WMS Update

Where is the warehouse management systems market headed in 2010?

Carl Brewer (left) and Jim Burleigh
Carl Brewer (left) and Jim Burleigh
By Andrew K. Reese

The storyline of the Great Recession has been one of cutting inventories throughout the supply chain. The most recent "Manufacturing and Trade Inventories and Sales" report from the U.S. Department of Commerce showed that manufacturers reduced their inventories by more than 11 percent between November 2008 and the same month in 2009. On the retail side, the seasonally adjusted figure for inventories to sales across all retail trade fell to 1.37, according to Commerce's latest report, down from 1.63 at the end of 2008 and the lowest reading for that metric since December 1994.

The drawdown in inventory, of course, has not alleviated companies of the need to better manage the goods moving through their supply chains. In fact, the inventory challenge for 2010 and beyond will be finding the right balance of inventory to meet uncertain demand, says Jim Burleigh, CEO of San Francisco-based SmartTurn, a provider of on-demand inventory and warehouse management solutions.

The problem that many companies will face moving forward, Burleigh adds, is the lack of any visibility or data to make the right decisions. Burleigh argues that those companies that have robust warehouse management systems in place will also have access the data they need to determine what they have in the supply chain, where to distribute it and, most importantly, how much to distribute. "For those who do not have an effective strategy for managing their supply chains," he adds, "they will continue to make kneejerk decisions that will result in inefficiencies, lost sales and, more importantly, declining market share."

Visibility Is King

Carl Brewer agrees that companies must ensure that their warehouse management system (WMS) is providing the proper level of accurate visibility into their inventory. Moreover, that visibility must be as close to real time as possible, says Brewer, who is president of software solutions at Downers Grove, Ill.-based Upp Technology, which offers a variety of inventory and resource management solutions, including a WMS. "You can't afford to make bad decisions based on old data anymore," he says.

The push to pull more real-time inventory data out of the warehouse reflects the changing nature of the supply chain, which is shifting toward becoming much more integrated both from a process and a technology standpoint. "What I used to tell people a few years ago," says Brewer, "was that what supply chain did for my business was force us to kick down the walls of the warehouse to provide upstream and downstream visibility. Back then, that was a strategy, but now it's a live-and-die proposition."

Third-party logistics providers, for example, can now expose an order management system to their clients, or even their clients' clients, allowing customers to interact directly with their inventory in a 3PL environment rather than going through a staged process. If, in the past, the dynamic was to create demand, then do the processing and prioritization against supply to then push and fulfill, today the idea is to shorten that bridge or do away with it altogether, so that fulfillment is guaranteed because everyone is looking at the same numbers for inventory.

Companies also are looking to their WMS solution providers to offer new and innovative ways to make use of the data coming out of the systems. "It's all about accessibility and expression of data," Brewer says. Business executives want solutions that provide actionable information quickly without the need to bring in an IT specialist to set up a query. "Users don't want to talk to the business analyst anymore; they want to be the analyst. And they don't want to have to go to the data, they want the data to come to them," Brewer says.

Where WMS Is Hot

Of course, as the economy went into a tailspin in 2008 and moving into 2009, many companies pulled back on their investments in WMS and inventory management solutions. Analyst firm ARC Advisory Group had reported last year that the worldwide WMS market shrank by just under 1 percent in 2008 but was due to contract much more severely last year as the recession took hold. (ARC had not updated its figures for 2009 as of the writing of this article.) Steve Banker, ARC's director of supply chain management and a leading analyst in this sector, projected in the firm's "Warehouse Management Systems Worldwide Outlook" report that the two-year downturn meant overall the WMS market would only see a compound annual growth rate of 2.2 percent through 2013.

Brewer confirmed that manufacturing and distribution have been cutting back on their investments in warehouse management systems as they ride out the recession. But he noted that other sectors have been seeing continued strong investment. "Healthcare is flourishing," he says.

Healthcare has been a good segment for UPP, in particular, as the company has considerable experience in pharmaceutical distribution and integrated healthcare distribution. In fact, UPP has been able to leverage that experience and roll out a solution for emergency management that has been adopted by various state and federal government agencies. The Centers for Disease Control uses the company's solutions for the management and distribution of strategic national stockpiles such as the H1N1 flu vaccine.

For his part, Burleigh sees the lower cost of entry associated with Web-based — also known as "on-demand" or "software-as-a-service" — warehouse management solutions opening up possibilities for small and midsize enterprises to take advantage of capabilities and features that previously might have been available in systems that were out of their price range. "From a technology standpoint, on-demand WMS provides more than enough functionality for the majority of businesses in a wide range of industries from 3PL and wholesale distribution to manufacturing and healthcare management," he says, adding that many larger organizations may also be drawn to an on-demand WMS in cases when, for example, they need to get a warehouse up and running quickly.

In the end, Brewer says that organizations of all sizes are coming out of the recession looking for the next incremental gains in productivity, as well as new and different ways to service their customers, and WMS systems offer opportunities to do both simultaneously. The lesson of the recession, he suggests, is simple: "The strong will always survive, but it's the innovative companies that are going to thrive this time around."¦