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Archive for August 23rd, 2010


Warehouse management is the critical part of any business and in order to manage efficiently, we need IT systems and tools.   Managing a modern day warehouse with ever increasing SKUs is becoming challenging. Added to that, globalization influenced how we warehouse products in a multi-site warehousing.  Complex supply chains, JIT, Cross Docking, In-transit merging and multi-site warehousing made inventory management and control a challenging task without an efficient WMS.  In order to deliver targeted warehouse objectives and transform warehouses into profit centre it is essential to understand warehouse objectives and make use of people strengths, processes and technology to achieve the same.

What are warehouse Objectives?

  1. Maximise Storage (space or cube) utilisation;
  2. Maximise WH equipment utilisation;
  3. Maximise human resources utilisation;
  4. Reduce SKU handling;
  5. Minimise Operating expenses;
  6. Assure protection of Assets

In order to achieve, above identified objectives, we need technology help and importantly information technology which is Warehouse Management System (WMS).

What is WMS?

“A warehouse management system provides the information necessary to manage and control the flow of products in a warehouse, from receiving to shipping.” In simple warehouse manages product flows and WMS manages information flows of the products handled and moved within a warehouse.  In many organizations we see WMS working as an independent node managing product flows.  However, it is crucial that WMS is integrated or capable of interacting with other information systems in order execute actions seamlessly.

Critical warehouse activities executed through WMS?

  1. Receiving;
  2. Put-away;
  3. Pick-n-Pack;
  4. Kitting;
  5. Despatch;
  6. Inventory Control and Management.

In order to execute the above mentioned activities, a WMS should be either connected through EDI or integrated with other information systems.  Further, we are in a multi-site and global warehousing age, hence the WMS is expected to be web enabled in order to provide accurate inventory status from time to time.

  1. Material Receipt – In order to receive material from suppliers, WMS is expected to receive the purchase orders in advance from procurement system.  Further, WMS should be capable of receiving Advanced Shipment Notices (ASN) from suppliers in order to prepare for receipt of material.
  2. Pick-n-Pack/Kiting – WMS is capable of handling components warehouse and finished goods warehousing.  Hence, WMs should be integrated with productions systems in order to pick the components and handle kitting activity if required.  In case of finished goods warehousing, in order to execute the pick-n-pack activity, WMS should be able to interact with Sales Order Fulfilment system.
  3. Accounting – Material once received and accepted through WMS, the supplier should be paid as per agreed payment terms.  In order to complete this activity WMS should be in a position to interact with finance and accounting system
  4. Despatch – once pick-n-pack activity is completed material needs to be despatched.  In order to carry out this activity WMS should be connected to the transport system in order to generate necessary paper work required for transportation.

Further, finance personnel would be interested to know the inventory value, procurement people would like to understand inventory on hand, order fulfilment personnel would be interested to know the exact inventory status to execute the sales orders and supply chain managers would like to align supply with demand with the help of WMS.  Hence, it is essential that WMS should possess the following basic qualities.

  1. Ability to Integrate with other information system;
  2. Ability to receive and send EDI messages;
  3. RF Enabled;
  4. Web enabled;
  5. Voice-Directed Distribution;
  6. Scalability to accommodate future needs.

What are the benefits of a Warehouse Management System?

  • Improving inventory visibility;
  • Reduce/Optimize inventory;
    • Minimize inventory Carrying;
    • Increase picking accuracy and order fill rates;
    • Improved inventory rotation efficiency;
    • Improved inventory accuracy
  • Labour productivity improvement;
    • Accelerate throughput and velocity
  • Improved despatch accuracy;
  • Improve perfect order rates;
    • Eliminating pick-n-pack errors;
  • Reduce direct operating costs and increase overall product margins;
    • System enabled process optimization resulting operational costs savings;
    • Cost savings through labour productivity improvement.
  • Improved warehouse size/cube utilization;
  • Improving material handling equipment life cycle;
  • Improved Customer Satisfaction.

Right Fit

There are several options in the market place, which is the right one for your organization?  Before going into the selection process, it is very critical to understand your business needs and benefits of having an automated and integrated WMS. The following are some tips before you select any WMS.

  1. Understand your Warehouse needs;
  2. Industry specific WMS will make life easier in customization;
  3. Ability to interface with other IT systems is very critical;
  4. Customization costs – All systems do not fit the requirement.  Some modification is necessary and the cost of modification/customization should be within your overall investment budget.
  5. WMS should be user friendly in order to train the warehouse personnel without much of effort;
  6. On-going support is very critical during and after implementation;
  7. Data export option is critical for analysis;
  8. Scalability is very important capability.  Business needs grow and the system should be able to accommodate the change;
  9. Capability to interface with other warehouse management technologies such as RF;
  10. Should be capable of receiving and sending EDI Signals;
  11. Last but not least talk to some of the current users and ask questions on implementation, flexibility, cost over-runs, ease of handling and customer support before you make up your mind.

EDI signals could ensure seamless warehouse data flows in a fragmented IT system:

It is not possible for all organizations to go for ERP systems that could provide end to end supply chain visibility.  As long as you have a WMS that could exchange information with other systems through EDI, it should serve the purpose in maximizing warehouse productivity.

“Electronic data interchange (EDI) is the structured transmission of data between organizations by electronic means. It is used to transfer electronic documents or business data from one computer system to another computer system, i.e. from one trading partner to another trading partner without human intervention.”

The two main EDI standards that are currently used in North America and Europe; the ASC X12 group of standards supported by the American National Standards Institute (ANSI) and the EDIFACT – United Nations/Electronic Data Interchange For Administration, Commerce and Transport (UN/EDIFACT) is the international EDI standard developed under the United Nations.

Few important EDI codes using ANSI standards:

At the end of the day, systems do not deliver miracles.  It is the human element that makes business grow or shrink.  Same theory applies to transforming warehouse into a profit centres.  What is a profit centre? – “is a section of a company treated as a separate business. Thus profit or losses for profit centre are calculated separately”. Conventionally, warehouse is a cost centre.  However, in my opinion any savings achieved over agreed budget should be treated as revenue and thus warehouse should be treated as profit centre.  Warehouses can be transformed into profit centres if we are able to exploit the technological advancement.   IT systems are only tools; it is us (humans) who may have to decide how to take advantage of these tools to deliver competitive advantage to the business.  An efficient WMS should be able deliver identified warehouse objectives and at the same time help business to expand globally and maintain lean supply chain through visibility.  Supply Chain visibility is the key to the success and WMS can deliver visibility with regard to warehouse operations.

Cartoon Source: http://www.scdigest.com


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