Warehouse Management Systems - Drivers for Managing Supply Chain

Off late, warehouse management system deployments have gained good pace and all ERP and SCM products companies have started investing into their solutions to fine tune to map to industry specific solutions. It has been a proven fact now that this is one of those controllable areas which can really make an impact in improving supply chain of organizations.

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When it comes to taking the necessary steps to create a more flexible and agile warehouse that can adapt and change to the ebb and flow of the market conditions, the goal is to ultimately minimize the time product or inventory stays in your warehouse – ultimately creating a near real-time inbound / outbound activity that matches all inventory to orders intended to turn revenue as quickly as possible.

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The metrics that are required to be tracked to improve the warehouse system and process efficiency are:

• First time sales order line picking accuracy
• On time shipment
• Back order percentage
• Turn around time for converting an order into sale
• Labor cost in warehouse

The reason why I added labor cost in warehouse as one of the metric to measure is that while increase in number of pickers can improve the picking accuracy and turn around time but at the same time it will drive the labor costs in warehouse up, so this will not be an optimum solution. The best solution will be to study the whole process first and find out the areas where there is a room of improvement. Then we need to implement processes that create more warehouse efficiency in addition of bringing down the operating costs with no sacrifice of service levels.

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To create more flexibility and agility in the warehouse, organizations need to leverage technology that can bring automation and visibility. Visibility here, means that the picker knows the contents of every bin in the warehouse in real-time and is also able to track inventory attributes like lot number, size, serial number or date etc. in real time. This visibility needs to be blended with automation like:

• Automated receiving or put away with the help of Radio Frequency Identification device (RFID) or bar coding
• Automation in replenishment process
• Ability to send advance shipping notices
• Managing containers with the order lines they contain etc.

This combination will help in improving the overall efficiency of the warehouse system definitely with lower costs in the longer run. One thing that we need to note here is that while we have talked about the visibility, it has to be real time or near real time visibility. If the employee has access to data that is month old then still the issues will not be resolved and in fact it can increase the amount of re-work and hence will impact the picking accuracy negatively.

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Another factor that has weightage here is that what is the age or version of the warehouse system that the organization is using. While most of the industry leader organizations were early adopters of WMS system but they are the ones which are facing bigger pressures today as the WMS solutions have evolved over time and much better and efficient solutions are available today against what they are using. The organizations that kept pace with this change and kept on upgrading their solution, were in much better position today.

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While almost all major ERP providers are offering these solutions but there are a few best of breed solution providers also available in market and companies are divided in their approach towards who they want to talk for getting the solution deployed.

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While assessing the improvement areas in existing warehouse system or going to deploy a new solution, the organizations need to make sure that:

• They break the processes into smaller pieces and then focus at all potential areas instead of trying to address just the most glaring issues
• They spend quality time to measure the important warehouse processes like Labor management, Yard management and Dock management
• They need to keep looking at warehouse as the enabler for improving the end to end supply chain process rather than a standalone system
• The team identifies the future growth areas in this and adequate budget is guaranteed towards these areas. Remember that even in this times of recession, investments will not stop but every organization will become wiser to invest in right areas

Few other metrics that can provide the warehouse system readiness index to an organization are:

• Capability to process warehouse activities without paper – Yes, it is possible to avoid paper pick slip too
• Ability to confirm transactions and communicate with automatic data capture in real time
• Advanced picking and replenishment process practicing
• Distributed order management usage
• Cross docking practices
• Reverse logistics handling capabilities
• Event management handling ability

The remaining year of 2009, as many experts have put it, is a year of transition where the organizations need to take this as an opportunity to dust-off existing issues in the WMS side of the Supply Chain and ensure that they have the best of solutions available that have the potential of reducing their cost of carrying inventory and its potential obsolescence, the cost of warehouse labor and the potential inefficiencies of processes.