Order in the chaos
MANY mid-sized organisations in Australia are still working with numerous technology silos to support their business processes (often called islands of automation and information). While the supply chain management function has been reasonably well served by more traditional ERP systems, and finance systems enhanced with Excel or other types of spreadsheet applications, the supply chain execution function has required companies to acquire additional technologies such as Warehouse Management Systems (WMS) that traditionally do not easily interoperate with the ERP systems.
While integrated shop floor control systems are a standard feature of most integrated ERP packages today, integrated warehouse planning and execution systems are not.
The continuous struggle for higher throughput and shorter time-to-market now compels companies to look for integrated solutions as a replacement for these fragmented silo systems to achieve both their supply chain management and supply chain execution objectives.
The origin of WMS
Twenty years ago, companies that had warehousing as one of their core activities only used WMS. These systems were monolithic, with excessive implementation duration and costs. However, as technologies improved, costs also came down and WMS saw adoption by medium sized companies who saw the benefits of improving their overall performance and efficiency with an acceptable ROI.
Over time, these systems have been further enhanced and now include planning algorithms, radio frequency (RF) facilities and functions to support cross docking, order picking, ABC analysis, as well as inbound, outbound, replenishment and removal processes.
Unfortunately, many of the early WMS systems either had limited or no integration to mainstream ERP systems. Enabling the integration proved a very cumbersome, time consuming and expensive process. Moreover, it was not in real-time.
By the end of the nineties, ERP software providers began including WMS as an integral part of their offerings. Originally, these systems were only meant for the high-end enterprise market, as the costs to implement were substantial. However, more recently these solutions have become more accessible to SMEs, as mainstream ERP vendors embed WMS functionality into their ERP packaged solutions.
Market Structure
Organisations who evaluate their aging and fragmented systems increasingly understand that they need an integrated solution for their core planning and execution processes. In many cases, WMS is a key component of the evaluation.
However, the WMS is not something that should be considered as simply a minor component of the broader supply chain management system replacement strategy. In almost all cases, the sheer volume of processes that have to be supported by the WMS will have a deep impact on the organisation and will ultimately force companies to rethink and re-engineer many of the supply chain processes.
That is why careful evaluation of requirements and selection is vital to have the right balance between likely change management impacts versus tangible benefits achieved by implementing a WMS.
Application and organisational disciplines
A properly implemented WMS offers numerous advantages to the customer’s organisation. WMS provides detailed stock control. Showing how much of a certain item is in stock, its location, its packaging, by whom that item was delivered, when it was delivered or manufactured and on the basis of what purchase or manufacturing order.
In order to capitalise on the inherent potential of WMS, it is fundamental that the WMS be seamlessly integrated with the other modules of the ERP system. This allows for both horizontal and vertical integration of business processes within an organisation, enabling speed, reduced errors, the higher customer service levels and optimally reduced costs of operations.
If the WMS is properly integrated as a standard module with the ERP system, organisations can use the WMS data for a great variety of applications. For instance, integration between the WMS and financial administration systems will not only save time, but also will also dramatically reduce error levels because the data does not need to be entered twice.
Additional benefits also flow from optimised manufacturing control and warehouse usage by having real-time visibility of stock levels. Minimum stock levels can also be reduced, resulting in savings of applied capital and space. All these advantages combined result in more efficient processes and better customer service levels.
Utilising a WMS, your warehouse management operations can be fully integrated with the rest of your business. This means your sales, purchase and warehouse departments are able to share and process information simultaneously. It also means you achieve better control over the movement and storage of materials within your warehouse, so you maximise the efficiency of your receipt and shipment of goods, optimise warehouse space utilisation and know at all times exactly where your goods are stored.
Warehouse and inventory management strategies can vary depending upon the complexity of specific organisations. Therefore, it is critical that the software selection matches not only the management strategy but also the complexity of the given environment.
* Pierter Reede is national solution specialist, supply chain, with Microsoft Australia. For more information visit www.microsoft.com/BusinessSolutions/default.aspx.
3-Nov-2005