Executive Briefings

The World of Warehouse Management: Current Challenges, Future Opportunities

Industry experts offer their views on how the discipline of warehouse management, including the deployment of new software applications, will evolve in the years ahead.

The World of Warehouse Management: Current Challenges, Future Opportunities

Casual observers of the supply chain might consider warehouse management to be a relatively mundane function, with little opportunity for innovation and contributing to the bottom line. The opposite is true. Some of the most exciting developments in the field today are occurring in warehouses and distribution centers - the repositories for that dreaded link of the chain known as inventory. Within the walls of these essential facilities, companies find themselves facing a number of serious challenges, including rising costs, shortages of skilled labor, rapidly changing technology and the age-old problem of matching supply with demand. What follows are excerpts from conversations that SupplyChainBrain's editors conducted with numerous experts on the topic, at the annual conference of the Council of Supply Chain Management Professionals in San Diego, Calif. They addressed a wide variety of trends, issues, opportunities, technology solutions and prospects for warehouse management.

Q: What are some of the major trends you’re seeing in warehouse management today?

Chris Elliott, consultant, Blue Horseshoe: The biggest trend we’re seeing is one we’ve been talking about for a few years: the omnichannel. Now we’re adding layers onto it. First, you had the ability to do click and collect and look at the inventory. Now we’re seeing deeper looks into channel inventory. We’re also starting to talk about the Internet of Things, and how that can add an extra layer of complexity to the warehouse system.

Brian Bourke, vice president of marketing, Seko Logistics: The current trends in warehouse management are very similar to those in transportation management. Organizations are getting rid of legacy systems and implementing sophisticated, state-of-the-art enterprise resource management applications. WMS functionality, just like that of TMS, usually comes at the tail end of that implementation. When it’s time to implement those features, the budget often dries up, or patience is gone, or the time-line is out of scope. This provides an opportunity for third-party logistics providers to assist shippers, and help them make connections to either their own warehouses or those managed by 3PLs.

Q: What’s the big pain point or challenge that warehouses face today, when looking for warehouse-management software?

Elliott: I think the biggest challenge now and in the future is the large variety of solutions out there. There are a lot of different areas to look at, and many capabilities that companies don’t know whether they really need. Also, when you’re considering moving to a cloud-based solution, you have to consider this whole breadth of functionality. Can you do it all in the cloud? Or do you need software that’s installed in-house?

Karl Siebrecht, chief executive officer, Flexe: There’s a fundamental dynamic in the industry with respect to warehousing. Warehouses come in large, fixed units of capacity, with long-term leases. Increasingly, with a lot of businesses, inventory levels are becoming variable, due to seasonality, business cycles and product promotions. This creates in some ways a fundamental mismatch. At any given time, some businesses have too much warehouse capacity, while others need additional space. The opportunity for businesses to transact with one another unlocks a lot of excess capacity that’s just sitting there. At the same time, it provides businesses with a layer of flexibility, to augment their fixed warehouse distribution network.

Q: What is the status of use – or non-use, for that matter – of big data in the warehouse?

Rudi Lueg, vice president of business development, W&H Systems: Today, big data is a buzzword. But what does it really mean? In a distribution center, we don’t do much with it. It’s a starting point for going deeper into the science. We implement systems based on the use of statistics, but they typically communicate through rudimentary data exchange.

Bourke: The question is, how do you integrate the data? While electronic data interchange has been a standard, automated programming interface integration is becoming a definite trend, not only in WMS but also TMS. It’s more real-time, quicker to ramp up, and quicker to switch. It doesn’t lock you into a provider or involve costly implementations or hours of work. API integration is more commonplace in the e-commerce space – anywhere else in retail or manufacturing, it is not dominant. But we see that changing for sure in the next couple of years.

Lueg: I’m inside the distribution center, moving brown boxes back and forth. We just report back, “This box made it from A to B.” We don’t capture how long it took, what route it took, why it was delayed, whether there was an exception, or if there was a no-read or a jam in the conveyor system. We just use that information for the next few moments to support the operation. Then we throw the data away. Wouldn’t it be great to keep it around for days or years? We could leverage that information and say, “That particular box, with that particular label, caused a little bit more of a problem. We saw this before.” Today, we rely on the gut feeling and experience of the operation, and on the statistics. We don’t really integrate that.

Elliott: Where I see the biggest trend, moving forward in warehouse software, is in convergence. You hear people talking about a lot of different solutions. We have warehouse-management systems, warehouse execution systems and the WMS on steroids, where it adds in the transportation. Then we start talking about big data, and the Internet of Things. We’re going to start seeing a convergence of these technologies. There will be a lot more meshing into the solution, into one global warehousing platform. Companies will be able to look from the consumer or business channel all the way back to the product’s source. They’ll have complete visibility, and be able to make smart decisions and execute on that.

Bourke: With regard to making WMS and TMS software applications work together in an optimal manner, the best-case scenario that I can think of is the omnichannel, for retailing, distribution and marketing. Almost every retailer that we talk to is going down the road of optimizing its entire supply chain for omnichannel. What does that mean as it relates to WMS and TMS? A perfect example is this: Let’s say 10 years ago, a retailer’s e-commerce orders totaled 2 to 3 percent of revenues. Now it’s closer to 30 or 40 percent. That has a direct impact on how a company sets up its distribution centers – whether it has outsourced them, positioned them around the country to manage fulfillment for the retail stores perfectly, done a center-of-gravity study, or taken into consideration drop-ship vendors and marketplaces. Now you have a rising percentage of direct-to-consumer e-commerce orders. That all starts at the DC. When it comes to picking, fulfilling and shipping an order, you should also be thinking about TMS integration: Is this going FedEx? Parcel? Integrator? Less-than-truckload? All of those considerations within the omnichannel need to be tied back to the WMS, especially as they relate to retail compliance.

Pat Ballard, vice president of business development, Americold: Automation is the buzzword, and we are definitely a part of that. We’ve got facilities that are automated, but it’s got to pencil. It has to make sense for both the customer and us as a service provider. If the strategic direction is to condense and combine facilities into a geographic area, maybe automation does make sense. That’s where our supply-chain analysis group would come into play – they can do a deep dive, look at the SKU count, throughput and volume, and identify whether it’s a good strategic fit.

Q: If you were given a glimpse into the warehouse of 10 to 20 years from now, would you see any people in there?

Lueg: That will not change. You’ve got to have skilled workers. They just have more responsibility today, and I believe there will be more talented people in the warehouse in the future.

Peter Schnorbach, senior director of production management, Manhattan Associates: The warehouse might be the most challenging environment that there is. We’re talking about relatively lower-paid workers, people coming in and doing the same thing day in and day out. A recent study by Gallup showed that manufacturing and warehouse workers are some of the least engaged employees as a whole in the world. It is very difficult to get these people engaged, yet it’s extremely important to do so, to achieve the productivity levels that you need to be a successful company.

Q: How would you characterize the capabilities of the WMS of the future?

Brian Lindenmeyer, solution consultant, IBS: What companies are going to be looking for is everything they do today, while bringing it into a format that’s ready for the millennial generation. We’re talking about visualization, drop-and-drag functionality and point and click, versus your typical spreadsheets or tables of data. Within the WMS framework and supply chain, we talk about executing order fulfillment, and getting things on time in the right order and amount. We’re seeing a growing need for D.C. and supply-chain experts who can also manage the sales and operations planning aspects of their business. I see a direct opportunity for tying software that helps people to plan their inventory both from the sales and purchase order perspectives, all the way through to effective delivery. The future state of WMS will be focused on how much we can get into the planning side of the business.

Casual observers of the supply chain might consider warehouse management to be a relatively mundane function, with little opportunity for innovation and contributing to the bottom line. The opposite is true. Some of the most exciting developments in the field today are occurring in warehouses and distribution centers - the repositories for that dreaded link of the chain known as inventory. Within the walls of these essential facilities, companies find themselves facing a number of serious challenges, including rising costs, shortages of skilled labor, rapidly changing technology and the age-old problem of matching supply with demand. What follows are excerpts from conversations that SupplyChainBrain's editors conducted with numerous experts on the topic, at the annual conference of the Council of Supply Chain Management Professionals in San Diego, Calif. They addressed a wide variety of trends, issues, opportunities, technology solutions and prospects for warehouse management.

Q: What are some of the major trends you’re seeing in warehouse management today?

Chris Elliott, consultant, Blue Horseshoe: The biggest trend we’re seeing is one we’ve been talking about for a few years: the omnichannel. Now we’re adding layers onto it. First, you had the ability to do click and collect and look at the inventory. Now we’re seeing deeper looks into channel inventory. We’re also starting to talk about the Internet of Things, and how that can add an extra layer of complexity to the warehouse system.

Brian Bourke, vice president of marketing, Seko Logistics: The current trends in warehouse management are very similar to those in transportation management. Organizations are getting rid of legacy systems and implementing sophisticated, state-of-the-art enterprise resource management applications. WMS functionality, just like that of TMS, usually comes at the tail end of that implementation. When it’s time to implement those features, the budget often dries up, or patience is gone, or the time-line is out of scope. This provides an opportunity for third-party logistics providers to assist shippers, and help them make connections to either their own warehouses or those managed by 3PLs.

Q: What’s the big pain point or challenge that warehouses face today, when looking for warehouse-management software?

Elliott: I think the biggest challenge now and in the future is the large variety of solutions out there. There are a lot of different areas to look at, and many capabilities that companies don’t know whether they really need. Also, when you’re considering moving to a cloud-based solution, you have to consider this whole breadth of functionality. Can you do it all in the cloud? Or do you need software that’s installed in-house?

Karl Siebrecht, chief executive officer, Flexe: There’s a fundamental dynamic in the industry with respect to warehousing. Warehouses come in large, fixed units of capacity, with long-term leases. Increasingly, with a lot of businesses, inventory levels are becoming variable, due to seasonality, business cycles and product promotions. This creates in some ways a fundamental mismatch. At any given time, some businesses have too much warehouse capacity, while others need additional space. The opportunity for businesses to transact with one another unlocks a lot of excess capacity that’s just sitting there. At the same time, it provides businesses with a layer of flexibility, to augment their fixed warehouse distribution network.

Q: What is the status of use – or non-use, for that matter – of big data in the warehouse?

Rudi Lueg, vice president of business development, W&H Systems: Today, big data is a buzzword. But what does it really mean? In a distribution center, we don’t do much with it. It’s a starting point for going deeper into the science. We implement systems based on the use of statistics, but they typically communicate through rudimentary data exchange.

Bourke: The question is, how do you integrate the data? While electronic data interchange has been a standard, automated programming interface integration is becoming a definite trend, not only in WMS but also TMS. It’s more real-time, quicker to ramp up, and quicker to switch. It doesn’t lock you into a provider or involve costly implementations or hours of work. API integration is more commonplace in the e-commerce space – anywhere else in retail or manufacturing, it is not dominant. But we see that changing for sure in the next couple of years.

Lueg: I’m inside the distribution center, moving brown boxes back and forth. We just report back, “This box made it from A to B.” We don’t capture how long it took, what route it took, why it was delayed, whether there was an exception, or if there was a no-read or a jam in the conveyor system. We just use that information for the next few moments to support the operation. Then we throw the data away. Wouldn’t it be great to keep it around for days or years? We could leverage that information and say, “That particular box, with that particular label, caused a little bit more of a problem. We saw this before.” Today, we rely on the gut feeling and experience of the operation, and on the statistics. We don’t really integrate that.

Elliott: Where I see the biggest trend, moving forward in warehouse software, is in convergence. You hear people talking about a lot of different solutions. We have warehouse-management systems, warehouse execution systems and the WMS on steroids, where it adds in the transportation. Then we start talking about big data, and the Internet of Things. We’re going to start seeing a convergence of these technologies. There will be a lot more meshing into the solution, into one global warehousing platform. Companies will be able to look from the consumer or business channel all the way back to the product’s source. They’ll have complete visibility, and be able to make smart decisions and execute on that.

Bourke: With regard to making WMS and TMS software applications work together in an optimal manner, the best-case scenario that I can think of is the omnichannel, for retailing, distribution and marketing. Almost every retailer that we talk to is going down the road of optimizing its entire supply chain for omnichannel. What does that mean as it relates to WMS and TMS? A perfect example is this: Let’s say 10 years ago, a retailer’s e-commerce orders totaled 2 to 3 percent of revenues. Now it’s closer to 30 or 40 percent. That has a direct impact on how a company sets up its distribution centers – whether it has outsourced them, positioned them around the country to manage fulfillment for the retail stores perfectly, done a center-of-gravity study, or taken into consideration drop-ship vendors and marketplaces. Now you have a rising percentage of direct-to-consumer e-commerce orders. That all starts at the DC. When it comes to picking, fulfilling and shipping an order, you should also be thinking about TMS integration: Is this going FedEx? Parcel? Integrator? Less-than-truckload? All of those considerations within the omnichannel need to be tied back to the WMS, especially as they relate to retail compliance.

Pat Ballard, vice president of business development, Americold: Automation is the buzzword, and we are definitely a part of that. We’ve got facilities that are automated, but it’s got to pencil. It has to make sense for both the customer and us as a service provider. If the strategic direction is to condense and combine facilities into a geographic area, maybe automation does make sense. That’s where our supply-chain analysis group would come into play – they can do a deep dive, look at the SKU count, throughput and volume, and identify whether it’s a good strategic fit.

Q: If you were given a glimpse into the warehouse of 10 to 20 years from now, would you see any people in there?

Lueg: That will not change. You’ve got to have skilled workers. They just have more responsibility today, and I believe there will be more talented people in the warehouse in the future.

Peter Schnorbach, senior director of production management, Manhattan Associates: The warehouse might be the most challenging environment that there is. We’re talking about relatively lower-paid workers, people coming in and doing the same thing day in and day out. A recent study by Gallup showed that manufacturing and warehouse workers are some of the least engaged employees as a whole in the world. It is very difficult to get these people engaged, yet it’s extremely important to do so, to achieve the productivity levels that you need to be a successful company.

Q: How would you characterize the capabilities of the WMS of the future?

Brian Lindenmeyer, solution consultant, IBS: What companies are going to be looking for is everything they do today, while bringing it into a format that’s ready for the millennial generation. We’re talking about visualization, drop-and-drag functionality and point and click, versus your typical spreadsheets or tables of data. Within the WMS framework and supply chain, we talk about executing order fulfillment, and getting things on time in the right order and amount. We’re seeing a growing need for D.C. and supply-chain experts who can also manage the sales and operations planning aspects of their business. I see a direct opportunity for tying software that helps people to plan their inventory both from the sales and purchase order perspectives, all the way through to effective delivery. The future state of WMS will be focused on how much we can get into the planning side of the business.

The World of Warehouse Management: Current Challenges, Future Opportunities