in Des Plaines, Ill. You want a system that is measurable, time-based and that fits your needs.

Identify real needs
A vital question at this stage is: What do I want the system to do? Do I need to hire a consultant to work out an assessment of my operation and its real needs?

Consultants bring to the table their expertise on many ways of accomplishing something, says John Barnard, vice president of operations at Learning Resources Inc. in Vernon Hills, Ill. Internally, we tend to be focused on the way we have done things rather than taking steps toward a better system.

Outside assessors can offer an objective view. They know the trends and are in touch with a wider gamut of WMS solutions. They help answer such questions as: What is everyone else doing? Is it time to outsource? Should my plant and warehouse be separated? Am I taking advantage of strategic traffic routes? Am I losing customers because my distribution channel is running against the flow of trade? How good are we at checking inventory control and out-of-stock items?

Don Thomas of IIG Commercial Developers in Houston counsels: You need to know where your customers are and where the interstate is.

An outside assessment is a useful tool from the get-go to help executives think strategically before buying a single piece of software. Recently, with the help of an outside consultant, a leading health care manufacturer with production facilities in Virginia and Missouri relocated its distribution facility closer to its customer base in the Midwest. It quickly regained a competitive advantage. The key was identifying real needs.

Function determines form
A wise rule of business, especially in the warehouse distribution area, is function determines form. One school of thought argues that distributors need to bend their distribution processes to fit the new software. Dont fall for that. A good WMS is a tool to help you execute your most improved and responsive distribution process.

Anyone can ship an order, but you have to be flexible to fit real customer needs, says Delsasso.

Remember that WMS by itself doesnt provide solutions. It simply offers more efficient ways to implement and access desired solutions once the process is mapped and assessed and improved. Flexibility is a desired value.

In researching WMS solutions, its important to seek flexible, scalable, robust WMS products that are easy to support and maintain, and provide continuous improvement for warehousing operations, says Majure.

Budgeting: hidden agendas
When considering any WMS implementation, its wise to start budgeting procedures as early in the process as possible. Business development experts counsel distributors to approach the financing of any transformation in two stages. First, there may be an initial start-up cost of about $150,000 to cover assessments and selection of alternative plans.

Then comes the much larger outlay that should cover needs (not wants). Plan cost scheduling with prospective software partners. Dont let the software supplier run the process. Watch out for schedules that are too open-ended. Write the ticket thats best for the operation.

Kerstin Nemec, national partner-in-charge of KPMG LLPs business incentives group, advises distributors considering a WMS changeover: The priority list is still proximity to customers, real estate, operating and transportation costs. The basics havent changed that much.

Too many managers today see software programs as part of a mysterious and magical process: the Black Box. Dont turn control over to the IS department too early. Its always better to ask dumb questions as early in the process as possible, especially in the budgeting process.

Dont be buffaloed. Deflate the aura of mystery. Finally, dont assume that a WMS automatically reduces costs. Additional bar coding, for example, can increase costs at the outset. Dont blue-sky the project without inventing an assessment framework that will play to real needs.

Consultants can be particularly helpful at this stage, especially in mapping out variables and hidden dynamics that inevitably arrive.

Whats needed is a focused goal and some expertise in how to get there, says Barnard. Consultants can keep you from going down the garden path.

WMS dos and donts
No WMS overview would be complete without a list of dos and donts.

Dont overbuy. Work for balance. Choose software that is neither too robust nor too sensitive. Keep the macro in balance with the micro. It may be helpful to appoint an internal project manager for the day-to-day tasks that arise and an operational project supervisor to keep things on track.

Dont minimize the problems of installation. A thorough, upscale changeover can take as long as a year. Ask how this installation will affect fast-changing product lines, especially if the unexpected and unplanned shocks the system (for example, a sped-up demand for perishable items).

Do check out prospective installers and service providers. The old question, How did they work with another customer, is still a good one even in the age of cyberspace.

Dont ignore the cost of updating WMS as business changes. Some suppliers have more experience and flexibility than others. Get the best within budget limits.

Do stay focused on the Big Three values. How this installation affects product search time, operator travel time and customer delivery time are topics that all successful distributors try to keep before them.

Three proven principles
In the end, it boils down to three dynamic principles.

1) Calibrate front-end planning with day-to-day operations and identify your needs. With the growth in NAFTA trade impacting distribution center site selection and the rise of e-commerce increasing customer demands for real-time deliverability, this is vital.

2) Let form follow function. Dont bend warehouse processes to fit glitzy-seeming software. The Internet mystique leads too many distribution managers to compromise their distribution process that is unique to their customers. Map, assess and improve the process before implementation. The goal of warehouse distribution strategy hasnt changed. It is still to get the product out quickly, to streamline daily deliveries, and to cope with the new challenges and demands from the world of e-commerce.

3) Exercise control over the budget from Day 1. Question every element of cost and be sure you know what youre getting from your investment. The promised land of flexible, scalable WMS is in view. Dont settle for less.

Lance Devereaux is principal in charge of business development for Business Engineering, Northbrook, Ill. Business Engineering provides process-improvement consulting to manufacturing and distribution operations. For more information, call .

This article originally appeared in the January/February 2001 issue of Progressive Distributor. Copyright 2001.

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