Is it Time to Trade Up, Trade In or Stay the Course?
While absolutes are nothing except never absolutely right (more on never saying never later), almost every warehouse or distribution center has an information management and/or control system of some type. Those warehouse management systems (WMS) at a minimum support the operation's functions of receiving, putting away product to storage, picking and order assembly and packing and shipping product to customers.
Most of those system applications have been in place for years. Many have been upgraded or modified since the late 1990s. (Don't we all remember the Y2K scare where fear of legacy computer systems not working when the year rolled to '00 drove a spike in new software purchases and “certified” upgrades for software of all types, and warehouse management systems were no exception?) The aging nature of the installed base of warehouse management systems is only one reason to consider upgrading or replacing an existing warehouse management system. Given the evolving nature of the software and hardware that comprise a distribution center's warehouse management system, as well as the ever-evolving nature of the business processes the system supports, reasons to upgrade or even replace warehouse management systems can pile up rather quickly. But how does a distribution business' operator, IT manager, senior management or owner evaluate when it is time to upgrade or replace their warehouse management system? There is no single answer to that dilemma but rather several possible reasons to upgrade or replace an existing warehouse management system. Each reason has unique considerations and may ultimately determine whether the best course of action is upgrading an existing application or replacing it altogether. Those reasons range from straightforward ones such as the age and supportability of the existing system, to more complex factors including changes in the operation's methods to fulfilling its mission or changes in the business the operation must support.
Is my WMS outdated?
There is no single means to determine if a warehouse management system is outdated. There are, however, some fairly sure signs that a system has reached, or is nearing the end of, its useful life.
If your WMS provider has informed you that they will no longer support your WMS software version, you have a problem. This reality, though seemingly harsh, is inevitable for warehouse management systems. As the software provider changes, upgrades and evolves their application and product, version after version will be developed and deployed. These upgrades and changes can be as simple as functionality additions, and as complex as changes in the software to allow it to operate on new and improved hardware platforms. Some customers will upgrade to newer versions, while others will maintain their initially purchased version. Over time, only a small portion of customers will still be using the oldest version of the application, and the product will evolve into something very different from the older version. Given the cost to support the smaller number of older version users, the software provider will eventually need to stop supporting the older version as it becomes cost prohibitive to do so for such a small installed base of original version 1.0 applications.
Another sign your system may be outdated or simply aging is failing reliability or maintenance costs. If the system's uptime begins to drop below 99 percent consistently, this may be due to aging and a sign that you need an upgrade or replacement. (Essentially, a system should always be available. It is your operating system. Would it be acceptable for a Windows PC operating system to be ‘down’ one hour out of every 100 hours you used it?) If your annual maintenance and operating costs are approaching 30 percent of the annual depreciated cost of your system application, this is another sign the WMS is requiring more attention and fiscal support than may be warranted. An upgrade or replacement may be in the operation's best fiscal interest.
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If you find yourself in this circumstance for any of the reasons outlined above, you can choose several courses of action. You can pursue the upgrade. If your WMS provider has been a good partner, your system has been a stable and beneficial tool for your operation and the new version's functionality and hardware requirements are appropriate for your operation and business,understanding the price of the upgrade is likely your first best step. Once the upgrade cost is understood, including the software license fees, installation cost, any required hardware changes and the cost of operation for any retraining or implementation disruption, compare the upgrade with a potential replacement of the WMS with another provider's product.
If another provider's application is more cost-effective, has functionality you prefer, works more cleanly with the IT hardware you are already supporting or all of the above, you may be better served by replacing the WMS with the new provider's WMS. Whatever course you choose, do not let any bias against your existing WMS provider resulting from their cessation of support influence your decision. While stopping support of an application version does seem harsh, it is the way of the world with technology applications, and it is just as likely that upgrades will eventually be required with a new WMS application to maintain its viability regardless of the provider supporting it.
Do I want to change my operational process?
Changes to how you want or need to operate your distribution center are another reason to upgrade or replace your existing WMS. Every distribution center operation understands its operational process may need to change to increase the effectiveness of the operation's storage capability, labor productivity, throughput capability or all of the above factors. The changes considered here are changes to the operation to better serve the business it executes. We'll talk about changes to the business itself in a few moments.
An operation can increase its business' profitability through more productive order fulfillment. Achieving this may drive a need for functionality that is not present in an existing WMS application. For example, a WMS might not support batch picking, and an operator may identify productivity increases available if the software could provide order groupings in logical batches. Storage density might be increased through a WMS supporting directed put away — directing an operator where to put away product in order to maximize storage density while maintaining a high level of productivity for those tasks. The labor or space savings may pay for the WMS upgrade or replacement and ultimately drive more profitability for the business the distribution center supports.
The competitive landscape may drive a need for enhanced WMS capabilities. If customers are demanding shorter cycle times for their orders, systems functionality supporting appropriate prioritization of orders waiting for fulfillment could be extremely valuable. Systemically ensuring you fulfill orders by the deadlines your customers are expecting is far more efficient and certain than relying on human tracking of order status. The proper WMS functionality allows for real-time reporting and viewing of order status and exception notification for orders falling behind schedule, and dramatically increases an operation's capability to increase on-time fill rate. More sophisticated WMS applications may even allow for a resequencing of orders if an order is too far ‘down the list’ to be picked and processed in time to meet customer requirements, automatically floating the pick tasks for that order to the top of the pile so that it will be picked sooner rather than later.
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One last reason for an upgrade or WMS replacement might be to allow for the use of more advanced peripheral hardware. Antiquated systems might not support radio frequency (RF) scanners, voice-directed picking devices and similar peripherals. While very few systems do not support such devices in some fashion, the oldest paper-based systems do not usually allow a business the productivity and accuracy advantages that such devices provide. An upgrade or replacement warehouse management system should not only support these operation-enhancing tools, but allow for the flexibility to make use of the devices you prefer for your operation, not limiting you to only one manufacturer or supplier of RF guns or voice-pick devices.
Have the needs of the business I support changed?
While it is possible that the aging of your WMS has given rise to the need for its replacement or upgrade, it could be that your business itself has changed and driven the need for a change in your WMS. It is paramount to remember that a WMS should provide functionality to support the optimal fashion in which your warehouse wants and needs to operate. With the proper initial implementation of a WMS, its functionality supports and enables the distribution center to function far more effectively with it than without it. As time passes and the operational needs shift through increasing volume, changing customer order sizes or profiles or increasing quantities and types of items in inventory, functionality that previously enabled the operation may end up limiting it. Often distribution operations with a WMS that lacks updating to reflect the changing needs of the operation end up being limited to functioning as the WMS allows it to operate instead of in the manner that best services its customers and business.
Simple growth may outstrip the viability of the WMS to the point that it warrants an upgrade or replacement. Some older generation systems operate completely on a batch download methodology. An entire day's worth of work might not be updated until the end of the day when pick lists and order sheets are manually key-entered into the WMS. Such a method would not allow for the operation to adjust to critical events throughout the course of the day since the WMS will not effectively “know” what has happened throughout the operating day until the end-of-day data entry is completed. The more volume a distribution processes, the more limiting such a manually updated WMS is. The larger an operation becomes and the more volume processed, the more an operation will benefit from real-time information updates that can be provided by an updated WMS.
A distribution operation that began only as a wholesale or retail distribution operation and expanded to include a significant direct-to-consumer channel is a prime potential example. The operation's needs may have passed by its WMS's functionality. Processing orders demanding a nominal number of units and order lines per order present different challenges than shipping cases of product to large business customers or stores. Upgrading or replacing the WMS originally developed and configured for servicing the previous business needs may be the only way to support the new business channel competitively and cost-effectively.
A business' growth may also drive its distribution assets beyond a single distribution center. With the introduction of a second distribution center into a business' supply chain, the operation's concerns increase somewhat exponentially. Inventory management, and the information feedback critical to managing inventory across multiple locations, becomes more complex. An older WMS may not have the architecture or functionality to properly support a single business across multiple locations. A new system may be required, allowing for the multisite information visibility required in such a supply chain.
Multiple site distribution networks may be even more complex if different locations service different purposes. The WMS may be required to support a distribution network with a single center stocking slow-moving items supporting multiple centers all stocking the faster-moving items for a business. A business that has grown into such a logistics supply chain is very likely to need a substantive upgrade to its WMS, if not a full-scale replacement to allow for world-class functionality and operations in all its distribution facilities.
If there is one immutable factor that drives the need for an upgrade or replacement of a facility's WMS, it is time. It is over time that technology improves to the point that functionality will enhance an operation so effectively that an upgrade or replacement will pay for itself. It is over time that the operational processes a facility must support will demand new functionality from their WMS only available through an upgrade or replacement. It is over time that a business may outgrow the capabilities of its facilities' existing WMS to the point that an upgrade or replacement is unavoidable. After completing that replacement or upgrade, will you need to replace or upgrade it again over time? Well … you should probably never say never.
Bryan Jensen has 29 years of experience in retail and wholesale distribution, transportation and logistics and is a vice president and principal with St. Onge Co. in York, Pa., assisting clients in developing and maintaining world-class distribution operations. Contact Bryan at 717/840-8181 or by email at firstname.lastname@example.org.
Alan Reigart has 35 years of experience in the planning, justification, specification, design and implementation project management of automated identification, information and control systems and technologies. Contact Alan at 717/840-8181 or by email at email@example.com.
St. Onge Co. is a material handling and manufacturing consulting firm specializing in the planning, engineering and implementation of advanced material handling, information and control systems supporting logistics, manufacturing and distribution since 1983 (www.stonge.com).
© 2012 Bryan Jensen and Alan Reigart