Warehouses depend on optimized business processes to ship product out on time and with a minimal amount of labor cost. Perhaps nowhere else in an organization are business processes more unique to a company than within the four walls of the distribution center. This is why designing the processes which will be used in the future state of the distribution center is key to selecting the right WMS, and both an art and a science.
This blog series, “How to Choose the Right WMS,” outlines the steps of a proper WMS selection process. This post explains step three of this process, "Define the Future State."
The solution to certain process issues may seem obvious; in other cases, further research must be done to identify the best way to rectify problems. A review of summary operational data is usually warranted at this stage. For example, in order to determine if a company should implement high performance distribution processes like cluster picking or batch picking, the company must thoroughly analyze key order metrics such as average lines per order, line item commonality, and pick-to-put ratios. Only then can complex solutions be properly evaluated.
Conducting a basic benchmarking assessment early on is a good way to determine the level of improvement which may be attained, and the degree to which processes should be re-designed. Companies that are already best-in-class in many categories may decide to only make minor modifications to their processes rather than the riskier wholesale re-engineering that laggard companies may need to do. Companies should list the important metrics which define success in their distribution center, and then research how their performance compares to that of other companies.
The Value of Outsider Perspective
It can be immensely helpful at this stage to gain some outside perspective into what best-in-class companies are doing to address similar situations. Supply chain consulting firms can have a tremendous breadth of experience from seeing hundreds or thousands of other distribution operations. Experienced advisors can help with the all-important task of separating what is possible from what is practical. There are numerous sources where lists of industry “best practices” can be found. However, not all companies need to implement best practices in all areas of their operations. To do so may be prohibitively expensive, and may not be cost justifiable in all situations. Experienced advisors can help sort out the changes which make the most sense for a given operation.
Perform Future Visioning
As important as it is to properly define and re-engineer the current business processes, failing to take into account future changes can hamstring an organization for years to come. To properly assess the potential impact of these changes, it is important to conduct a Future Visioning Session. Attending this session should be the entire Project Steering Committee, the Executive Sponsor(s), and C-level executives from various functional areas who are involved in long-term business planning. Some of the key questions which should be asked during the Future Visioning Session are:
- What levels of organic growth are projected?
- What will be the nature of this growth? Will it involve greater sales of the same SKUs to the same clients? Greater sales of the same SKUs to new clients? Greater sales of new SKUs to new clients?
- Are there other sales channels the company is exploring? Will the company begin to sell to larger retailers with vendor compliance mandates? Is the company planning to begin or ramp-up a direct-to-consumer channel?
- What is the trend with regards to order profiles? Are customers placing smaller, more frequent orders?
- To what extent does SKU proliferation affect the enterprise?
- Is the company contemplating any mergers or acquisitions that will have a material impact on the operation?
- Is the company planning to target new geographic markets?
- Is the company planning to source product differently?
- What pending regulatory changes will affect the operation?
The operations group must then consider the potential impact of any of these changes on the distribution center processes. The key changes anticipated in the Future Visioning Session should then be incorporated into the Detailed Process Specification, Future State.
Create the Business Process Review Committee
Once the data analysis, benchmarking and future visioning have been performed, and outside perspective has been obtained, it is time to start the work of designing the new processes. A vital first step here is to create the Business Process Review Committee. This group should be made up of executives, managers and supervisors, and at least some of the rank-and-file workers who will be responsible for actually using the new processes. Executives can often bring vital perspective to the table: rather than thinking in terms of “this is how we’ve always done it,” some executives or even managers and supervisors may have experience with best practices at other companies and can help the group understand other ways of doing things. It is also vital that the workers themselves feel vested in the process. It will not be possible to please everyone with every process design, but if workers are genuinely listened to and made a part of the process, then they will tend to be more supportive of the changes, even if some of the new processes are not designed exactly as they would have chosen.
Create the Detailed Process Specification, Future State
Using the same spreadsheet format as for the current state documentation, re-create the business processes as they will occur in the future state.
- Re-design inefficient process
- Leave good process intact
If the exceptions to the rules have been thoroughly accounted for when defining the current state, then they can serve as a useful guide to ensure that nothing has been overlooked when designing the future state. When the documentation is complete, each step should be reviewed, discussed, and approved, line-by-line, by the Business Process Review Committee.
Determine Integration Strategy
Thus far, this phase has primarily involved operational resources. However, once the operational requirements have been defined, it is important to involve the IT group to begin to map out the more technical characteristics of the solution which is pursued. The IT group will be responsible for integrating the new software with the company’s existing software systems, as well as maintaining and supporting the solution internally. WMS systems must often interface with a number of different host systems, including ERP, MRP, POS, TMS, and accounting software, as well as any material handling control systems like Warehouse Control Software (WCS) and Warehouse Execution Software (WES) systems.
Related Content: WMS vs WCS – Sorting out the Truth from the Hype
Some of the key questions for the IT group to consider at this phase of the project are:
- What operating system is preferred? (Windows, Unix, I-series, etc.)
- What deployment architecture is desired? (Client-server, Web-based, Software-as-a-Service, etc.)
- What database is preferred? (Oracle, DB2, SQL, etc.)
- Does the IT group desire a solution with open source code to allow them to make extensive modifications? (many WMS companies do not allow this)
- Is the IT group ready to take on the task of creating a series of interfaces between their host systems and a 3rd-party WMS? How much effort do they feel this might entail?
- What other IT projects are scheduled for the next 24 months which may divert resources from this project?
- Does the IT group prefer to implement a WMS which is a module of their ERP system in order to minimize the amount of interface work that is required?
- How will the system ultimately be supported? Will the IT group take responsibility for creating new workflows as these are needed, and making code changes when required? Or will they depend on the WMS provider or third-party integrator to perform these tasks?
Building Bridges Early
Many companies experience a significant disconnect between the IT and Operations department, and this disconnect can create problems during a complex software implementation. Bridging some of these gaps early in the process can be vital for the future success of the project. Involving the IT groups up-front in this phase is a good way to achieve this internal cohesiveness.
Stay tuned. The next blog in this series, Project Future Savings – The Fourth Step in Selecting the Right WMS, will outline how to identify and dollarize the key areas where financial savings can be achieved with WMS. Can’t wait? Read the white paper, How to Choose the Right WMS – Part I: Distribution Center Process Optimization