Warehouse Management for Manufacturers: Why Extended ERP Might Be the Right Choice

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Originally Published - June 16, 2008

Any manufacturer that makes a substantial number of shipments from a distribution facility has likely considered bringing a degree of automation to its warehouse and shipping functions. For some companies, a full-blown warehouse management system (WMS) is a necessity, particularly if their operation relies on an automated racking system, perhaps housed in a rack-mounted structure with its own track-mounted materials-handling system.

However, for the vast majority of manufacturers—even those that complete a large number of shipments every day—a WMS that is separate and distinct from their other business systems will be counterproductive. Even a full integration of WMS with an enterprise application like enterprise resource planning (ERP), designed to eliminate entry of the same data into two different systems, will result in redundant systems and substantially greater expense than a unified system would. Moreover, WMS-ERP integrations that rely on batch updates will create opportunities for inaccurate information and will often slow operations down rather than expedite them.

This article explores the drawbacks of integrating stand-alone WMS and ERP systems, and makes a case that for many companies, it makes more sense to extend the manufacturing application already used by the organization as a whole, as opposed to integrating with an entirely new technology stack. Also offered is advice on selecting and implementing a warehouse automation solution that works well with a client’s manufacturing enterprise suite.

Basic Warehouse Management versus WMS

At a certain point in a manufacturing organization’s development, management will begin to look for ways to automate the movement of materials from manufacturing to distribution, and into the customer’s hands. A broad spectrum of WMS can in fact help manufacturers to better use their workforce by automating the picking, staging, and shipping processes. The ultimate goal, of course, is to increase the speed and reduce the cost of getting the right product to the right customer at the right time.

The primary business trigger that often prompts a company’s management to begin considering some type of WMS solution is the sheer number of shipments the company has to handle each day. As the number of shipments increases, it becomes more attractive to move the distribution process from an order-by-order environment toward an arrangement that makes better use of labor in the warehouse. Rather than send someone into the warehouse each time for individual orders, warehouse management technology makes it possible for workers to

  • pick multiple orders in a single pass through the warehouse
  • bring those orders to a shipment staging area
  • crate the orders up appropriately for each carrier
  • see that the orders are in the right place for pickup

Warehouse management can also help automate the work of warehouse laborers who might be picking different items that are all part of the same order. Through automation, these workers can reliably be directed so that these items are staged at the shipping area for proper inclusion in the combined order.

Moreover, it should be the goal of managers planning a warehouse management project to have warehouse workers use handhelds or other mobile devices to receive instructions on what to pick. The use of such devices eliminates the need for workers to travel repeatedly to and from a centralized dispatch station, where pick lists are printed as hard copies and distributed.

Most manufacturers are producing a product that will be moved into an on-site or close-by warehousing or shipping area. If they are already running an enterprise suite, like IFS Applications, for example, they have access to some preexisting logistics functionality, which is integrated with inventory functionality and information on the customer orders to be fulfilled.

Extended ERP

Extending that existing enterprise suite with straightforward technology designed to direct workers in the warehouse can be easily achieved without a stand-alone WMS solution. Moreover, the extended ERP approach can facilitate the more comprehensive approaches to picking and warehouse management, including the following:

  • Batch and wave picking. Batch picking involves combining the picking requirement for several orders, and then sorting the materials for individual orders as the picker goes along. Wave picking entails accumulating a large number of orders for picking as a batch.

  • Voice-directed and light-directed picking. Both voice and light inputs can instruct workers what to pick, and extended ERP strategies can accommodate each of these methods.

  • Picking by carrier. For some companies, it makes sense to pick by carrier, particularly if they have a large number of small shipments that need to be packaged according to carrier specifications (UPS or FedEx, for example), while larger shipments are treated much differently, since they are to be shipped by the pallet or by truckload.

  • Communicating picking information to warehouse workers over handhelds in multiple languages. Even companies that are strictly domestic in their footprint likely employ people for whom English is a second language, and can benefit from making other languages available in the warehouse. Global companies obviously need broad language support in their enterprise suite and in their warehouse solutions, including through handhelds.

  • Accommodating requirements to pick and ship items according to first-in, first-out (FIFO) or in accordance with expiration dates.

  • Picking products that are subject to revision levels. Revision levels present warehouse workers with the challenge of looking at two of what appears to be the same item, but that in fact differ on the basis of detailed revisions or engineering change levels, which are tracked in the manufacturing system. While these revisions are documented in inventory records, they may not be visually obvious. Validating picking requirements at the revision level on the handheld scanner eliminates these potential errors.

We believe that many companies will benefit more from extending the logistics and shipping functionality within an enterprise environment than by rolling out a full-blown WMS. After working with a number of companies that have integrated a full-blown WMS with their ERP system, we have found that there is a definite gap between ERP distribution capabilities and WMS distribution logistics. Furthermore, these full-blown WMSs duplicate many of the systems within the ERP environment and deliver numerous capabilities most manufacturers will not use. Most manufacturers simply need a few pieces of key automation, logistics support, and labor- and productivity-enhancing features; they don’t need all the bells and whistles of a complete WMS.

In our experience, we have had success extending the warehousing capabilities of ERP systems by blending them with our automated workforce productivity suite, which includes data collection, mobile devices, truck mounted devices, and the ability to direct workers to the next task. This approach delivers functionality for picking and warehouse automation, driving efficiencies to and automating the work of people performing those functions. A WMS might accomplish some of the same things, but it brings the added cost of additional licenses for the application and database, additional server hardware, additional support and maintenance fees, and additional staff time to maintain expertise on two disparate systems. Moreover, the integration of the ERP system and WMS will add cost not only in the initial implementation, but during each upgrade as well, since the integration will need to be “uplifted” to accommodate new software for both the ERP system and the WMS.

Furthermore, integrating a WMS technology stack with a preexisting enterprise suite can effectively slow down processes and sabotage lean inventory initiatives. The typical means of integrating a WMS and a manufacturing system is to periodically refresh data in the WMS in a batch process from the manufacturing software. In situations when product must be shipped literally right after it comes out of manufacturing, that batch integration is often not fast enough. In these situations, an up-to-the-minute snapshot of the manufacturing system is essential.

Additionally, many companies today are turning inventory too quickly to accommodate a batch process update to a WMS, and they can experience even more problems with visibility of current inventory from the manufacturing side. In a make-to-stock environment, manufacturers are always trying to make just enough product and have the correct amount of finished goods in inventory. Lacking up-to-date visibility of what is in the warehouse, the manufacturer has a harder time managing that lean inventory, and it might make too much of a product. Moreover, product that shows up as still available according to the manufacturing system in the warehouse may have in fact already been shipped, making it impossible to make good on promised delivery times.

Planning the Warehouse Automation Implementation Project

When preparing to implement warehouse automation technology—whether a full-blown WMS or tools to extend existing ERP functionality—a number of hard questions need to be asked. The decisions necessary to chart a course of action should not be rushed, as the results of these decisions will impact your business for many years to come. Here are a few guidelines:

1. Handle diverse customer needs.
Understand clearly what your customer’s requirements are. Many organizations have a single, static process they follow when serving their customers. Yet most customers have varying needs and requirements. Understanding and categorizing the various needs of different customers can allow implementation of a more flexible solution, as opposed to a rigid warehouse solution that meets 100 percent of the needs of only 50 percent of customers.

Consider for a moment that a business has high-volume customers, high financial reward customers, demanding customers, and low-volume customers. A manufacturer may have customers in different industries, needing things to be done in a slightly different way. In some cases, the expectations of or regulatory demands placed on the customer’s customer may impact the shipping process. In situations like this, integration may be critical not only with the manufacturing and inventory systems, but with the customer relationship management (CRM) system as well.

Diversity in order size alone may require parallel picking and shipping systems: some customers may order by the hundred gross, while others order by the dozen. In this case, 50 percent of orders might be packaged for delivery by UPS, while others might be palletized and prepared for intermodal transport.

2. Respect the nature of the workforce.
In planning a warehouse automation project, it is critical that management understands the capabilities of its workforce. Can employees handle the learning curve of various automation solutions, and will they be receptive to the resulting change? Remember that employees may need a very concrete overview of how automation will affect them and benefit the company, particularly if warehouse staff is currently performing manual processes.

3. Attain interdepartmental cooperation.
While warehouse automation is facilitated by technology, it is not strictly an IT-driven initiative. The ultimate solution must be driven not only by customer needs, but by 1) the business intelligence requirements of manufacturing, which include the need to know what is in the warehouse at any given time, and 2) senior management, which needs to assess inventory levels and monitor business performance.

Senior management must be directly involved at the early stages of an implementation plan, to establish goals and deliverables. Once the goals are identified, it is essential that key and knowledgeable members of manufacturing, distribution, and IT departments work closely together to achieve those goals. In most cases, a lot of the information necessary to achieve warehouse automation resides in the manufacturing and CRM systems, so a thorough audit of existing systems and functionality should be performed prior to selecting additional technologies to add to the mix.

About the Author

David Barks is vice president of Radley Corporation. During his 16 years in this position, his responsibilities have included management of research and development (R&D), operations, and sales. Barks has authored numerous white papers and articles on shop floor automation, and speaks regularly at trade events. Prior to joining Radley, Barks worked for a pioneering voice messaging firm, where he was responsible for telecommunications systems integration testing and support, before moving into a sales role in the Federal Systems Group.

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