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S E P T E M B E R 2 0 1 4

WMS and WCS Implementations Best Practices

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RESEARCH REPORT

The business world as we know it is changing at a rapid pace, and the logistics/supply chain segment is no exception to the rule. From omni-channel retailing to e-commerce to the introduction of more and more automated processes, the way manufacturers and distributors do business has morphed dramatically over the last few years. Driving much of this change is an increasingly demanding

customer who has come to expect accurate order processing within a compressed time frame.

In this report, we’ll examine the changing logistics environment that today’s organizations are grappling with, explore the results of the WMS and WCS Implementations & Best Practices survey, a study recently conducted by Peerless Research Group (PRG), and look at how companies are already using technology and business intelligence to optimize their competitive positions in this new world.

A Rapidly Changing Environment One need only look at the e-commerce landscape to see the significant changes taking place in the way companies do business. According to Forrester Research’s most recent online retail sales forecast, U.S. e-retail sales are expected to reach $414 billion by 2018 (up from $263 billion last year). Growing at an annual rate of 9.5 percent, e-retail’s share of total retail sales will reach 11 percent within the next four years (from 8 percent in 2013), according to Forrester.

While business-to-consumer (B2C) e-commerce continues to grow at a steady clip, business-to-business (B2B) online sales are also picking up momentum. Reaching $559 billion in total sales in 2013, according to Forrester, the B2B e-commerce market continues to expand along with its consumer-focused cousin, B2C.

Despite the fact that e-commerce sales have been growing year over year, not all organizations have caught up to the trend yet. According to a new survey conducted on behalf of Modern Materials Handling magazine for FORTE, WMS and WCS Implementations & Best Practices, more than one-half (53 percent) of

WMS and WCS Implementations & Best PracticesAn uptick in e-commerce and omni-channel retailing pushes warehouse and distribution center managers to rethink their technology and automation investments and optimize their operations to meet the new demands of today’s business world.

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WMS and WCS Implementations & Best Practices

those we questioned said their company’s online orders have increased over the last two years. However, more than four out of ten claim they’re not realizing these gains yet and are either now just evaluating (21 percent) e-commerce systems or have no plans to sell via an e-commerce strategy (19 percent); a few (2 percent) further noted that they’ve seen their e-commerce sales dip during this period, while for others (6 percent) sales have leveled.

To best manage their e-commerce operations, almost half of the operations we surveyed (47 percent) use a warehouse management system (WMS), while others rely on another order fulfillment software application (29 percent) or a warehouse control system (WCS) (14 percent).

Tackling Challenges in the Warehouse

For now at least, companies remain focused on some basic warehousing challenges that have plagued them for decades. Cost control, process management, labor management and accuracies in data and reporting continue to be central issues for many operations. Operations are additionally being tested to attain better real-time tracking functionality across all stages: from the instant an order is placed to the moment of delivery, both in transit and in facilities, right down to the level of individual items. Operations are further focused on gaining sufficient order-to-ship processing in e-commerce distribution to better enable same-day delivery of in-stock items.

Status on e-commerce activity

E-commerce orders have increased over the last 2 years 53%

E-commerce activity is the same as two years ago 6%

E-commerce orders have dropped 2%

We presently do not have an e-commerce system in place, but are evaluating/implementing 20%

We presently do not have, nor are we planning to sell via an e-commerce strategy 19%

Systems use to manage e-commerce operations

WMS 47%

WCS 14%

Another order fulfillment software application 29%

Other 10%

“ We’ll be adding more functionality to our WMS implementation. We’re looking for better control over inventory and greater optimization of our labor resources.”

—IT, Business Analyst; Pharmaceuticals; $2.5B+

in annual revenues

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WMS and WCS Implementations & Best Practices

To help achieve these goals, companies require more technology, and more automation for use in manufacturing, material handling and logistics applications.

As it pertains particularly to order fulfillment processes, warehouse and DC managers consider the following goals as needing the most attention (ordered by importance):

1. Ability to quickly and accurately fill orders, including single and multi-line orders

2. Fill the perfect order as measured by our team and customers

3. Manage a high volume of orders through the packing area

4. Ability to flex to extremely large peak throughput periods

5. Meet our shippers’ cut-off times to enable same- day shipping or next-day delivery

6. Ability to modify product flow through a facility

Subsequently, we learn from this research that more companies appear to be turning to technology to help mitigate these key warehousing/DC challenges.

While roughly one-third (35 percent) run fully or highly automated material handling operations, an additional one out of four (23 percent) is moving to automate more of their material handling tasks.

However, many operations continue to lag and still handle many of these processes manually, leaving operations vulnerable to errors, delays and ultimately dissatisfied customers. More than four out of ten (42 percent) report that fewer than half of their material handling procedures are manual.

Of the operations that either already run or are planning/considering future warehouse automation systems, one out of three (33 percent) is evaluating these apps as a cloud-based solution; conversely, two-thirds are not.

When asked whether certain factors matter when buying and using warehouse automation software, respondents cite compatibility with existing systems, configurability, ease of integration with other applications, after-sales service/support, financial stability of the supplier and intuitiveness of user interface as the most important considerations.

Top challenges shippers face

56%Reduce labor costs

52%Improve accuracy/Minimize errors

49%Measure and manage workforce productivity

48%Improve throughput

43%Better reporting

43%Improve our non-automated processes

Improve process flow through our DC 42%

40%Labor management/

Proper deployment of our workers

37%Increased inventory tracking/awarenessduring fulfillment processing

34%Real-time order tracking

34%Reduce order cycle times

26%Lack of visibility

26%Upgrading our WMS

“ We’re working to attain closer systems integration and attain better performance by reducing system bottlenecks. This will give us more accurate information on delivery times to our customers.”

—Director of Distribution Systems; Apparel;

$1B-$2.5B

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WMS and WCS Implementations & Best Practices

Automating the Warehouse 101 Within their warehouses/DCs, the bulk of companies are using RF terminal technologies such as bar code scanning devices for picking applications. Paper-based systems, batch-picking to cart and voice-directed picking are also commonly used warehouse solutions.

In assessing their companies’ use of warehouse automation software, two-thirds (68 percent) claim that usage has stayed the same during the last two years, while nearly one out of three (30 percent) asserts that deployment of warehouse automation has increased. Just 2 percent say their companies’ use of automation has declined.

“ We’re moving from inventory management [IM] solutions/modules to WM [warehouse

management] solutions/modules. This places more automation in material movement. In a WM environment, all material movements are system driven versus manual operator driven movement as experienced in an IM environment.”

—Senior Manager, Supply Chain Logistics;

Pharmaceuticals; $500M-$1B

Technologies used for warehousing tasks

64%

51%

43%

20%

13%

13%

5%

RF terminal technologiessuch as bar code scanning

Paper based

Batch-picking to cart

Voice-directed picking

Pick-to-light and/or sort-to-light

Goods-to-person picking enabled byautomated storage/conveyor technologies

Mobile robotics-enabled picking (such as Kiva)

Usage of warehouse automation software

Yes, it has increased 30%

Yes, it has decreased 2%

No, it has stayed the same 68%

“ We’re just at the starting point of implementing automated systems. We’re developing more scan and bar coding operations as we need more throughput without lots of labor.”

—Corporate Management; Oil and

Gas; $100M - $500M

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WMS and WCS Implementations & Best Practices

To run their warehouses, managers are using inventory management systems running on their ERP backbone, legacy or homegrown WM applications, ERP WMS and best-of-breed WMS. Curiously, a handful (7 percent) of the companies we surveyed say they use “none or minimal” technology applications for warehouse management.

When asked if they plan to run their WMS module within their ERP solution, more than half (58 percent) indicated that would be their method for deployment

Of those organizations already employing some level of automation within their warehouses, nearly half (45 percent) currently run a WMS application, while one in four (23 percent) now runs a WCS solution. In addition, one out of four of these operations will be looking to improve their WMS package (25 percent) with slightly fewer upgrading their WCS (18 percent). However, while some are unsure of future implementation plans for WMS (8 percent) or for a WCS (28 percent), a greater percentage of those we surveyed will be evaluating WCS solutions (31 percent) versus a WMS package (25 percent).

The impetus behind these WMS and WCS initiatives includes upgrading picking

Warehouse systems and technologies in use

39%

30%

27%

20%

19%

17%

14%

7%

ERP Inventory management system

Legacy WMS (basic WMS, homegrown & developed in-house)

ERP WMS

Best-of-breed WMS

Slotting

Labor management system (LMS)

WCS

None or minimal

Utilization and implementation of WMS and WCS

Currently run

Plan to upgrade

Plan to evaluate/implement

No answer/Unsure

45%

25%

22%

8%

23%

18%

31%

28%

WMS WCS

“ We plan to upgrade to a best-of-breed WMS solution. This will make our operation more agile and responsive to business needs and will improve efficiencies and allow us to check inventory in real time.”

—Logistics Operations Manager; Wholesale;

$2.5B+

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WMS and WCS Implementations & Best Practices

procedures, streamlining inbound and receiving processes, attaining greater efficiencies in inventory management and fulfillment, and greater utilization of space and inventory locating.

“ We are currently in the process of implementing a new system so

operations will hopefully be much more effective. Improvement will be in the areas of order tracking, product quality control, and streamlined picking-and- loading functions.”

—Corporate Management;

Agriculture; Less than $50M

Reasons for employing WMS and WCS solutions

68%

62%

61%

59%

59%

58%

53%

49%

45%

44%

42%

41%

40%

36%

35%

31%

25%

24%

17%

16%

11%

31%

28%

Picking

Cycle counting

Inbound and receiving processes

Outbound and shipping

Order fulfillment

Inventory management and deployment

Space and inventory location (putaway and storage)

Order management

Replenishment

Real-time control

Labor management

Returns processing

Label printing

Real-time visibility across key functional areas

Wave planning

Resource planning

Slotting

Transportation

Packing

Task interleaving

Freight/Package rating

Manage e-fulfillment operation

Omni-channel

“ Inventory is synced with our order system, substantially reducing orders for product that is no longer here. Orders flow automatically into the WMS, thus eliminating the need for manual data entry.”

—Vice President of Operations; Food and

Beverage; $50M - $100M

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WMS and WCS Implementations & Best Practices

WCS applications are currently being used or planned for as a WMS interface with automated systems, inventory management tracking and real-time visibility applications.

When asked about the level of integration between their WMS and WCS implementations, one out of four operations (25 percent) runs highly integrated systems. Many warehouses looking for more seamless integration, however, still face an uphill battle in melding their WMS and WCS solutions; just under half (41 percent) of those we surveyed consider their systems to be “somewhat integrated.” Others (34 percent) see their WMS and WCS as fully disparate applications with each having its own role.

It was further suggested that there’s a need to create a better balance in the roles and functionality of their WMS and WCS applications.

Of those firms currently evaluating WCS, roughly one-half (48 percent) say they are considering both WCS and hybrid options. These managers claim they tend to rely more on their WCS for order fulfillment and warehouse management processes, in particular, for their picking and packing operations.

Applications for WCS

49%

48%

41%

33%

29%

27%

26%

24%

17%

15%

25%

24%

WMS interface with automated systems

Inventory management

Real-time visibility into operational status

Provide historical data

Equipment control

Provides productivity metrics

Space and asset management

Manage controls

Storage

Goods-to-person picking processes

Manage voice- or light-enabled picking processes

Maintenance management

Level of WMS/WCS integration

10bHighly integrated/Seamless operation 25%

Somewhat integrated 41%

They are fully disparate applications with each having its own role 34%

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WMS and WCS Implementations & Best Practices

Interestingly, of those running both, the large majority (80 percent) say their WCS is not performing tasks once handled by WMS. Of those tasks that are being handled by the WCS, picking (80 percent), receiving (50 percent) and shipping (50 percent) were the most common applications.

The benefits realized through the usage of implementations employing a WMS/WCS integrated solution include a reduction in labor costs, improved picking accuracy, better move and storage management, and faster order processing times.

Measuring Technology Performance When asked whether the roles of their WMS and WCS applications overlap, more than one out of four (27 percent) of those we surveyed indicated that they, in fact, do intersect.

Most operations measure performance improvements resulting from their WMS and WCS implementations; almost three-fourths (73 percent) of the managers surveyed say their company does perform these assessments. It is interesting to note, though, that a surprising 27 percent do not capture these data!

Most businesses do not expect immediate results regarding a return on investment (ROI) for their warehouse automation software solutions. Two-thirds estimate it’ll take somewhere between one and two years to realize their ROI, and an additional 16 percent expect to see their return further out than two years.

Taking It to the Next Level As evidenced by the results to our WMS and WCS Implementations & Best Practices survey, the operational challenges that today’s distribution center managers are dealing with require a new breed of warehouse software. This software must be able to fill the critical gaps left open by the combined manual-automated that many companies continue to rely on.

As they work to understand the new realities and demands of doing business in today’s online, omni-channel and increasingly automated world, supply chain managers are using technology and leveraging operations intelligences to better optimize their distribution facilities and networks. Data mining, predictive analytics and performance metrics all play key roles in helping organizations achieve this underlying goal, with next-generation WCS software playing an important role in this process.

Anticipated ROI timeline

Less than6 months

6-12months

12-18months

18 months-2 years

In more than2 years

8%

15%

32%30%

16%

WMS and WCS Implementations & Best Practices

MethodologyThis research was conducted by Peerless Research Group (PRG) on behalf of Modern Materials Handling magazine for FORTE. This study was executed in June/July 2014, and was administered over the Internet among subscribers to MMH.

Respondents were qualified for being involved in decisions regarding the evaluation, operation, recommendation and/or purchase of warehouse automation software for their company. Individuals were further screened for being employed with an organization that is running, planning to upgrade or implement warehouse automation solutions. Manufacturing as well as wholesale and retail distribution businesses were surveyed.

The findings are based on information collected among 108 individuals. Respondents are primarily executive management (18 percent), warehouse, distribution or logistics management (36 percent), and IT management (10 percent). All company sizes are well represented: 38 percent are employed with companies reporting less than $100 million in annual revenues, 28 percent work at businesses having revenues between $100 million and $999.9 million, and 34 percent are with organizations with $1 billion or more in annual sales.

About FORTE FORTE is a leading distribution consulting/engineering, design/build and software technology firm focused on driving high-performance distribution operations for many of the world’s fastest-growing brands. The company is expert in designing and implementing omni-channel fulfillment operations for companies in a variety of industries.

FORTE’s next generation of warehouse execution software (WES), the Smart Warehouse Suite™, maximizes automation functionality while delivering real-time operational intelligence. Designed for the complex requirements of today’s highly automated, omni-channel fulfillment operations, the Smart Warehouse Suite provides supply chain managers with performance metrics and analytics delivered in a new, easy-to-use graphical user interface with remote monitoring capabilities.

Contact Information: FORTE

6037 Commerce Court Mason, Ohio 45040

(513) 398.2800 Main Phone (800) 796.5566 Toll-Free

info@FORTE-Industries.com

www.forte-industries.com