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Warehouse Management Systems - WMS  WarehouseManagement Systems (WMS). ByDave Piasecki Theevolution of warehouse management systems (WMS) is very similar to thatof many other software solutions. Initiallya system to control movement and storage of materials within a warehouse, therole of WMS is expanding to including light manufacturing, transportationmanagement, order management, and complete accounting systems. To use the grandfather of operations-related software, MRP, as acomparison, material requirements planning (MRP) started as a system forplanning raw material requirements in a manufacturing environment. Soon MRP evolved into manufacturing resource planning (MRPII), whichtook the basic MRP system and added scheduling and capacity planning logic. Eventually MRPII evolved into enterprise resource planning (ERP), incorporating all the MRPII functionality with full financials and customer and vendor managementfunctionality. Now, whether WMSevolving into a warehouse-focused ERP system is a good thing or not is up todebate. What is clear is that the expansion of the overlap in functionality between Warehouse Management Systems, Enterprise Resource Planning, Distribution Requirements Planning, Transportation Management Systems, Supply Chain Planning, Advanced Planning and Scheduling, and Manufacturing Execution Systems will only increase the level of confusion among companies looking for software solutions for their operations.Eventhough WMS continues to gain added functionality, the initial core functionalityof a WMS has not really changed. Theprimary purpose of a WMS is to control the movement and storage of materialswithin an operation and process the associated transactions. Directedpicking, directed replenishment, and directed putaway are the key to WMS. The detailed setup and processing within a WMS can vary significantlyfrom one software vendor to another, however the basic logic will use acombination of item, location, quantity, unit of measure, and order informationto determine where to stock, where to pick, and in what sequence to performthese operations. At a bare minimum, a WMS should:  Have a flexible location system. Utilize user-defined parameters to direct warehouse tasks and use live documents to execute these tasks. Have some built-in level of integration with data collection devices. Do You Really Need WMS?Notevery warehouse needs a WMS. Certainlyany warehouse could benefit from some of the functionality but is the benefitgreat enough to justify the initial and ongoing costs associated with WMS? Warehouse Management Systems are big, complex, data intensive,applications. They tend to requirea lot of initial setup, a lot of system resources to run, and a lot of ongoingdata management to continue to run. That’sright, you need to "manage" your warehouse "management" system. Often times, large operations will end up creating a new IS departmentwith the sole responsibility of managing the WMS.TheClaims: WMS will reduce inventory! WMS will reduce labor costs! WMS will increase storage capacity! WMS will increase customer service! WMS will increase inventory accuracy! TheReality: The implementation of a WMS along with automated data collection will likely give you increases in accuracy, reduction in labor costs (provided the labor required to maintain the system is less than the labor saved on the warehouse floor), and a greater ability to service the customer by reducing cycle times. Expectations of inventory reduction and increased storage capacity are less likely. While increased accuracy and efficiencies in the receiving process may reduce the level of safety stock required, the impact of this reduction will likely be negligible in comparison to overall inventory levels. The predominant factors that control inventory levels are lot sizing, lead times, and demand variability. It is unlikely that a WMS will have a significant impact on any of these factors. And while a WMS certainly provides the tools for more organized storage which may result in increased storage capacity, this improvement will be relative to just how sloppy your pre-WMS processes were. Beyond labor efficiencies, the determining factors indeciding to implement a WMS tend to be more often associated with the need to dosomething to service your customers that your current system does not support(or does not support well) such as first-in-first-out, cross-docking, automatedpick replenishment, wave picking, lot tracking, yard management, automated datacollection, automated material handling equipment, etc. Setup Thesetup requirements of WMS can be extensive. The characteristics of each item andlocation must be maintained either at the detail level or by grouping similaritems and locations into categories. Anexample of item characteristics at the detail level would include exactdimensions and weight of each item in each unit of measure the item is stocked (eaches,cases, pallets, etc) as well as information such as whether it can be mixed withother items in a location, whether it is rackable, max stack height, maxquantity per location, hazard classifications, finished goods or raw material,fast versus slow mover, etc. Althoughsome operations will need to set up each item this way, most operations willbenefit by creating groups of similar products. For example, if you are a distributor of music CDs you would creategroups for single CDs, and double CDs, maintaining the detailed dimension andweight information at the group level and only needing to attach the group codeto each item. You would likely needto maintain detailed information on special items such as boxed sets or CDs inspecial packaging. You would also create groups for the different types oflocations within your warehouse. An example would be to create three differentgroups (P1, P2, P3) for the three different sized forward picking locations you usefor your CD picking. You then setup the quantity of single CDs that will fit in a P1, P2, and P3 location,quantity of double CDs that fit in a P1, P2, P3 location etc. You would likely also be setting up case quantities, and palletquantities of each CD group and quantities of cases and pallets per each reservestorage location group.Ifthis sounds simple, it is…well… sort of. In reality most operations have amuch more diverse product mix and will require much more system setup. And setting up the physical characteristics of the product and locationsis only part of the picture. Youhave set up enough so that the system knows where a product can fit and how manywill fit in that location. You nowneed to set up the information needed to let the system decide exactly whichlocation to pick from, replenish from/to, and putaway to, and in what sequencethese events should occur (remember WMS is all about “directed” movement). You do this by assigning specific logic to the variouscombinations of item/order/quantity/location information that will occur.BelowI have listed some of the logic used in determining actual locations andsequences. LocationSequence. This is the simplest logic; you simply define a flow through yourwarehouse and assign a sequence number to each location. In order picking this is used to sequence your picks to flow through thewarehouse, in putaway the logic would look for the first location in thesequence in which the product would fit. ZoneLogic. By breaking down your storage locations into zones you can directpicking, putaway, or replenishment to or from specific areas of your warehouse. Since zone logic only designates an area, you will need to combine thiswith some other type of logic to determine exact location within the zone. FixedLocation. Logic uses predetermined fixed locations per item in picking, putaway,and replenishment. Fixed locationsare most often used as the primary picking location in piece pick and case-pickoperations, however, they can also be used for secondary storage.RandomLocation. Since computers cannot be truly random (nor would you want them to be)the term random location is a little misleading. Random locations generally refer to areas where products are not storedin designated fixed locations. Likezone logic, you will need some additional logic to determine exact locations.First-in-first-out(FIFO). Directs picking from the oldest inventory first.Last-in-first-out(LIFO). Opposite of FIFO. I didn't think there were any real applications for this logic until a visitor to my site sent an email describing their operation that distributes perishable goods domestically and overseas. They use LIFO for their overseas customers (because of longer in-transit times) and FIFO for their domestic customers.Quantity or Unit-of-measure. Allows you to direct picking from different locations of the same item based upon the quantity or unit-of-measured ordered. For example, pick quantities less than 25 units would pick directly from the primary picking location while quantities greater than 25 would pick from reserve storage locations. FewestLocations. This logic is used primarily for productivity. Pick-from-fewest logicwill use quantity information to determine least number of locations needed topick the entire pick quantity. Put-to-fewest logic will attempt to directputaway to the fewest number of locations needed to stock the entire quantity. While this logic sounds great from a productivity standpoint, itgenerally results in very poor space utilization. The pick-from-fewest logic will leave small quantities of anitem scattered all over your warehouse, and the put-to-fewest logic will ignoresmall and partially used locations.Pick-to-clear. Logic directs picking to the locations with the smallest quantities onhand. This logic is great for spaceutilization.ReservedLocations. This is used when you want to predetermine specific locations to putawayto or pick from. An application for reservedlocations would be cross-docking, where you may specify certain quantitiesof an inbound shipment be moved to specific outbound staging locations ordirectly to an awaiting outbound trailer.NearestLocation. Also called proximity picking/putaway, this logic looks to the closestavailable location to that of the previous putaway or pick. You need to look at the setup and test this type of logic to verify thatit is picking the shortest route and not the actual nearest location. Since the shortest distance between two points is a straight line, thislogic may pick a location 30 feet away (thinking it’s closest) that requiresthe worker to travel 200 feet up and down aisles to get to it while there wasanother available location 50 feet away in the same aisle (50 is longer than30).MaximizeCube. Cube logic is found in most WMS systems however it is seldom used. Cubelogic basically uses unit dimensions to calculate cube (cubic inches per unit)and then compares this to the cube capacity of the location to determine howmuch will fit. Now if the units arecapable of being stacked into the location in a manner that fills every cubicinch of space in the location, cube logic will work. Since this rarely happens in the real world, cube logic tends to beimpractical.Consolidate. Looks to see if there is already a location with the same product storedin it with available capacity. Mayalso create additional moves to consolidate like product stored in multiplelocations.LotSequence. Used for picking or replenishment, this will use the lot number or lotdate to determine locations to pick from or replenish from.It’svery common to combine multiple logic methods to determine the best location. For example you may chose to use pick-to-clear logic withinfirst-in-first-out logic when there are multiple locations with the same receiptdate. You also may change the logicbased upon current workload. Duringbusy periods you may chose logic that optimizes productivity while during slowerperiods you switch to logic that optimizes space utilization.Other Functionality/ConsiderationsWavePicking/Batch Picking/Zone Picking. Supportfor various picking methods varies from one system to another. In high-volume fulfillment operations, picking logic can be a critical factor in WMS selection.See my article on Order Picking for moreinfo on these methods. TaskInterleaving. Task interleaving describes functionality that mixes dissimilar taskssuch as picking and putaway to obtain maximum productivity. Used primarily in full-pallet-load operations, task interleaving willdirect a lift truck operator to put away a pallet on his/her way to the nextpick. In large warehouses this cangreatly reduce travel time, not only increasing productivity, but also reducingwear on the lift trucks and saving on energy costs by reducing lift truck fuelconsumption. Task interleaving is also used with cycle counting programs to coordinate a cycle count with a picking or putaway task.AutomatedData Collection (ADC). It is generally assumed when you implement WMS that you will also beimplementing automatic data collection, usually in the form of radio-frequency(RF) portable terminals with bar code scanners. I recommend incorporating your ADC hardware selection and your softwareselection into a single process. This is especially true if you are planning on incorporating alternate technologies such as voice systems, RFID, or light-directed systems. Youmay find that a higher priced WMS package will actually be less expensive in theend since it has a greater level of support for the types of ADC hardware youwill be using. In researching WMS packages you may see references like “supports”, “easily integrates with”,“works with”, “seamlessly interfaces with” in describing thesoftware’s functionality related to ADC. Since these statements can mean just about anything, you’ll find itimportant to ask specific questions related to exactly how the WMS system hasbeen programmed to accommodate ADC equipment. Some WMS products have created specific versions of programs designed tointerface with specific ADC devices from specific manufacturers. If this WMS/ADC device combination works for your operation you can saveyourself some programming/setup time. Ifthe WMS system does not have this specific functionality, it does not mean thatyou should not buy the system, itjust means that you will have to do some programming either on the WMS system oron the ADC devices. Sinceprogramming costs can easily put you over budget you’ll want to have anestimate of these costs up front. Aslong as you are working closely with the WMS vendor and the ADC hardwaresupplier at an early stage in the process you should be able to avoid any majorsurprises here. Read my article on ADC.Integrationwith Automated Material Handling Equipment. If you areplanning on using automated material handling equipment such as carousels, ASRSunits, AGVs, pick-to-light systems, or sortation systems, you’ll want toconsider this during the software selection process. Since these types of automation are very expensive and are usually a corecomponent of your warehouse, you may find that the equipment will drive theselection of the WMS. As with automated data collection, you should be workingclosely with the equipment manufacturers during the software selection process. AdvancedShipment Notifications (ASN). If your vendors are capable of sending advanced shipment notifications (preferablyelectronically) and attaching compliance labels to the shipments you will wantto make sure that the WMS can use this to automate your receiving process.In addition, if you have requirements to provide ASNs for customers, you will also want to verify this functionality. CycleCounting. Most WMS will have some cycle counting functionality. Modifications to cycle counting systems are common to meet specificoperational needs. Read my article on Cycle Counting and check out my book onInventory Accuracy and Cycle Counting.CrossDocking. Inits purest form cross-docking is the action of unloading materials from anincoming trailer or rail car and immediately loading these materials in outboundtrailers or rail cars thus eliminating the need for warehousing (storage). In reality pure cross-docking is less common; most "cross-docking"operations require large staging areas where inbound materials are sorted,consolidated, and stored until the outbound shipment is complete and ready toship. Ifcross docking is part of your operation you will need to verify the logic theWMS uses to facilitate this. Pick-to-Carton. For parcel shippers pick-to-carton logic uses item dimensions/weights to selectthe shipping carton prior to the order picking process. Items are thenpicked directly into the shipping carton. When picking is complete,dunnage is added and the carton sealed eliminating a formal packingoperation. This logic works best when picking/packing products withsimilar size/weight characteristics. In operations with a very diverseproduct mix it's much more difficult to get this type of logic to workeffectively.Slotting. Slotting describes the activities associated with optimizing product placement in pick locations in a warehouse. There are software packages designed just for slotting, and many WMS packages will also have slotting functionality. Slotting software will generally use item velocity (times picked), cube usage, and minimum pick face dimensions to determine best location.YardManagement. Yard management describes the function of managing the contents(inventory) of trailers parked outside the warehouse, or the empty trailers themselves. Yard management is generally associated with cross docking operations andmay include the management of both inbound and outbound trailers. LaborTracking/Capacity Planning. Some WMS systems provide functionality related to labor reporting andcapacity planning. Anyone that hasworked in manufacturing should be familiar with this type of logic. Basically, you set up standard labor hours and machine (usually lifttrucks) hours per task and set the available labor and machine hours per shift.The WMS system will use this info to determine capacity and load. Manufacturing has been using capacity planning for decades with mixedresults. The need to factor inefficiency and utilization to determine rated capacity is an example of theshortcomings of this process. Notthat I’m necessarily against capacity planning in warehousing, I just thinkmost operations don’t really need it and can avoid the disappointment oftrying to make it work. I am,however, a big advocate of labor tracking for individual productivitymeasurement. Most WMS maintain enough data to create productivity reporting. Since productivity is measured differently from one operation to another you can assume you will have to do some minor modifications here (usually in the form ofcustomreporting).Activity-based costing/billing. This functionality is primarily designed for third-party logistics operators. Activity-based billing allows them to calculate billable fees based upon specific activities. For example, a 3PL can assign transaction fees for each receipt, and shipment transaction, as well as fees for storage and other value-added activities.Integrationwith existing accounting/ERP systems. Unless the WMS vendor has already created a specific interface with youraccounting/ERP system (such as those provided by an approved business partner)you can expect to spend some significant programming dollars here. While we are all hoping that integration issues will be magicallyresolved someday by a standardized interface, we ain’t there yet. Ideally you’ll want an integrator that has already integrated the WMSyou chose with the business software you are using. Since this is not always possible you at least want an integrator that isvery familiar with one of the systems.WMS+ everything else = ? AsI mentioned at the beginning of this article, a lot of other modules are beingadded to WMS packages. These would include full financials, light manufacturing,transportation management, purchasing, and sales order management. I don’t see this as a unilateral move of WMS from an add-on module to acore system, but rather an optional approach that has applications in specificindustries such as 3PLs. Using ERPsystems as a point of reference, it is unlikely that this add-on functionalitywill match the functionality of best-of-breed applications available separately. If warehousing/distribution is your core business functionand you don’t want to have to deal with the integration issues ofincorporating separate financials, order processing, etc. you may find these WMSbased business systems are a good fit. Implementation TipsOutsideof the standard “don’t underestimate”, “thoroughly test”, “train,train, train” implementation tipsthat apply to any business software installation (read my article SoftwareSelection and Implementation Tips) it’s important to emphasize that WMSsare very data dependent and restrictive by design. That is, you need to have all of the various data elements in place forthe system to function properly. And, when they are in place, you must operatewithin the set parameters. Example #1 Customer Service Person: Why didn't part XYZ ship to customer 123 yesterday? Warehouse Person: The warehouse management system couldn't find it so it didn't produce an instruction to ship it. Customer Service Person: Well my screen shows that we have 500 available in locaion 1A. Are you telling me that we don't have them. Warehouse Person: No, they're there all right. Customer Service Person: If I can see them on my screen, why can't the WMS find them. Warehouse Person: I don't know. I think if you don't have everything set up right , it won't let you ship it. Example #2 Warehouse Supervisor: I thought I told you to stock those pallets in location F12. Lift truck operator: I tried but the warehouse management system wouldn't let me. Warehouse Supervisor: Why wouldn't it let you? Lift truck operator: It told me that they didn't fit. Warehouse Supervisor: Well do they fit? Lift truck operator: Yes Warehouse Supervisor: Then why does the WMS think that they don't. Lift truck operator: I think it's because they sometimes come in a different size box. These are some very real examples (if only I could draw cartoons) of what you can expect when working with systems like WMSs. As you run into instances such as these, you must remember that these are not flaws with the WMS. In fact, you want your WMS to be restrictive, that’s what gives you control over your operations. You should to be aware, however, that the cultural change required to work within the operational constraints provided by the WMS is often the most difficult part of a WMS implementation.When implementing a WMS, you are adding an additional layer of technology onto your system. And with each layer of technology there is additional overhead and additional sources of potential problems. Now don’t take this as a condemnation of Warehouse Management Systems. Coming from a warehousing background I definitely appreciate the functionality WMSs have to offer, and, in many warehouses, this functionality is essential to their ability to serve their customers and remain competitive. It’s just important to note that every solution has its downsides and having a good understanding of the potential implications will allow managers to make better decisions related to the levels of technology that best suits their unique environment. Alsoread my articles on Software Selection andImplementation Tips, Order Picking, and CycleCounting. Links to Warehouse Management Systems on LinksPage. Extra: Industrial Data & Information, Inc offers several publications and RFI kits focusing on WMS selection. Products Include: Selecting Warehouse Software From WMS & ERP Providers. Reviewed on my Books Page Standard Warehouse Management System RFP Bundle. Warehouse & Logistics Software Directory, WMS For additional IDII products check their web site at www.idii.com  Inventory Accuracy: People, Processes, & Technology I'm pleased to announce the release of my book. Inventory Accuracy: People, Processes, & Technology is a comprehensive treatment of Inventory Accuracy and Cycle Counting in distribution, fulfillment, and manufacturing environments. I have long known that many businesses struggle with accuracy and are often unclear as to what they should be doing to improve operations. The interest I have received on the articles I have written related to inventory accuracy inspired me to write what I like to refer to as "the ultimate resource on inventory accuracy." Rather than just writing a little book on cycle counting or bar coding, I decided to write a book that not only comprehensively covers these topics, but also goes beyond bar codes and cycle counts to cover many other key facets of accuracy. For more detailed information, sample pages, and ordering information go to www.accuracybook.com. Returnto Articles Main PageDavePiasecki, CPIM is owner/operator of Inventory Operations Consulting LLC, a consultingfirm providing services related to inventory management, material handling, andwarehouse operations to manufacturers and distributors in Southeast Wisconsin and Northeast Illinois.He has over 15 years experience in warehousing and inventory management and canbe reached through his website (http://www.inventoryops.com),where he maintains additional relevant information and linksCopyright© 2001, 2002, 2003 Inventory Operations Consulting L.L.C. Send mail to email@inventoryops.com with questions or comments about this web site.Last modified:July 19, 2006Copyright © 2000 - 2007 Inventory Operations Consulting L.L.C. |
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