For most distributors who use them, Warehouse Management Systems (WMS) are an essential tool, providing greater visibility and insight into stocks, supply chains, and transactions. They can deliver basic process improvement, performance measurements, and often some improvements in materials handling.
But for the many businesses that haven’t yet made the leap, WMS is still a bit of an unknown.
In conversation with TheUserGroup.org, distribution specialist Howard Coleman and Andrew Weith, chair of TUG’s TWL Special Interest Group, talk about the difference a WMS can make.
TUG: What is life like without a WMS?
Coleman: The thing about life without a WMS is that it seems perfectly normal to someone who’s never experienced anything different.
Think about someone who consumes a lot of red meat, and can’t remember the last time they had their cholesterol or blood pressure checked. As far as they know, everything is fine. Even if something small goes wrong in their day-to-day functioning, they may not initially notice. Everything still feels normal. But that doesn’t mean there isn’t trouble brewing below the surface.
A wholesaler-distributor has to look out for signs and symptoms that might affect their blood pressure. Symptoms like low warehouse productivity, uncontrolled costs, processing errors, inaccurate inventory, or customer service failures. In other words, all the performance attributes that can make or break your competitive advantage.
By providing the means to “do the right things” and showing “how to do them right”, a WMS becomes a big part of your life as a distributor.
Weith: When I stroll through a warehouse, there are signs that indicate there is no WMS in place: people walking around without direction, looking for inventory, looking for things to do, rather than being directed to inventory or their next task.
I also talk to people who are looking to implement solutions that take them from green screens to a simple GUI interface. That’s no quantum leap. It isn’t even catching up with what’s current! We shouldn’t be struggling to implement technologies that were revolutionary decades ago—barcode scanning is from 30-plus years ago, and if you’re still not using it, your operations are not relevant at all.
Imagine if your grocery store or department store didn’t use these technologies, either. What would your shopping experience be like? For the most part, the reason wholesale-distribution has been able to survive without these essential tools is that we’re typically not consumer-facing. We can hide our inefficiencies behind the big steel and concrete warehouse walls.
TUG: Is my distribution company too small for a WMS?
Weith: I’ve implemented WMS at numerous five-person or less sites. The hardware costs are relative to the number of people and the size of the building, so scale isn’t necessarily a factor. Smaller companies do have trouble shouldering the cost of consulting and labor to set up the software, set up the building, and train end users. Consultants and programmers can be used sparingly when their services would be more cost-effective.
People may think a WMS is only for large operations, but it can actually be of great benefit to many smaller locations. In an operation with very few employees, staff is already multi-tasking and often consumed with day-to-day operations. Automating and simplifying those duties can free up overburdened staff and allow them to focus on improving operations, not just living with them.
Coleman: There’s room for continuous improvement in any distribution business, regardless of size. Especially when you consider that only about 40% of warehouse activities add value that a customer sees and is willing to pay for. That means you have to understand where the waste exists, which is why processes are so important.
A WMS typically makes most sense for a warehouse that is at least 20,000 square feet in size. But that doesn’t mean smaller wholesale-distribution businesses can’t benefit from WMS concepts like bin location management, or by storing product by “order hits velocity”. There’s ROI to be captured, even in smaller operations.
TUG: How much money can I save by implementing a WMS?
Coleman: The savings you can achieve with a WMS depend on your current cost structure and baseline transaction costs and the level of improvement you can sustain. But a distributor can expect a minimum productivity increase of at least 10 to 15%, or as high as 50%.
For any wholesale-distribution business that anticipates significant sales growth, introducing a WMS now could be the key to future cost avoidance. If your warehousing system can absorb steady, incremental increases in volume without incurring new costs, that’s a benefit that rebounds right through the business.
Weith: Like Howard, I often see businesses benefit from WMS by growing their throughput year after year without adding staff to compensate, and also by eliminating redundant quality control steps. Perhaps even more important are the qualitative savings on the customer service side. If you can reduce your errors, improve inventory accuracy, provide up-to-the-minute status on orders in process, improve your lines per hour, and increase your on-time deliveries, that translates into fewer dissatisfied customers. At a time when a click of the button gets you what you want (and delivered the next day, even on a Sunday), wholesale distribution customers are coming to expect these service levels in their work lives, just as they do in their personal lives. It’s time to become relevant!