Warehouse management systems (WMS) have been around for more than a generation, yet there is still a great deal of confusion about what they are supposed to do, and even more questions regarding how well they do it. It has become part of the alphabet soup of acronyms associated with the management of data specific to warehousing and distribution in the quest to improve decision making.
Today there are over 1,000 companies that purport to have some level of warehouse management embedded in their products. Warehouse management systems range in price from $25,000 to well over seven figures. The meaning of the term "warehouse management systems" depends on whom you speak with, and on their occupation. It is said that only 41 percent of organizations that implement WMS systems for the first time are satisfied with their result.
It is the purpose of this article to critically examine WMS systems and to determine whether they adequately meet the needs of their customers. In addition to this, we are launching a complementary research project focused on collecting customer data that may help determine the effectiveness of these systems in the rapidly changing business environment.
Below is a definition of warehouse management systems from Wikipedia.
A warehouse management system, or WMS, is a key part of the supply chain and primarily aims to control the movement and storage of materials within a warehouse and process the associated transactions, including shipping, receiving, putaway and picking. The systems also direct and optimize stock putaway based on real-time information about the status of bin utilization. A WMS monitors the progress of products through the warehouse. It involves the physical warehouse infrastructure, tracking systems, and communication between product stations.
More precisely, warehouse management involves the receipt, storage and movement of goods, (normally finished goods), to intermediate storage locations or to a final customer. In the multi-echelon model for distribution, there may be multiple levels of warehouses. This includes a central warehouse, regional warehouses (serviced by the central warehouse) and potentially retail warehouses (serviced by the regional warehouses).
When we started this work over 30 years ago, our focus was on warehouse management (hence the name WMS) and supporting management with information and tools, in each of five functions that we understood to be the responsibility of managers. Specifically:
1.) Plan total daily capacity, the carriers, routes, customers, and orders, to guide the activity for a shift or a day.
2.) Organize the work flow through the day to move material through the warehouse, minimizing staging and bottlenecks, meeting departure and delivery expectations.
3.) Allocate staff and assign personnel by work area throughout the day, to keep the flow balanced, and optimize the use of personnel and equipment.
4.) Direct and provide instructions to perform each task to optimize productivity, with a locator system and with methods and procedures that fit the requirements.
5.) Monitor, measure, and report progress relative to the plan throughout the day to determine if the plan would be met, to uncover issues in a timely way, and to assess sooner if overtime would be required (Benson,Knab, 2012).
When you compare the Wikipedia definition with the management objectives stated above, you begin to realize that something significant has changed. The intention went from a management system being originally an information system that assisted managers in making the right decisions, to a piece of software that issues instructions based on calculated thresholds.
This point was brought home to me recently when I provided WMS training for a group of 25 logistics professors from China. After the presentation, I fielded many questions about the need to have managers involved in these decisions at all. The professors argued that complex and adaptive software systems can certainly issue instructions based on calculated thresholds and algorithms. This may be true. While these software systems are not so good at conceptually understanding the “big picture,” they are good at shifting human resources and equipment from one area to another to avoid bottlenecks.
Stephen Hoch of the Wharton School would argue that rapid advances in information technology have significantly altered decision making. While computers have provided vast quantities of information, the central challenge in designing information-driven decision-support systems (DSS) is how to divide the responsibilities between computers and humans (Hoch, 2001, 83). Hoch goes on to say that although humans are not well suited to the memorization of minute detail, they do well at finding and applying meaning (Hoch, 2001, 95).
For all the above reasons, the study and analysis of warehouse management systems (WMS) is important. The question of whether the WMS is a decision-support system (DSS) or a standalone decision-making system is important from the perspective of how we manage the distribution function. This series of articles will explore the functionality of the WMS in critical detail, from this perspective.
Dave Piasecki, Glossary of Inventory Management and Warehouse Operation Terms,Warehouse Management Systems, Wikipedia, 2012.
Donald Benson and Dr. Edward Knab, Getting the Most out of your WMS (presentation to Distribution Managers Association, Ontario California, February 18, 2012
Stephen Hoch and Howard Kunreuther, Wharton on Decision Making, Hoboken, N.J.: John Wiley & Sons, 2001. 81-101.