Why you shouldn't let your ERP software control your warehousing and distribution operations.
Most major ERP systems are at least a year or two away from being able to provide the functionality required to support the warehouse and its supply chain initiatives adequately. Even companies with modest distribution/warehouse management requirements are finding that ERP systems are lacking at the warehouse level. Not able to wait for their ERP provider to develop a fully functional warehousing module, customers find themselves searching for a third-party solution. Many look to either a bolt-on warehouse management system (WMS) or a radio frequency (RF) middleware product.
Companies that buy into the "one solution" promise of their ERP systems often find it hard to swallow that another software investment is required if they are to adequately support their warehouses. Therefore, many companies justify purchasing middleware because it appears to be an easier, cheaper alternative to a robust WMS, and one that will get RF into the warehouse. But, middleware is destined to disappoint, not only in terms of its functionality, but also in terms of return on investment.
While both WMS and middleware are marketed as solutions for managing the warehouse, the two approaches are very different. A WMS is an execution system that manages the warehouse functions intelligently, directing worker's tasks in the most efficient manner. While the WMS interfaces with the ERP system, the WMS controls the warehouse and executes material flow based on its own logic and rules.
The WMS performs instant verification of operator entry and allows for the correction of errors while the worker is still performing the current task. This verification ensures accuracy and prevents errors in receiving, stocking, picking, etc. that cause productivity lapses and poor customer service. This instant verification also promotes productivity by allowing the software to guide workers through their tasks based on accurate inventory quantities and locations. With a WMS, there is virtually no time wasted searching for misplaced product or travelling to empty locations.
With middleware, however, the ERP system is still in control of the warehouse. ERP systems are designed to work with immobile terminals and therefore are unable to perform instant verification of operator entry. ERP systems expect the material handling operator to write down the transaction information and pass it to a data entry operator for later entry. Even though the information is "real-time" once it's finally entered, the result is essentially the same as "batch" data entry. Middleware accommodates the ERP system's "batch-like" data entry structure by enabling the ERP package to capture some data automatically via scanners on RF terminals. However, the true power of RF lies not in its ability to capture data automatically but rather in its integration with an intelligent execution system, such as a WMS, that has been designed to take advantage of real-time input.
A WMS uses real-time data not only to correct errors on the spot but also to improve operator efficiency. For example, if an operator is directed to get material and discovers that the material is damaged, the operator can flag it for inventory hold and immediately be routed to another location for the material. ERP software is not designed to interact directly with the material handling operator. Even with middleware, you still rely on the operator to drive the system. Therefore, if the ERP warehousing functionality doesn't meet your needs, middleware isn't the answer.
Companies that implement middleware often don't realize its fundamental lack of functionality and end up having to make significant investments in software modifications to include the logic to validate data entry and direct workers productively. This customization leads the middleware away from being a transparent interface between the ERP system and the RF network and towards being a bolt-on solution. Furthermore, since the software is no longer standard, you have the problem of upgrade compatibility. The end result of many middleware projects is a non-standard bolt-on software product for the warehouse that, ironically, costs as much or more than a WMS but contains functionality well below that of a robust WMS.
Middleware's dependence on the ERP system leads to other pitfalls as well. First, if the ERP system is down, the warehouse is down. But a bigger problem, one that contributes to productivity loss, is the notoriously slow RF response times with middleware. While WMS users enjoy RF response times of one to two seconds, middleware users often report delays of 30 to 70 seconds or more.
Take it from Lucent
When Lucent Technologies in Omaha, Nebraska was looking for a warehouse/distribution solution for their upcoming SAP implementation, management there performed a detailed comparison between middleware and WMS. Lucent discovered that they would have to increase their manpower by up to 50 percent if they switched from their current WMS to middleware. According to Phil Warren, the production control manager at Lucent's Omaha plant, middleware is an inferior solution because of its own lack of functionality and its dependence on the ERP system's inherently low level of warehouse functionality.
When Lucent Technologies installed the WMS product at its Omaha and Atlanta facilities about 10 years before the corporate office even considered an ERP system, management at these two facilities began to understand the value of a robust, real-time WMS. Inventory accuracy at these plants, which had been around 95 percent, exceeded 99 percent after the WMS was implemented. Inventory was reduced 15 to 25 percent. Because the WMS has virtually eliminated human error and wasteful warehousing and distribution practices, overall these two plants have experienced significant operation cost savings over the years.
When the SAP conversion was imminent, management at the Omaha and Atlanta plants rallied even more strongly behind their WMSs after comparing them with middleware offerings. Both plants decided to make the investment to integrate the WMS with SAP. Phil Warren says that they experienced absolutely no WMS interface problems when SAP went live in November 1998, nor did they lose any ground in terms of the flow of benefits from the WMS. The interface was SAP certified, making the transition that much smoother. Now he's looking forward to the benefits of a truly integrated planning, sales planning, distribution, and financial process.
Where the rubber meets the road
The Lincoln, Nebraska Goodyear Tire & Rubber plant management rallied behind its existing WMS after the company selected SAP's R/3 system. The IT manager in Lincoln, Ron Clinch, says that Goodyear felt they couldn't live without the WMS, and they chose to make the investment to interface it with the SAP system instead of to revert to SAP's built-in warehousing and distribution functions. Because their WMS interface was SAP-certified, the integration effort went very smoothly and had minimal problems.
No more driving blind
The Siemens Automotive plant in Newport News, Virginia relied on an in-house WMS from 1986 to 1992, when it was replaced by a Dun & Bradstreet business system for stock location and receiving activities. At that point, all warehouse operations reverted back to a manual system. The plant soon experienced work-in-progress problems due to delays because lot tracing was tied into the mainframe system, which was often slow and occasionally down. Moreover, the plant wasn't achieving "first in, first out" control over inventory with its batch system.
Siemens Automotive management planned to replace the Dun & Bradstreet system with SAP R/3 in October 1998, and the Newport News plant decided to implement a best-of-breed WMS before the conversion. They wanted both to lessen the impact of change on the warehouse operations and to once again reap the benefits of a WMS even before the SAP system went live. Besides wanting to improve inventory accuracy, plant management especially looked forward to performing lot tracing within the WMS.
The WMS went live in February 1998, eight months before SAP was scheduled to go online. So, for approximately five months before getting SAP they had been seeing real, significant business benefits from their WMS. For starters, FIFO material flow became much more reliable, inventory accuracy significantly improved, and the plant no longer had to perform extensive daily audits of its materials. Bob Spell, manager of Logistics Services in Newport News, says that when the SAP conversion took place, the people in the warehouse barely noticed it.
One of Siemens Automotive's main goals was to have the warehouse operations interface so successfully with SAP that there wouldn't be any lull in WMS benefits. Spell says that they were able to achieve their goal primarily because their WMS interfaced so well with SAP. While overall business has increased steadily, the number of warehouse personnel required has remained the same. Because of the WMS, warehouse managers in Newport News are able to spend more time on valuable supervisory tasks and less time on wasteful auditing ones.
Problem "one" solved
The plants mentioned above will transition into the next century gracefully because their warehouses, and their Supply Chain, are supported by an intelligent execution system designed to maximize the value of real-time information. These warehouses are able to respond quickly and accurately to changes elsewhere in the organization due to the dynamic communication between the ERP system and the WMS. If ERP were in control of warehousing and distribution at these plants, customer service would be impaired and strategic business decisions would be jeopardized. Companies like these have found that ERP systems with their limited warehousing functionality are not quite the "one solution" that they are sometimes touted to be. Lucent, Goodyear and Siemens Automotive understand that the solution that makes sense is a best-of-breed WMS.