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The truth about warehouse management systems

Some savings can be obtained by using cheaper technologies

by Dick Friedman

After paying for expensive Enterprise Resources Planning (ERP) systems, some distributors learned that their new systems do not include real Warehouse Management System (WMS) functions. They had been told that the ERPs had some warehouse management system functions, which was true – but not the functions that can really increase productivity, reduce mistakes and enable more cubes to be stored in a warehouse. Here are a few key functions of a true WMS, followed by a list of possible benefits and an outline of the obstacles to success.

ERP vs. WMS
An ERP mainly plans and manages the logical business activities of a distributor (entering data for orders, generating recommended purchase orders). Some ERPs contain a few functions that are also in a WMS (after entering receiving data, the ability to print a putaway list).

A WMS is a separate, optional, extra-cost software package that plans and manages the physical arrangement and activities of a warehouse. Bar code readers or other reading devices are not strictly needed for a WMS to function, but without reading devices, productivity would not increase as much. Printers are needed for functions explained later.

A WMS must be interfaced with a distributor's ERP in order to send transactions to the WMS, which uses them to initiate warehouse activities (such as generating a suggested reslotting report for rearranging item storage). It must be interfaced so that the ERP can receive from the WMS data used to update the ERP (for example, quantity received on a PO) and initiate ERP activities (generating invoices for shipped orders).

What is a "Warehouse"?
Unlike an ERP, a WMS requires that the warehouse in which it is being used be precisely defined, including temporary floor locations. During installation, one step is to define the ID of each bin (aisle, bay, level and slot). Then define "zones": name and ID numbers of the aisles in each zone. For example, a pallet zone can be defined as those aisles where pallets are stored. Zones can also be characterized as "required" or "prohibited." For instance, items characterized by an MSDS code must be stored only in zones defined as MSDS. There are several other characteristics that can be defined for each zone. For each bin ID, capacities and several characteristics can be defined, such as the weight capacity, to preclude WMS-recommendations that would overload a shelf.

For each item that might be stored in the warehouse, some characteristics must be defined (e.g., unit weight).

Capacities can be defined for each type of truck, forklift, pallet jack, etc., and for each type of shipping pallet, carton, etc.

Standard labor rates can be defined for various warehouse activities, such as picking.
Cohabitating Items

Most WMSs allow more than one item to be stored in a given bin location, which reduces storage space requirements; this can avoid adding shelving/racking – or adding on to the building – as inventory increases. When items are assigned to a shared bin, the WMSs uses bin characteristics and item data and characteristics to determine if each particular assignment is allowed.

Planning for Receipts
Some WMS can store a vendor-transmitted EDI transaction called an Advance Shipping Notice (ASN), that is sent before an order arrives. These WMS use ASN data to determine, by day, which receiving dock will be used by each inbound truck.

More sophisticated WMSs can create an hour-by-hour dock assignment and determine where each item in an expected receipt will be put away – if an ASN contains the expected time of arrival, and if sales orders will be picked in the ERP-determined sequence. Using a WMS to determine putaway locations may seem unneeded, but a warehouse can be defined with "floating" bulk/overflow storage (not picking) locations, which is another way of reducing storage space requirements. Of course, if picking locations float, the use of a WMS for dynamic putaway assignment provides even more benefits.

Furthermore, a WMS can generate a "license plate" label for each expected pallet. Each label shows the intended putaway location ID(s) and quantity for each item, data that is also stored in the WMS, and used to validate the putaway locations reported during putaway.

Receiving, QC and PutAway
If ASN and license plates are used, receiving with a WMS is much faster than with an ERP – scan the license plate, check for any warnings/adjustments from the WMS, then move it out. But, most distributors cannot take advantage of either ASN or license plates, so all WMSs allow for capturing receiving data by keying it in (against the PO) or scanning bar code labels on the received cartons or pallet wrap. Even without ASN and license plates, a WMS can dynamically determine where to put bulk/overflow that is not stored in fixed locations, which saves time and can save on space utilization.

If a received item is found to be defective or questionable, a WMS can determine the temporary storage location for that item – subject to the prohibitions, requirements and other factors mentioned earlier. The WMS would store data about the defective/questionable item.

If bar code labels are used in a warehouse, this is the step where new or replacement bar code labels would be printed by the WMS (or ERP for that matter).

Pull Down
This function is used only in warehouses where there are bulk/overflow storage areas; items are moved from the bulk/overflow areas to the pick zones (it's called pull down, because overflow quantities are often stored on the top shelves right above the corresponding pick bins). Based on real-time bin and sales order data and replenishment parameters, a WMS determines when to pull down items, before pick bins are emptied. It prints pull down tickets that show what and where to pull from, and where to put each pulled item; or it transmits pull down data for display on RF guns. If the labor tracking function is in use, the WMS determines who gets which tickets.

Picking
Unlike an ERP, a WMS can also "pick to truck." For each delivery truck or common carrier truck, it generates one or more order or wave pick tickets (or displays data on RF guns or other kind of picking devices). A WMS can generate a "mini-wave" pick ticket(s) for picking a few individual orders with items in common, such that all the items to be picked would not exceed the capacity of the forklift or pallet jack to be used. After the items are brought to a staging area, they are segregated by individual order. Furthermore, a WMS can determine when an item for an order should be picked from bulk/overflow, not the picking zone (and generate separate pick tickets).

If the labor tracking function is in use, a WMS can assign orders/tickets to specific pickers, based on real-time availability or even projected availability. The labor tracking function can reduce warehouse head count without hurting customer service.

Pack, QC, Load
By order, a WMS can determine the kind of shipping carton(s) needed, and calculate the quantity needed. As each carton is packed, a WMS can store data on the items in each carton/pallet – which requires the use of RF guns to read bar codes. Data on items rejected at this point is also stored.

Where there is more than one truck that can deliver to a given route, a WMS can determine which orders should be loaded on each truck, and print a loading report for each.

As trucks (including common carrier) are being loaded, a WMS can store data about the truck and the orders loaded on to it – enabling customer service people to quickly respond to the question, "Where's my order?".

(Re)Determining the Bin Arrangement
A possible step in installing a WMS is to use it to determine where each item should be stored, initially or "permanently." This can be done for warehouses that use fixed picking storage locations, and must be done for those that involve floating picking locations. Users select rules from a list and key in parameters that the WMS uses to do the "slotting" based on historical velocity.

Regardless of initial use, this function can be used annually or to increase productivity by reslotting items.

Labor Management, Standards and Productivity
A WMS can be used to store standards by type of task (receiving, picking, etc.) and can be used to store captured-data on task times and quantities involved (such as start and stop time for picking an order, and the quantities picked). Then it can generate a productivity report and/or display (for example, lines picked per hour, by person) and, if standards are in use, also show the variance. Similarly, a WMS can capture and report on various kinds of warehouse errors.

Obstacles To Success
First the possible benefits: increased productivity and reduced lost time, perhaps to the extent that staff can be reduced; reduced errors, which results in happier customers (and less lost business); not having to add shelving or add on to the warehouse or move to a larger one. I say "possible" for two reasons. The warehouse must be arranged and function in a way that doesn't prevent obtaining the benefits, and good procedures
and controls must be in place in the warehouse. Depending on several factors, a warehouse may now be functioning so well that a WMS would not provide much improvement.

Cost is another reason that many distributors do not install a WMS. Some distributors that install a WMS learn too late that cost includes many things the WMS vendor forgot to mention – like interfacing with the ERP system and annual support costs for software and devices such as bar code readers.

To avoid fruitlessly spending a lot of time and money, before getting WMS quotes or seeing demos, determine if a warehouse is ready for a WMS. Estimate all the long-term costs (including any warehouse changes and interfacing to the ERP system) and estimate the truly attainable cash savings and intangible benefits. For some warehouses, many of the savings and benefits of a WMS can be obtained by using cheaper technologies or other measures not involving much expense.

Dick Friedman is a recognized expert on warehouse operations, WMS and warehouse technologies for fastener, tool, industrial and MRO distributors. He is a Certified Management Consultant and is unbiased, so he does NOT SELL computer systems, WMS or warehouse technology. He applies more than 30 years of experience to help distributors objectively determine if a WMS or any warehouse technology would be worthwhile. He also helps prevent warehouse errors and increase productivity, often through inexpensive, quick changes that don't require a WMS or any technology. Call (847) 256-3260 for a FREE consultation, or visit www.GenBusCon.com.

This article originally appeared in the Sept.Oct. 2010 issue of Industrial Supply magazine. Copyright 2010, Direct Business Media.

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