Organize Your Inventory

About five years ago, warehouse management systems (WMS) software came onto the logistics scene offering new ways for jan/san distributors to improve communication, streamline operations and save money. Varying from the complex to the simple, WMS is a general term for using technology to organize warehouse functions. With this technology, distributors can increase productivity and also make better use of warehousing space.

For some managers, a WMS is just one or two computers that keep up-to-date inventory records. Others require a more advanced system that allows for assembly, automation and transfer of data.

Initially, in the mid-1990s, software developers set their sights on the top-tier warehouses — the companies with millions of dollars to spend — hoping to reap the highest profits.

Fast-forward to 2001: After saturating the market of top-tier distributors, WMS manufacturers and vendors have now directed their marketing efforts to medium-sized and small warehouse managers, creating a world of opportunity for many jan/san distributors. The scaled-back versions that vendors are offering are less automated, but less expensive. Newer, more specialized systems increase basic organization and help warehouse managers keep data up-to-date affordably.

Jan/san distributors are seeing the benefits of investing in a WMS. Many, like TechniChem Corp., in Boise, Idaho, have a basic system in place, but still have room to grow.

“We’ve got an off-the-shelf version,” says Brian Rencher, TechniChem’s president. “It’s pretty simple and easy to use.”

Other distributors are content to store and ship inventory manually. They want to be sure that a WMS will be a sound, cost-effective investment before they take action. However, Chris Newton, a senior analyst in supply chain strategies with AMR Research in Boston, says the days of simply using a warehouse for housing products are gone. Keeping inventory manually will soon be a thing of the past.

Warehouses of the Future
“It used to be that warehouses were just places to store stuff,” says Newton. “But now they do much more: light assembly, kitting, specialized ticketing, packaging and many other value-added services.”

More and more, distributors must provide value-added services for both the manufacturer and the customer — a feat requiring extreme organization. Specialized ticketing, for example, is the process of labeling specific products for specific destinations. This necessitates accurate inventory information, which a WMS can provide. Furthermore, many distributors work with other warehouses and, as Philip Obal, president of Industrial Data & Information Inc., in Webbers Falls, Okla., points out, a distributor must keep accurate records in order to answer questions from customers and suppliers.

Increasingly, data needs to be “real time,” meaning that as soon as one employee makes a sale or ships a product, that information is immediately updated in the main system. Obal, author of the book What To Look For in Warehouse Management System Software, emphasizes the need for distributors to always maintain records, keeping them clean and accurate. “If data is clean, it really means a lot.”

Doug Levin, executive vice president of Prophet 21, a vendor of WMS software in Yardley, Pa., says that communication between warehouse workers often breaks down when it comes to product inventory. A salesperson may be selling a product that may not even be in the warehouse if another employee hasn’t entered shipments into the system yet. “You really serve the customer when you give accurate information,” says Levin. “You don’t want to say, ‘I think it has shipped.’ You want to be able to say, ‘I know it has shipped.’”

Still, some warehouse managers are wary of investing in a WMS, often because they are not sure if the efficiency savings will justify the cost. Terry Miller, president of the Hibbing, Minn.-based B. Miller Products Inc., argues that having a WMS is crucial for distributors. “I definitely think that it is not only beneficial, but that it’s absolutely essential,” he says. “It basically helps us to keep track of exactly what inventory we have and exactly how much we need.”

Rencher agrees, admitting that before his company used a WMS, deciding how much inventory to purchase was an inaccurate science. “We’d buy what we thought was a three-month supply, but we found out that it was really a six-month supply,” he explains. “Now I can track what we have and what we need effectively.” This tracking is part of monitoring product flow. A good WMS should keep track of what old inventory is sitting on the shelf and also should provide information on how much inventory needs to be ordered from month-to-month.
WMSs can also track inventory weight, says Obal. He explains that most distributors don’t have a system for weighing products, even though they should. “It’s important to know how much things weigh,” he says. “Sometimes a warehouse is three or four stories high and all the weight from the products and machinery are pushing down on the first floor.”

As trucking and shipping systems become more advanced, transportation managers also need to know specific product data — like weight — before they can transport inventory, explains Obal. Convenient, since the Occupational Safety and Health Administration (OSHA) and other safety organizations have required warehouse managers to provide total square footage and weight capacity for a warehouse to verify structural stability.

But even with the benefits of a WMS, medium-sized warehouses have still been slow to jump on the bandwagon.

“Right now only about 30 percent of the warehouses that could have WMSs in the United States are using them,” says Newton.

Ed Mazer, president of Stanpak Systems, Suffield, Conn., says that in the paper and cleaning supply industry that figure is much lower — less than 1 percent. “There are very few distributors using WMSs right now,” he says.

What to Look For
Perhaps some of the industry’s hesitation results from distributors’ inability to choose (there are more than 100 WMS vendors in the United States). With all the options out there, they may feel they need a degree in computer science just to make an educated decision. But finding a good system doesn’t have to be complicated.

“For any WMS, there are two main goals,” says Obal. “First, you want to optimize your labor efficiency, and second, you want to be able to maximize your storage space.”
Here are five basic functions or capabilities that distributors should look for in a system:

1. Radio Frequency (RF)
Palm Pilots have taken off in the business world, and the same kinds of devices have become increasingly popular in warehouse management. Some managers equip each employee with a two-way radio that contains a small display to receive instructions. Others have mounted communication and display capabilities directly on machinery, like a forklift. (They can then run off the machine’s power source.)

RF is sometimes referred to as the “bare bones” of a WMS. It enables all warehouse employees to be networked together, and every task is recorded in the overall system. But how much can RF really do? “Some people think that a hand-held computer will eventually replace the laptop for warehouse management, but they are not replacements, they’re extensions,” says Gerry Human, president of Step1 Business Products, Newbury Park, Calif.

2. Inventory Data
This is vital as distributors are pressured by both customers and manufacturers to add value to the supply chain. Customers are becoming more informed and are starting to ask specific questions about what distributors have available. A warehouse manager loses credibility when he has to say, “We think we have about…”

3. Shipment Tracking
A WMS allows distributors to partner with customers and transporters, sharing data through computer and RF networks so that exchanges are made smoothly. Distributors know when, and in what condition, inventory arrives at a destination.

4. Assessing Product Flow
Distributors Rencher and Miller each tout the benefits of being able to accurately assess product flow with a WMS. Having a strong grasp of the product cycles allows warehouse managers to know how much they need and when they need it.

5. A Bin-Locator System
“This could be very simplistic or very complicated depending on the system,” says Obal. “When an employee is deciding where to place a box, a bin-locator system will go through a series of rules so that space isn’t wasted and hazardous products aren’t put in dangerous places.” Honeycombing, or piling products together in inefficient ways, is one of the things a WMS can prevent, he says.

Other Features
It is also important for distributors to look for a WMS that can be easily upgraded in the future. Many programs have the capacity to add capabilities, but some would need to be overhauled entirely before they can be upgraded.

In order to evaluate how the software will adapt to a warehouse, WMS consultants suggest giving a prospective WMS a “test-drive” by entering some of the company’s data. A distributor should try to think of different scenarios that will arise in the warehouse and see how a particular WMS responds. Incorrect data can even be entered, to evaluate the WMS’s ability to catch mistakes.

There are also several logistical issues to consider before a distributor decides which WMS is best, says Newton. A warehouse manager “really needs to get organized before shopping for a WMS,” he says and explains that distributors should configure stocking locations, evaluate internal business processes and go over shipping procedures to make sure that no bottlenecks exist.

Measure Value
Jan/san distributors have requested software that will be integrated into the systems they already use and the providers seem to have been listening. “Some customers in the industry said, ‘We’re interested in getting a WMS,’ so we’ve been developing one,” says Mazer.

Prior to buying, there are five key ways that distributors can assess their return on investment with a WMS:

1. Inventory savings — The benefit most distributors point to is a large decrease in wasted inventory. A WMS will keep a distributor from over-ordering or under-ordering month-to-month. This is one of the foremost ways to evaluate a WMS’s cost-effectiveness.
2. Labor — Are employees able to save time and energy with a new WMS? Do they communicate in and out of the warehouse more effectively? With a good WMS, the answers will be yes.
3. Equipment — A management system that organizes the warehouse and reduces labor should also increase the productivity of equipment and machinery that is used.
4. Facility Space — As mentioned earlier, honeycombing is a common problem for warehouse managers. Distributors will find space they never knew existed with a WMS, and it should keep inventory from piling up inefficiently.
5. Customer Service — WMSs make it easy to store and retrieve data for customers whenever questions arise. Distributors can receive accurate “real time” facts with a new system.

For a basic, low-end, system, recent costs have hovered around $50,000 — still a sizeable investment. On the high end are systems with value-added services such as bar coding, employee route efficiency, storage strategy, storage automation, quality control, light assembly and other specific features. These systems can be anywhere from $500,000 to more than $1 million.

For now, costs seem to have dropped because of the lower cost of computer hardware. According to Mazer, viable systems for jan/san distributors can run between $10,000 and $20,000.

Choose Wisely
Now is a great time for midsized jan/san distributors to invest in a WMS. Distributors are needing to be competitive in third-party logistics (working with multiple manufacturers and wholesalers), align with transportation management systems and seek out the best ways to add value for the customer.

“Industry is going toward more standard interfacing,” says Obal. “A year ago you had maybe 20 WMSs that could do third party logistics as well, now there are more than 40 in the United States. To do that, there are a lot of issues that need to be addressed. We’re seeing that the private warehouses are really going to need the third-party functionality.”

Mazer, whose company Stanpak is developing a WMS specifically for jan/san distributors, says, “Buyers always have to be careful. However, in the paper and cleaning supply industry it’s not only important for a WMS to be integrated with an already existing network, it’s crucial.”

If a distributor would like a detailed comparison of the various WMS packages and vendors, they should consider contacting a WMS consultant, who can help fit a specific warehouse with a compatible system.

Distributors must be sure to choose a consultant who does not have ties with a certain WMS provider. “If a consultant is only mentioning one or two WMS options of the many that are available, a distributor should be worried,” says Obal.

Prepare For the
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