Smart warehousing makes smart business

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Consumer goods supply chains are becoming more complex. As retailers deliver services across an increasing number of channels to maximise revenue potential, customers in each of those channels are becoming increasingly demanding.

The supply pipeline in each of those channels is becoming increasingly global, as international sourcing seeks to exploit cheaper alternatives and wider choice, and order fulfilment involves serving customers from many more regions and countries. These paradigm shifts in the way businesses are run, where customers and suppliers are located and how consumers behave, means that the role of warehouses everywhere will change radically.

 In the future, systems that run warehouses will not only need to become a lot smarter in the way they manage conventional warehousing they will also need to facilitate trading partner management, supply chain event management, goods returns management and order management

Forward-thinking consumer goods suppliers and retailers of all sizes and varieties have already started to appreciate how the organisation of their logistics is likely to be a major source of future competitive advantage. They no longer regard the warehouse as simply a goods in/goods out facility, nor as a cost centre as many have traditionally done. Instead, they see it as an opportunity to enhance revenue, customer satisfaction and ultimately shareholder value. Perhaps most important of all, they have started to recognise that the software required to manage the warehouse and the wider supply chain is having to become a great deal more sophisticated to meet the requirements of growing supply chain complexity.

In the future, systems that run warehouses will not only need to become a lot smarter in the way they manage conventional warehousing processes by applying new technologies such as RFID and voice recognition. They will also need to facilitate trading partner management, supply chain event management, goods returns management and order management, all of which depend on the ability of an enterprise and its business partners to make available and deliver information in real-time to parties along the supply chain that require that information to make decisions.

there is no one type of WMS that fits all companies requirementsit is no longer feasible to regard the warehouse as a stand-alone operationthe best technology available does not guarantee success.

So, what should consumer goods companies supply chain and IT directors consider and look for when selecting a warehouse management system (WMS) that is capable of rising to these challenges? There are three main considerations.

Firstly, there is no one type of WMS that fits all companies requirements. Instead, the selection of a WMS depends on the strategic and tactical objectives of the organisation. In other words, the company needs to decide if its aim is to improve the bottom line by reducing operational costs or if it is striving to improve the top line, trying to generate more sales through better service levels and/or by targeting multiple sales channels. Secondly, in this new era where supply chains now compete with other supply chains, it is no longer feasible to regard the warehouse as a stand-alone operation. Decisions about the type of WMS a company will select and how its warehousing operations will be organised need to be made in the context of the wider supply chain. Finally, and a point often overlooked, is that the best technology available does not guarantee success. In fact, other selection criteria such as upgradeability and the vendors vertical sector experience must also be considered.

Functionality that meets strategic and tactical objectives

In choosing a vendor there are, broadly, two types of warehouse management system. There are those that handle traditional warehouse movements and those that embrace the changing role of the warehouse as a multi-channel distribution centre. The first type will enable a company to better manage traditional warehousing operations that focus on serving a single sales channel.

There must also be integrated processes and data in place to handle reverse logistics

The advantage of the second type of solution is that it meets the diverse and changing needs of retailers, and their suppliers and customers. For example, it enables a new breed of distribution centre to handle both bulk and single picking, so that both store and individual customer orders can be fulfilled. It can also process the entire order, not just picking. For instance, for individual customer orders received via mail-order or via the web, goods can not only be picked, but gift-wrapped, packed, labelled and shipped, while the data collected during the order/fulfilment process that is held in the WMS system can be forwarded to enterprise systems including merchandising, finance, marketing and transport management.

There must also be integrated processes and data in place to handle reverse logistics, particularly in the mail order and web shopping arena, where returns can sometimes be more than 50 per cent of original orders.

WMSs that are RFID-enabled will enable organisations to achieve substantial cost savings through increased visibility and accuracy of inventory throughout their supply chain and through significant productivity improvements with the elimination of manual scanning.

Systems that offer advance shipment notice (ASN) processing capability offer multiple benefits. This functionality enables warehouse managers to better predict future workloads and helps to synchronise cross-docking activities. This means order turnaround is faster, which improves customer service and staffing levels can be optimised, which cuts costs. Resource planning can be further optimised where systems combine historic data with current order information to predict workflows.

WMSs that are RFID-enabled will provide companies with a number of key top and bottom-line improvements. Such solutions will enable organisations to achieve substantial cost savings through increased visibility and accuracy of inventory throughout their supply chain and through significant productivity improvements with the elimination of manual scanning. They will enhance revenue through improved customer service with the prevention of out-of-stock situations. Arguably of most importance, they will allow consumer goods companies to prepare themselves for compliance with the mandatory RFID labelling initiatives of major European retailers.

intelligent use of space can have a big impact in lowering the cost of running a warehouse.

Other solution components that a would-be WMS buyer should look for are optimisation tools. For example, intelligent use of space can have a big impact in lowering the cost of running a warehouse. This kind of functionality should offer strategic pick line organisation and allow users to set criteria such as reduced travel time, family grouping and ergonomics, for optimal product placement and retrieval. Business Intelligence capability is another example, using tools that should enable users to graphically access real-time and historical information on the vital aspects of the companys fulfilment operation.

WMS and source-to-consumption supply chain execution

Trends indicate that we are moving on from just supply chain planning and supply chain execution towards source-to-consumption supply chain execution. This is supply chain execution performed collaboratively and in real-time by supply chain business partners involved from the point of initial production to final consumption, allowing supply chain optimisation to be achieved in real-time. We have already mentioned how information might be exchanged between two supply chain partners to make supply chain performance more effective, as in the ASN example above. This is a single piece of information being exchanged, a single step towards generating visibility between and integrating two partners in a supply chain.

The more complex the supply chain, the greater the challenge, but the key is in selecting a WMS that can interface seamlessly with disparate systems and that facilitates real-time information exchange.

When one considers the number of players involved in some global supply chains that might consist of literally hundreds of suppliers, assemblers, manufacturers, transport service providers, wholesalers and retailers, and the amounts of information that are exchanged, the potential to improve a supply chains performance and the bottom and top line for every member of a supply chain community is enormous.

A WMS that is integrated into the world around it must be able to facilitate process integration and trading partner personalisation. It must also be capable of generating and receiving information that can be selectively passed on to or received from other supply chain participants. More importantly, it should facilitate real-time visibility into supply chain partners systems. Finally, it must have supply chain event management (SCEM) capability. The more complex the supply chain, the greater the challenge, but the key is in selecting a WMS that can interface seamlessly with disparate systems and that facilitates real-time information exchange.

Other selection criteria

Selecting the best technology does not guarantee a successful implementation. Other factors should also be taken into account.

It is important to appreciate that systems today are less customised and are more productised. This is crucial as companies must focus not only on their current needs but also on their future requirements. It is easy to outgrow a customised system, and this will ultimately prove very costly when the time comes to replace the system completely. A flexible, upgradeable system will enable a company to make vital improvements in future, at a much lower cost. An increasingly important aspect of software selection should the ability of the software to be integrated with other systems around it. It should be possible for the system to be easily integrated with a companies enterprise resource planning system, as well as other supply chain execution solutions such as transportation management, order management and trading partner management.

Finally, the promise that WMS providers make in the new world of multi-channel commerce and supply chain collaboration is easily made, but not always so easily fulfilled. All vendors have a vision for where they would like to be and use this positioning to impress their customers and prospects that they understand the future, however it is important to be confident that the vendor either has or can fulfil its own ambitions. More and more companies are coming into the new logistics arena with the promise of multi-channel commerce seamlessly integrated at both process and data levels, few however can deliver.

Allen Scott was appointed vice president of European operations, Manhattan Associates, in July 2002, having joined the company as European operations director in the early part of 2000. In his current role, Allen is responsible for consulting services, technical services and client relations across the region. In addition he is the Managing Director for the UK business unit.

INFORMATION: Free information is available from MANHATTAN ASSOCIATES on the subject in this story. Click here to request a copy

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