How To Implement A Warehouse Management System

There have been many well-publicized Warehouse Management System (WMS) failures in recent years. Nike, Trends Lines, Sainsbury, MFI Furniture, Hewlett-Packard, Molnlycke Health Care, Heinz Portion Pac and many others have attracted the wrong kind of headlines on this issue.

When Nike's $400 million inventory management software project went awry they lost $100 million in one quarter, their stock plunged 20% and they were hit with lawsuits. MFI Furniture's WMS bugs had them making three deliveries per order. Due to falling sales, higher transportation costs and a triple picking workload, the CFO and supply chain management were shown the door. British grocery retailer Sainsbury had the same experience when its $700 million automation project flopped. The entire supply chain team subsequently joined the ranks of the unemployed.

"Many executives end up chained to their desks managing a WMS for years because the extensive customizations they made require their constant attention" says Dennis Waliczek, Vice President of Information Technology for USF Logistics who's first tasks at USF was to replace the heavily customized WMS installed by his predecessor.

Systems with modifications are costly to maintain and difficult or impossible to upgrade. That is why more companies refuse to install software requiring customizations. In response, vendors that once touted tool sets enabling easy customization are now having their software rewritten offshore in China and India.

With outcomes like these, it is not surprising that some company executives decide to do nothing. Why get behind a WMS project that could leave you tied to the system or facing a pink slip?

Despite reported catastrophes, the WMS market is expanding. According to Venture Development Corp of Natick, MA, the sector brings in close to a billion dollars annually in hardware, software and service revenue and is expected to grow at a rate of 8.5% annually for the next several years. Why such growth in the face of so much bad news? Because when done correctly, WMS works and corporate heroes emerge.

Although WMS implementations can be career threatening, several team members advanced at Four Seasons Produce in Ephrata, Pennsylvania after their first "Go Live."

"One of our core values is to establish exceptional partnerships with associates, customers, and suppliers" explains Nelson Longenecker, Vice President of Organizational Development. He links his peoples' success to this partnership commitment and says "our supplier's implementation methodology developed project skills in our team enabling several associates to take on more responsibility within our company."

Four Seasons associates are not alone. Despite the odds Greg Smith, IT project manager at America's largest public utility; Southern Company, spearheaded a WMS project in Alabama and ended up promoted for his efforts. Similarly, David Trenkenshoe landed a plant manager position after managing a WMS project at SSI, the central distribution center for Raley's and Savemart in Northern California. Jan Gage's decision to automate her distribution facility earned her a spot on the board of directors at Sunclipse, a publicly held Australian paper company.

What do these people have in common? How did they beat the odds? What is the difference between WMS success and failure? And what can be learned from the decisions these successful executives made about selecting a WMS?

All WMS vendors make the same claims of improved productivity and accuracy. How can you tell the difference between systems that can propel a company forward and systems that can get an exec fired? What is needed is a true measure of project success – not just saving a few dollars or improving efficiency by replacing a manual system or outdated inventory software. Employee promotion is one such measure.

"Instead of asking prospective vendors for examples of implementations that led to increased customer service levels or reduced labor costs, people looking for a WMS should pay more attention to the fate of those who selected and implemented the system," says Ann Price, CEO of Motek, a Beverly Hills, California-based company that developed the Priya Warehouse Management System. "Demand a vendor that can provide the names and contact information of several executives promoted for WMS implementations." Price calls these executives corporate heroes.

Beating the Odds
Executives that found themselves promoted after a WMS installation had several things in common. Their selection process involved three critical considerations: product, process and depth.

Product
Successful projects begin with configurable products. There should be no need to customize any aspect. The sign of a true, quality product is a customer base that is using the current version or latest release. If you cannot find three reference sites on the same release running the same code, it is a sure sign that the vendor does not have a real product.

By focusing on this issue, Southern Company narrowed the field from many options to one. "Our objective was to find an off-the-shelf product that was closely aligned with our business needs," says Southern Company's Greg Smith. "The main goal for our selection team was to do no customization due to the fear that more customization would require more maintenance and make it harder to implement future releases."

Process
Implementation plays a big role in project success. There is really no need to have a vendor onsite for more than four visits, each lasting three or less days. The sign of a good implementation methodology is a cookbook approach with written instructions that can be reproduced at additional sites without the vendor. Other signs of a solid process include a fixed number of implementation hours and the absence of vendor reliance for upgrades and subsequent changes. It pays, therefore, to ask for references that installed their subsequent sites on their own without vendor help.

Systems requiring extensive onsite implementation assistance typically fail. The reasoning is simple. If a vendor has to spend a lot of time at a facility installing, customizing and setting up the product, the customer will be at their mercy when an upgrade or install is required at additional sites. Further, when business needs change, the vendor must be engaged to re-customize the system.

An implementation process can reveal as much about a WMS as the demo of the product itself. Failure to scrutinize the details of how the product will be delivered could be fatal.

Four Seasons, for example, worked closely with their vendor to automate one warehouse. During this initial implementation, they learned the ropes and gained the confidence to configure and install four additional sites independently using the cookbook they relied on for their first Go Live. "We subsequently configured, tested and went live in our remaining facilities without any onsite vendor help," said Four Seasons' Longenecker.

Depth
Systems that help executives beat the odds come from focused vendors that deliver deep functionality. It is advisable to avoid a system that tries to solve all problems in one package. A good analogy is the television. Most customers won't buy a television with a VCR & CD player all in the same box. For the same reason, a company should not buy a transportation system that includes an order entry system and a WMS.

Although many vendors sell the dream that one company can solve all these problems, in reality they cannot create such products. The reality behind the scenes is that these solutions come from different sources and are simply cobbled together. Some companies will even acquire other companies with products the customer needs to integrate them.

The customer ultimately pays the price as they struggle with different code bases, conflicting data designs and opposing corporate cultures. The incompatibilities can become a nightmare, with additional support money required to fix the product.

Signs of a deep system from a focused vendor include offerings where everything is included and there is only one product. Critical warehouse features like voice picking and real time labor standards should be "in the box" and written by the original team all in the same language used to develop the system. These systems should deliver immediate tactical and strategic results.

Attempts to deploy an all-encompassing supply chain execution system that tries to be all things to all people invariably ends up delivering shallow results. Why? By being a mile wide, such products end up being an inch deep. Similarly, vendors selling a system in modules, or offering two different systems based on customer size or type of business are not deeply focused on a particular customer.

Even vendors with Legacy systems will divert new dollars to old customer problems leaving the customer to foot the bill for their inability to create long-lasting, easily upgradeable software. Make sure all dollars go into the support budget for one product, rather than development of products or modules the vendor will sell to the customer down the road.

WMS for All Seasons
The WMS implementation at Four Seasons Produce Company illustrates how focusing on these three areas works. Longenecker spent plenty of time narrowing down the field, and then bought a configurable product that enabled him to implement deep and deliver immediate results yet remain vendor independent. Here is how he beat the odds.

Four Seasons recently unveiled one of the largest produce distribution facilities in America. At 262,000 square feet, this facility is state-of-the-art when it comes to refrigeration and temperature control, and it utilizes the latest in hands-free voice, radio frequency (RF), labor management and WMS technology.

As a full service produce distributor, Four Seasons is unique in the industry. It serves the entire range of retail, wholesale and foodservice markets. As well as supplying a variety of wholesale distributors, its trucks go direct to many well-known restaurant and retail chains in the Northeast. With such a wide range of offerings, it is no surprise that Four Seasons was expanding rapidly. In fact, it has recorded an average annual growth rate of 18% during its 30-year existence. This year produce deliveries will be approximately 11 million cases.

Such fast-paced expansion, however, came at a price. Over the years, the company added additional warehouses as growth occurred. Eventually the company had five facilities – four for storage and repacking, and one for shipping. "Product for daily shipping had to be pulled from multiple buildings, transferred to the central shipping warehouse, slotted, selected, and loaded onto trucks," says Longenecker. "We ran into traffic delays and other problems, and were constantly under tremendous time pressure."

To make matters worse, Four Seasons ran its distributed warehouse operation using manual processes. This meant staff tracked inventory manually by keying in every quantity received, transferred, and shipped and applying labels to every box for shipping. "With so many manual transactions taking place, we suffered from significant errors and were always one step behind the product," says Longenecker. "It wasn't uncommon to lose track of whole pallets, which affected service levels and ate into profits."

While these inefficiencies are a concern in any business, they're particularly troubling in produce where entire inventories turn every four or five days, and many products are received and shipped within 24 hours of receipt. Temperature and time sensitivity must be designed into the shipping and receiving process to ensure high quality and to consistently fresh produce.

"We recognized we could dramatically improve the confidence of our sales and buying teams by eliminating inventory mishaps," says Longenecker. "If a buyer knows he needs so many pallets of lettuce, the last thing you want is to have too little in stock. At the same time, to maintain freshness, you can't overstock."

Realizing technology was the only sure route to continued growth; Four Seasons initially identified over 100 WMS suppliers and evaluated their options. They soon reduced the list to 25 vendors. Further pruning occurred at trade shows, resulting in five finalists. All five demonstrated their systems at the Pennsylvania headquarters against a basic requirements list that included real-time case and pallet inventory, voice recognition for hands-free case picking, the continuation of previously realized labor management gains and system scalability to meet future needs.

The selection team quickly identified the difference between the choices when they started to call and visit references. Vendors with customers all using the same software release running the same source code stood out. So did references that could configure their systems in different environments without vendor assistance and customers that had installed the system in subsequent sites independently. The selection team wanted a vendor on a true Microsoft platform. In the end, Four Seasons selected the Priya Warehouse Management System by Motek.

"Our selection identified Priya as the clear leader in WMS functionality," says Longenecker. "Priya gave us all the features we required, and an implementation path that made sense in our world. Further, we could deploy it on our existing Windows-based infrastructure." "It was the only real Microsoft warehouse solution we found giving us vendor independence and a comprehensive implementation approach we believed in."

Implementation Challenges
Management at Four Seasons planned to consolidate its five dispersed locations into one central building. Therefore, it embarked upon the construction of a state-of-the-art 262,000 square-foot distribution center and headquarters complex that would be the envy of the industry.

With construction still in planning stages, the company decided not to delay their Priya implementation. In the fall of 2002, the warehouse management software was deployed in four sites. "We decided to iron out all the intricacies of the warehouse management system at a single location, learn how to do it and then add our other buildings one at a time," says Longenecker. This approach was successful.

Inevitable construction delays meant the consolidation of these four facilities and the final move to the new building had to take place in the midst of Four Seasons' peak season in May/June of 2004. Four Seasons was able to do it all independently with Priya. To maintain inventory accuracy, associates used Priya to organize and facilitate the move.

"As the Priya inventory software recognized our inventory levels in all buildings, it expedited the move," says Longenecker. "Since produce is perishable, we couldn't stop. So we filled all our orders and made the transition during a 36-hour shut down over a holiday weekend."

Motek deployed Vocollect hands-free RF technology in conjunction with Symbol RF devices driven by Priya to capture, move and manage information in real time to and from the point of business activity at Four Seasons. Priya manages these data collection devices which tell pickers where to go and what to pick or put away in real time. This powerful combination enables operators to confirm each pick using spoken check digits and scan each putaway using wireless RF devices. Priya enables more items to be picked faster and more accurately.

Priya also makes it possible for Four Seasons to compile detailed operational metrics. The results are impressive: more than a 60% reduction in mis-picks and shorted product; 99.88% shipping accuracy - up from 99.6%; 64% reduction in inventory control labor hours and 38% increase in selector productivity. The use of Priya has raised case selection productivity from 155 to 230 cases per hour; achieved a 22% reduction in lost sales due to errors; and case inventory accuracy has been boosted from approximately 98% to 99.8%.

"We now record only 12 errors in ten thousand cases picked compared to 40 before, and overall productivity has been greatly enhanced," says Longenecker. "We have a world-class work environment that gives us a definite competitive advantage."

SOURCE: Motek