Introduction
As with any software selection process, you must establish a basic framework in which you want to operate before you start to look at package solutions. This is particularly true in evaluating a warehouse management system (WMS). Knowing how you want your warehouse to be organized and operate will assist you in selecting the most appropriate software package and what procedural changes you might need to make. In this article we examine the basic warehouse functions of putaway, picking, inventory control, and enabling technologies. Furthermore, this article poses questions that should be considered before and when evaluating a software solution to manage your warehouse.
There is one caveat if you currently have enterprise resource planning (ERP) software in place. There may be two choices as to where required functionality can occur, namely in the ERP or WMS software. Consequently, you may have to make decisions as to where this functionality can best, or most effectively, be satisfied. Then, based on the decisions made, custom interfaces may be needed between the two software systems. For example, quality control verification and checks typically are standard in both ERP and WMS software. For manufactured goods, it may make more sense to perform these checks in the ERP software. For vendor purchased goods, perhaps compliance checking should be performed in the WMS. Do you want to mix and match? Will the right hand know what the left hand is doing? Being someone who has been there and done that, these may not be easy or trivial decisions and will be addressed in a future article. Enough said; let's move on to the discussion at hand.
Putaway
Putaway is the process whereby purchased or manufacturer goods are assigned warehouse locations and are physically moved to these assigned locations. The first process that you might want to consider is how you expect notification of receipt to occur. If for manufactured goods, what portal will exist between the manufacturing system, possibly embedded within the ERP software, and WMS? If for purchased goods, are you currently using or planning to use Advanced Shipment Notification (ASN) or Purchase Order (PO) EDI transactions?
The second process could be the license plating of goods. This could be the form a bar-code label or a simple descriptive label. Or perhaps, you have negotiated with your vendors to provide goods already labeled. In any of these scenarios, how will the WMS handle this requirement? Will the WMS produce labels meeting your specifications or are you going to have to re-label your entire inventory? Can the WMS read your vendor-supplied labels? Similar questions should be addressed if your company is considering using vendor-supplied price tags and promotion stickers.
Next you will want to define your specific putaway requirements. Such requirements could include purely random putaway, suggested or intelligent putaway, and industry specific protocols. In a purely random scenario, you may need only to ensure that the goods will fit in a designated location based on cubic dimensions. Accordingly, at a minimum you might expect the WMS to identify locations by comparing the dimensions of potential storage locations with the dimensions of the goods. Here, you have to be concerned as to whether you have multiple and/or unusual dimensional requirements such as those for bulk or liquid ingredients that you typically find in the process industry.
Suggested or intelligent putaway allows the WMS to suggest a storage location based on company-defined rules. Of course, you can override this suggested location but what value will this feature be if you are constantly operating in override mode. A simple example can help illustrate how effective suggested putaway can be. Let's say your company was food products manufacturer where formulas can use ingredients A and B separately but a large number of formulas use ingredients together in a premix operation. To accommodate both possibilities, you would want the WMS to suggest locations where these ingredients can be co-located; not together but as close as possible to reduce warehouse travel time. To satisfy this and other putaway strategies, you may require a flexible, rules-based WMS that can be adapted to existing or changing demands.
Industry specific putaway strategies could include fixed location putaway and cross docking. In fixed location putaway, a storage location is specifically designated for a product. For example let's assume your company manufactures automotive parts, say batteries. You designate a specific warehouse location to store the finished batteries. Pretty straight forward? Not really. As quantities are depleted from these locations, your production requirement will be determined. In other words, once the quantity of batteries goes below a set level, a production order to make more batteries would have to be issued. You can see the obvious linkage between ERP software and a WMS. A corollary would be the "putaway near picking bin", also known as strategy K, in which the materials are put away in a reserve storage location near the fixed location for the material or product.
Cross docking is where the goods move directly from receiving to shipping eliminating the putaway, and possibly the picking, process. Consider the food company that not only manufactures a product for restaurants but also distributes this and other products to a number of restaurants. This is common in the fast food industry. With refrigerated trucks, frozen, refrigerated, and non-perishable items do not present as major a problem with freshness as with rolls and bread products. Consequently, you typically would ensure that you receive just enough rolls for the day's requirement and, then, immediately set up this type of product for distribution to the restaurants. While this process would appear to eliminate or simplify the putaway process, do not forget that goods still be need to be received into inventory so that the invoice can be set up for payment.
How difficult can putting away goods and material be anyway? The putaway function can be straightforward or complicated and diverse. Knowing which category your company falls into will help you decide which WMS can best meet your requirements, today and in the future.
Picking
Whether you are picking ingredients or parts for a production order or picking product for shipment to customers, how you pick is not significantly different. Where you pick can be another question. Let's first dispose of the how question. Typically, you can order pick or bulk pick. For a production order, ingredients or parts are picked for a specific order. Particularly in process manufacturing where you make large quantities in bulk and pack off in units, order picking only makes practical sense. In discrete manufacturing, picking can be a hybrid of order and bulk pick. If you have a production order for 100 PC's, you are going to pick the parts for the production order but you will pick the individual parts in bulk, namely 100 motherboards, 100 memory chips, 100 hard drives, and so on. Consequently, how you pick is a function of what you are manufacturing. Verify that the WMS can handle how your company wants to pick orders.
Where you pick implies you have a choice of locations from which to pick. In our fixed putaway location example above, the choice has been predetermined unless you have to dip into the reserves. However, in a company where there is a high inventory turnover and warehouse locations are at a premium, a pick-to-clean strategy is usually employed.
An example will help to illustrate this strategy. Let's assume that you have an order for 100 widgets. In locations A, B, and C you have quantities 75, 25, and 125, respectively. Under the pick-to-clean strategy, you would travel to two locations, A and B, and pick both locations clean. While you have increased warehouse travel time, this strategy does free up a critical commodity, namely warehouse locations. As you might suspect, a "reduce-travel time" strategy would dictate that you make one trip to location C to obtain the 100 widgets. In the retail industry where there is a high turnover of new products, it is likely the pick-to-clean strategy will be employed. Determining where you want to pick your orders could narrow your choices of a WMS. Other intelligent strategies include FIFO, LIFO, shelf life, expiration date, a composite of several strategies, or step down progression of strategies in a priority sequence.
Other complementary or supporting strategies must be considered but may not have a "show stopper" effect when selecting a WMS. Picks can be dropped (i.e. initiated) at the same time each day or in waves based on criteria such as volume of orders, availability of warehouse personnel, or satisfying external shipping deadlines. Bear in mind that the longer you can delay a pick, the wider the window of opportunity in which the warehouse has to initiate transfers. Such transfers and consolidations can result in greater picking efficiencies. Once the pick is dropped, you have frozen the "to be picked" quantities at their designated locations until the pick is completed. By utilizing wave picking you may be able to reduce the number of frozen items for shorter periods of time.
Forward pick area is another strategy that helps to reduce travel time. Using Pareto's 80/20 Law, 80% of all production orders use the same ingredients and parts, which represent 20% of inventory in the warehouse. If you can move this 20% of the inventory to a forward pick area, that is closer to the production lines, the travel time of the warehouse personnel could be reduced significantly. The forward pick area could also be used to facilitate a premixing operation. Recalling our food manufacturer example above, you would move ingredients A and B to the forward pick area where they could be premixed together before moving down the production line. In retail, this is known as kitting.
Regardless of what picking strategies your company wants to employ and a WMS must support, order consolidation is a common and critical process. By using consolidation rules to match orders based on product, ship method, or warehouse locations, a WMS can identify opportunities for consolidation and improve pick, pack, and ship efficiencies.
Usually, a company employs picking rules for a specific reason, namely getting the ingredients and parts to the production line or the product to a customer in an effective and expeditious manner. Any WMS that impedes this objective runs the risk of alienating customers and eroding profits.
Inventory Control
You can employ Big Blue (you know that computer that beats chess masters) to devise intelligent putaway rules. You could use an Olympic sprinter to run throughout your warehouse to complete your picks. However, if your inventory is not properly stated and maintained in the WMS, all will be for naught. A WMS should provide the necessary inventory control tools to maintain accurate inventory balances by location and suggest warehouse movements to increase efficiencies. Likewise running these tools all day does get the product to the customer. A reasonable balance must be struck between the putaway and picking functions and inventory control tools to maximize the benefits of each.
The
basic components of effective inventory control are:
-
physical inventory counts
- cycle
counts
- inventory
management
A
physical inventory count consists of a complete count of the
entire inventory in the warehouse. Physical inventories are usually taken twice
a year. As required for publicly traded companies, a complete physical count
must be taken prior to the issuance of audited statements.
Typically, a physical inventory must be taken during non-operational hours or during a shutdown period. This requirement necessitates that the counting be completed in the least amount of time practical, thereby minimizing the disruption on the organization. If your company feels that it has already achieved this objective, assurances must be obtained that the same counting methodology can be utilized within the WMS. If improvements can be made or are needed, the physical inventory strategies of the WMS should be explored and possibly tested. Too often a WMS is installed just prior to year-end and the last physical inventory. Consequently, the requirements of the physical inventory are quickly forgotten and are not resurrected until days before the next physical inventory is due to start using new software.
Cycle
inventory counting uses an incremental approach to counting and adjusting
inventory. Effective cycle counting can identify inventory misstatements and,
equally important to a company's bottom line, minimize financial adjustments
at year-end.
Typically, you establish a cycle counting strategy such that a complete physical inventory is completed in a prescribed period of time such as a calendar quarter. You would also assign the frequency in which items are counted. For example, fast moving items are counted every two weeks. Moderate moving items are counted every month. Slow moving items are counted once a quarter. The shortcoming of this approach, depending on the layout of your warehouse, is the warehouse personnel are dispatched in a somewhat haphazard manner throughout the warehouse on a mission to count inventory.
You might consider whether it may more appropriate to count based on warehouse sectors. Again, this may be an example where ERP software and a WMS will offer the same functionality but different features. Which software do you want to use? Whatever your decision may be, the resulting data must be used to update the non-selected system.
Inventory
management consists of several processes such as inventory adjustments,
intra transfers, warehouse-to-warehouse transfers, and suggested inventory movements
and consolidations to increase efficiencies. While intra transfers permit you
modify or correct inventory in assigned locations within a single warehouse,
warehouse-to-warehouse transfer must be able to accommodate data structures
at other facilities. Inventory movements must be able to promote the putaway
and picking strategies defined for your warehouse. For all of these processes
there must be a sufficient audit trail through which you investigate discrepancies
and query the supporting details.
Enabling Technologies
A "lights out" warehouse with its automated pickers, loaders, and conveyors have tons of technology but are not cost-effective or cost-justified to most companies. Even less costly technologies like voice and pick-to-light systems are difficult to implement and maintain. They usually are not a company's first attempt to introduce technologies inside the four walls of a warehouse.
Typically, a company is using or is planning to use radio frequency (RF) technology within the warehouse. For companies that are already using RF, the obvious concern, when looking at a WMS, is assurance that their existing bar-code readers, collection devices, and labels are still usable and do not have to be replaced.
For companies planning on introducing RF into the warehouse, the questions regarding the interface with a WMS are more numerous and complex. First, understand that the cost of RF is not just in the readers, the antenna systems, collection points, and labeling. It is also in training and procedural changes. Assuming that a cost-justification case has been made for RF, you must decide what devices are supported by a WMS and how you want to use RF.
Essentially, the accepted methods of RF data collection are store-and-forward and real time. The store-and-forward method stores each scan on RF device and transmits to a WMS or intermediate server on an event driven basis. This event could be an end of a pick or the end of work shift. The benefit is that this method lessens the load on the server, thereby meaning less hardware and costs to support the WMS. The negative is that errors have to be corrected in a batch mode. Your confidence in your inventory records will help determine whether this method is acceptable. Specifically, if your perpetual inventory records are reliable, the errors may be minimal.
In the real time method, scans and the data are validated after each click of the scanner. While errors can be dealt with as they occur, the constant interaction with the server and software can be put a drain on the system. Regardless of the method that works best for your company, you need to know what method can be accommodated by the WMS. Also, while you may start out with the store-and-forward method, you would probably like to know if a migration to real time in the future is still possible within the constraints of the WMS.
Summary
Just a final thought, and example, of how different aspects of a WMS can offset each other. The primary benefit of RF is to reduce data entry and collection. An argument, however, can be made against the need of RF. If your warehouse is well managed and controlled, you should have a high degree of confidence in picking. In other words, you should be confident, that what you were told to pick, will be in the right location and in the right quantities. Consequently, you could confirm picks by negative confirmation, minimizing the amount of data to be entered. The morale is that you need to consider all of the areas and aspects of your warehouse as a whole, working in concert, and not as individual pieces of a large puzzle. If you don't, you never get the big picture and figure how the pieces of the puzzle fit together.
Unfortunately, Warehouse Management Systems are not normally considered an integral part of ERP and supply chain management (SCM). This could be a big mistake. However, as we continue to look for more areas from which to squeeze savings out of our operations, this can and probably will change. As you have seen in this article, we have simply followed some of the more common paths that goods travel in a warehouse. Be assured that there are others. This process should stimulate thinking of other areas to explore and investigate to help ensure that a selected WMS meets the current, intended, and future needs of your company.
About the Author
Joseph
J. Strub has extensive experience as a manager and senior consultant
in planning and executing ERP projects for manufacturing and distribution systems
for large to medium-size companies in the retail, food & beverage, chemical,
and CPG process industries. Additionally, Mr. Strub was a consultant
and Information Systems Auditor with PricewaterhouseCoopers and an applications
development and support manager for a Fortune 100 company.
He
can be reached at JoeStrub@writecompanyplus.com.