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The Tier 1 Warehouse Management Systems – When to Consider “All the Bells and Whistles”…and When to Be Cautious

By Ian Hobkirk | 11/18/2014 | 8:58 AM

The last decade has seen significant changes in the Tier 1 Warehouse Management System (WMS) landscape. In 2003, there were about a half-dozen software developers who could lay a credible claim to being “Tier 1” WMS vendors. Today, that number stands at three. Vendors in this group tend to share the following characteristics:

  • Complete set of warehousing functionality.
  • Complete warehousing peripheral functionality from native modules like slotting and labor management with seamless integration back to the core WMS.
  • Full supply chain functionality: While not a requirement from a purely warehousing perspective, companies tend to associate Tier 1 WMS vendors with this additional supply chain functionality in areas such as transportation management, inventory planning, etc. It should be pointed out that even amongst Tier 1 vendors, these broader supply chain applications are usually not as tightly integrated with the WMS in the way that a slotting or LMS module might be. 

If your company is in the market for a new WMS but you're not sure which type of system to evaluate, read on. This post outlines which distribution center functionality requirements truly dictate the need for a Tier 1 WMS such as JDA, Manhattan or HighJump.

Inbound Warehousing Complexity

Business process complexity is still the primary reason why companies should consider a Tier 1 WMS over other categories. While WMS systems across all tiers have made strong advances in developing features for outbound processes like picking, Tier 1 providers still lead the pack in inbound process capabilities, including:

  • Receiving staging by zone: at receiving, direct that inbound product be staged on a pre-defined movable unit based upon its destination zone.
  • Put-away by movable unit: allow multiple SKUs to be placed on a license plated movable unit; allow the movable unit license plate to be scanned once at put-away, and direct put-away of all SKUs on that movable unit in a logical pick-path.
  • Clustered put-away: allow multiple SKUs to be put away in the same trip through the warehouse in a logical pick path.

These three features are very important in an operation that receives small amounts of individual SKUs and must put away multiple SKUs at the same time. Companies like this with large contingents of labor in receiving and put-away (20 or more) would do well to consider the benefits offered by increased efficiency in these areas. These features matter less in operations where full pallets of the same SKU are received and put-away.

Task Interleaving

Companies handling full pallets of goods at receiving, and who also frequently pick full pallets can see tremendous efficiency gains from inbound/outbound task interleaving. This functionality involves combined put-away/picking cycles - when a full pallet is put-away, the WMS searches for full pallet picks which need to occur in proximity to the put-away bin and places this pick as the next task in queue (See below).

Task Interleaving



 

 

 

 

 

 

 

The business case for task interleaving is similar to that for back-hauling in the transportation world: reduce the amount of empty vehicle travel. In my experience, task interleaving is still primarily in the domain of Tier 1 WMS systems, due to the complexity of proximity-based task assignment.

Slotting and Labor Management

As noted previously, a distinguishing characteristic of Tier 1 WMS continues to be the fact that these providers have developed native, fully integrated slotting and labor management modules. It should be pointed out, however, that many Tier 2 providers are able to offer this same functionality by partnering with other software providers. This begs the question then, when does it make sense to have a fully integrated solution vs. a “best of breed” slotting or LMS system?

The truth is that not all companies require an integrated Tier 1 slotting system. Many companies have stable product lines and little seasonality. These businesses may certainly benefit from a large-scale, one-time re-slotting exercise, followed by minor rebalancing on an annual scale. This level of slotting does not require a fully integrated solution, but can often be satisfied with spreadsheet-based tools or other commercially available applications.

However, some businesses have a high rate of new product introductions, short product lifecycles, and a large degree of seasonality. These industries can include consumer electronics, apparel, and certain aspects of housewares. For these companies, slotting must occur much more regularly – on a quarterly, monthly, or even more frequent basis. These businesses will benefit from a Tier 1 slotting solution. These systems have benefits over less sophisticated tools in that they can create slotting tasks and pass these directly to the WMS for execution. Additionally, when used in conjunction with labor management, a Tier 1 system can evaluate the potential labor savings from re-slotting a SKU against the time it will take to perform the re-slotting. A sophisticated, prioritized list can be developed which shows the most important moves to make, and also includes pre-requisite move chains (example: first move SKU A to make room for SKU B). Only fully integrated solutions can offer this level of complexity. Companies with large labor forces as well as volatile demand patterns should consider Tier 1 WMS providers for these reasons.

Labor Management Systems similarly have various levels of capability, with not all companies requiring a full-featured, Tier 1 system. Companies with a high level of uniformity in picking processes may find that simple historical averages or “reasonable expectations” are enough to set a credible performance standard. Other companies may have invested heavily in goods-to-picker automation which makes the human labor component a smaller portion of the overall cost of distribution; these companies also may have diminished need for a sophisticated labor management system.

However, many operations feature numerous different types of picking – piece picking, case picking, pallet picking, etc. In these situations, fully engineered labor standards are often the best way to develop a real performance standard that takes into account factors such as travel distance, transaction time, and other variables. Additionally, processes such as receiving, put-away, and shipping have so much inherent variability in each task that it can be challenging to use any generalized averages to set a performance bar for individuals. Labor management software using engineered labor standards fills this need by calculating a precise amount of time it should take to complete each task using a library of master standard data. There are very strong independent software providers that offer Labor Management Software; it is also offered by both of the acknowledged Tier 1 WMS developers.

The value of Labor Management Software that is fully integrated with a WMS is that reporting and visibility into performance can be more real time. Tasks are created in the WMS, the LMS calculates a standard for them, and the WMS tracks the worker’s performance to that standard, all in real time across an interface maintained by a single software provider. 

Companies that should consider a Tier 1 Labor Management Software System are ones with operations that rely on vehicle-based picking, conveyor-based picking (to a lesser extent), and that have high levels of process variability in the operation. As with most WMS-related business models, it also helps to have a lot of labor in the distribution center to begin with, so that the savings can more easily justify the cost of technology.

Multi-Site Distribution

Companies that plan to deploy their WMS solution at multiple sites in a short period of time may feel that the larger pool of resources available with a Tier 1 provider will be valuable. This can certainly be true in many instances. Some Tier 1 providers have very mature partner ecosystems which they can draw on to support a large-scale deployment. These partners have developers that are trained and certified on the specific WMS system and can add vital man-power on complex implementations. Smaller WMS providers may not have this network, or it may not be as experienced in WMS work.

It should be pointed out that some Tier 2 providers also have large teams of resources available, especially those companies that fall into the ERP software space. 

Global Requirements

Most mid-tier providers in the United States only offer English and Spanish language support, while in many cases, Tier 1 providers support a larger selection of global languages. This will be important for companies that wish to deploy the WMS globally. 

Reasons to be Cautious About Tier 1 Technology

Lack of Responsiveness

The proverbial analogy of the small fish in the big pond often holds true in the WMS world. The WMS world is very project-oriented, and even the largest of companies can be spread thin at times if too many projects come in their door at the same time. When this happens, it can be difficult for smaller customers to get the attention they require when companies many times their size are competing for the same resources. Additionally, the perception of “safety in numbers” can evaporate quickly if most of the developers assigned to a project are inexperienced. Sadly, I have seen this scenario play out on occasion, with smaller user-companies failing to have their projects staffed with the right quantity and quality of resources.

Integration Doesn't Live Up to Expectations

A Tier 1 provider’s broader assortment of applications such as Transportation Management, Inventory Management, and Order Management applications can often seem impressive, as can the prospect of having a single software provider supporting all of a company’s supply chain applications. Many companies choose this path in the hopes that IT integration will be simpler as well.

Caution should be exercised here, however. Many Tier 1 providers have grown through acquisition, and have a potpourri of applications with different code bases that may be poorly integrated. Additionally, just because a provider has a best-in-class WMS system does not imply that other supply chain applications in the suite are as functional or mature.  I have witnessed instances where a Tier 1 WMS deployment was successful, but the overall project struggled due to less mature peripheral applications.

The best way to guard against this situation is to fully vet any additional supply chain applications which are being considered in the same thorough manner in which the WMS was evaluated. Never assume that all of a software provider’s offerings are equal in terms of functionality or maturity. 

Costs Can Add Up

One of the primary reasons that some companies don’t use Tier 1 providers is that they can be cost-prohibitive in some instances. Tier 2 providers have caught up to Tier 1 providers in a number of functionality areas. If there are no glaring functional gaps in a Tier 2 provider’s offering, many companies are not willing to pay the premium required by a top tier WMS developer.

I have observed that Tier 1 providers can, on certain occasions, be very price-competitive with their mid-tier rivals. While this is not consistently true, certain factors which can drive the price point of a Tier 1 provider down include:

  • If the purchasing company is large and there is potential for future implementations
  • If the purchasing company is managing a thorough competitive bidding process that includes mid-tier providers
  • Leveraging the calendar: closing the deal at the end of the month or quarter

This blog was an excerpt from a whitepaper I wrote, “Selecting the Right WMS.” The whitepaper includes a similar overview of the pros and cons of Tier 2 and Tier 3 software players. To read the whitepaper, click here.

 

 

 

 

 

 

 

 

 

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The opinions expressed herein are those solely of the participants, and do not necessarily represent the views of Agile Business Media, LLC., its properties or its employees.

About Ian Hobkirk

Ian Hobkirk

Ian Hobkirk is the founder and Managing Director of Commonwealth Supply Chain Advisors. Over his 20-year career, he has helped hundreds of companies reduce their distribution labor costs, improve space utilization, and meet their customer service objectives. He has formed supply chain consulting organizations for two different systems integration firms, and managed the supply chain execution practice at The AberdeenGroup, a leading technology analyst firm.



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