WMS Software Selection—All You're Betting Is the Business
By Mohamed Y. Amer, Ronald D. Chase, and Chris L. Brumett -- Supply Chain Management Review, 6/1/1999
Selecting a Warehouse Management System (WMS) for your organization involves a series of complex decisions that carry both immediate and long-term strategic and operational implications. If the selection and installation goes perfectly, it will occur virtually unnoticed. Receiving and shipping activities will appear to continue as usual as the real benefits of the WMS are steadily and increasingly realized over time.
On the other hand, the slightest hitch in the WMS implementation process can bring your warehouse to a standstill, confound all backup plans, and even destroy your business. The difference between a smooth and seamless transition to the WMS and the worst nightmare of your career depends heavily on the preparation and due diligence expended during the preparatory and software selection phases leading up to implementation. This article offers guidance on how to execute those critical activities successfully.
Warehouse Management System projects are unlike any other challenge a supply chain professional or IT project manager will face. Why? A successful WMS must function in concert with the physical facility, equipment, and workstation layout as well as the individuals working in the distribution center. A WMS is an integrated business system, a critical link in your supply chain. If it doesn't work, everything stops—and everyone up and down the supply chain will feel the impact. So in a very real sense, you're betting the business on the success of its implementation
Should you be a player in the third-party logistics arena (3PL), the WMS implementation stakes may be even higher. Third-party providers have unique business requirements that set them apart from the typical distribution center. For them, a WMS is a key marketing tool in the pursuit of prospects. In the 3PL's multicustomer environment, the reporting requirements, inventory data integrity, and labor-hour tracking capabilities are of paramount importance.
Today's WMS packages can deliver a host of benefits. They can effectively address such diverse and intricate distribution center issues as customer service, inventory management, business needs, and labor and materials-handling requirements. A well-integrated WMS solution can deliver exciting inventory reductions, accuracy improvements, labor savings, and better space utilization.
The extent of those benefits can vary from installation to installation—even with the same WMS package. To a large degree, the benefits derived will be driven by your current operational situation. To assist in measuring the potential benefits and actual benefits derived from the WMS implementation, you must collect baseline data on current costs and key operational metrics. It's important that the measures used can be applied equally well in both the pre- and post-implementation environment.
An Industry in TransitionToday, it is "buy, sell, and consolidate time" in the WMS business. The good news for users and potential users is that, as the shakeout continues, those at the top are clearly separating themselves—at least in revenue and number of implementations—from the rest of the pack. Characteristics of the emerging leaders are (1) the financial strength to allow for necessary R&D investments, (2) a global implementation ability, (3) an increasing product footprint that includes transportation and labor management, (4) an integrated supply chain vision, and (5) a business organization that can deliver against that vision. Current WMS leaders include EXE Technologies, Manhattan Associates, McHugh Software International, Catalyst International, and Optum Software.
The consolidation will continue over the next several years as the major players respond to pressures both from within the WMS vendor community and from ERP vendors that are poised to market their own fledgling WMS offerings aggressively. The top-tier Warehouse Management System vendors will survive and grow, while the rest of the pack struggles to survive. The dwindling number of smaller players will likely focus on specific industry verticals. Instead of providing standardized, packaged solutions with global execution capabilities, these niche players will concentrate on local/regional customized solutions delivered with a "high-touch" service approach.
In addition to the consolidation taking place, there are fundamental changes in the business approach being adopted by the players in this market arena. A few short years ago, the predominant mode of operation was to provide custom solutions. In effect, a vendor's last implementation was the starting point for its next one. Typically, these customized efforts ran over budget, incurred too-long implementation periods, and were dominated by proprietary technology. Furthermore, custom solutions brought with them an unacceptable level of risk.
That approach no longer works very well. Users want proven solutions that can be executed within a shorter time frame. Accordingly, the new direction is packaged solutions that require few, if any, modifications. Customers would rather remain on the WMS vendor's upgrade path, enjoying the ability to enhance their system easily with each new release. Increasingly, vendors are recognizing the importance of maintaining that path.
The Life Cycle of a WMS ProjectThe WMS project life cycle generally has three distinct stages: preselection events, software package selection, and finally implementation. (Exhibit 1 gives an overview of these stages.) Each stage varies in length based on a company's particular situation. The main variables include organizational readiness, operational complexity, available resources, and budgetary processes. From preselection to startup, a WMS project can take anywhere from 18 months to three years or more. Each stage is discussed below, with an emphasis on preselection activities and software selection.
The Preselection Events
The preselection stage has less to do with any specific WMS package than it does with the state of your company. Preselection encompasses all of the preparatory organizational activities necessary to sell the project internally. Everyone in your organization must recognize the WMS initiative as a strategic business decision ... a decision that will meld operational flexibility, customer service, and facility design into a competitive advantage. During this critical phase the selection team is named and a project leader chosen who will develop a strong business case for WMS implementation. This key individual must carefully lead decision-makers through the options at every stage of the project.
Select the Right Team
Your WMS selection team should be a core group of logistics and information systems professionals. Ad hoc participation by other disciplines such as marketing, finance, and merchandising will depend on your industry and the nature of your organization. It's important to include line supervisors at every point in the selection process. They are the people who will make the chosen system succeed or fail. More importantly, from a selection standpoint, line supervisors can help bridge any knowledge or communication gaps between the line workers and the "big-picture" executives.
In drafting a winning selection team, keep in mind that you are organizing for a business logistics project—not an IT project. Although you do want to pull in the ideas, possibilities, and technological options that only IT people can contribute, it is the operational folks who will breathe life into this system (or squeeze the life out of it). So, the message is to draw your leaders from operations.
One way to create a positive team mix is to include IT people who balance well with the WMS business project manager. Seek out people who appreciate and respect each other's knowledge and judgment. Never forget that you are building a team that not only has the professional expertise to choose the right system, but also the political clout to sell it into the organization—from preselection through implementation.
The selection team also needs to develop a clear understanding of its requirements early on. This process begins with identifying the functionalities essential to your company. Other important considerations include service and support, technology, vendor viability, and vision. Start by getting agreement among the team and executive sponsors concerning what is needed and what is an absolute "must have."
One of the selection team's early tasks is to identify a list of potential vendors. One proven approach is to begin by developing a long list of candidates (say, 20 or more). The listing can be based on basic functionality, technology needs, and inherent risk. Read the trade publications, review vendor marketing literature, and talk to your peers in developing this list. Here's where participation in professional organizations like the Council of Logistics Management, Warehousing Education and Research Council, or APICS can prove invaluable. Consultants and other specialists in this area then can work with you to pare the list of candidates down to a more manageable size of 10 or less.
It's not too early at this point to start thinking through the kinds of questions you ultimately will have to answer through the evaluation and selection process. Can the vendor provide proper support during all phases of the project—from presales, through a Conference Room Pilot, and then during implementation and post implementation? Can it handle multiple projects simultaneously? Does the vendor attract and keep good personnel while consistently demonstrating professionalism at all levels? Is the vendor's technology appropriate for you? Can the vendor handle your needs as you grow? Does it show proven competence in your industry? Has it implemented an operation similar to yours? How long has the vendor been around and is it well funded?
The more effort that is expended during this pre-selection stage, the less likely that you'll be disappointed with your final selection.
Identify Your Risk Quotient
In the process of addressing these issues, you will begin to understand the inherent risk—the risk quotient (RQ)—that your organization finds acceptable or desirable. Risk-seeking organizations may find a high-risk vendor or project acceptable, while being dissatisfied with a low-risk option. Conversely, risk-averse companies will likely be far more comfortable with a low-risk vendor or solution. Your RQ could turn out to be the tiebreaker in the final decision as you get down to the short list of vendors. Knowing your risk quotient also may lead to needed final adjustments in the contract that will increase the likelihood of your project's success.
As you think about your risk quotient, consider that higher-risk projects are likely to include more aggressive timelines, "bleeding edge" technologies, new vendor functionalities, new version releases, and advanced processes and operations. A safer, lower-risk project would exhibit opposite characteristics. A low-risk solution, however, might never deliver on the benefits you sought by implementing a WMS in the first place.
Software Package Selection
In the software package selection stage, you determine your requirements, develop a request for proposal, conduct demos and site visits, select the vendor, and begin work on a high-level implementation plan. (Exhibit 2 gives an overview of the process.)
Determine the Business and Logistics Requirements
Determining your company's real business and logistics requirements is one of the most critical activities in the software selection phase. These requirements are the drivers for the operational and technology capabilities to be delivered by the WMS package. (See Exhibit 3.) The following activity checklist will help in establishing these critical requirements:
- Review your company's business direction and overall strategy.
- Assess current and prospective supply chain strategies.
- Review existing logistics initiatives.
- Define required current services and planned future services.
- Determine expected service levels.
- Review product and transportation flows.
Once the base requirements are set, you can define the operating concepts and the needs of your materials-handling system. This is a good time to review your existing operational processes carefully to see how they might better support the business and logistics requirements. Look at your entire facility—the layout, the equipment, the workstations. How do your associates perform receiving, putaway, and picking? Can these activities be improved upon? Take this pivotal opportunity to make any changes that already should have been made. This exercise will help you avoid having to change your operational processes after implementing the WMS.
Defining your technology and interface needs is another critical task in the requirements definition phase. The following actions will help put the technology boundaries around the WMS application:
- Define application scope needed to support your business and logistics requirements.
- Determine your technology strategies and desired technical architecture and standards.
- Define your organization's desired interface approach.
- Review, define, and assess likely interfaces to corporate systems.
- Document technology issues, requirements, and desired standards.
Look to your IT professionals for help here. They will be invaluable in validating the technology direction and sifting through the various vendors' claims. Working closely with IT, the logistics people will be better positioned to determine current and future needs. Among the key questions to ask at this point are these: Are real-time updates to your customer service and central inventory necessary? Once you implement the WMS, will you have dedicated IT support or will that capability reside in your logistics group? What new technology-related skills will be required of your supply chain professionals?
Develop the RFP
Developing a Request for Proposal (RFP) for distribution to potential vendors is the next step in the software selection process. As depicted in Exhibit 4, definition of the WMS requirements drives the RFP preparation and evaluation criteria. These requirements also serve as the basis for creating demo scripts and associated evaluation criteria.
The identified operational and technical needs must be translated into specific WMS functionality, interface, and technical requirements. To illustrate, a company might have a business requirement to reduce cycle time—specifically shipping goods within six hours of receipt in the distribution center. That requirement could point to a need for cross-docking. A cross-docking capability, in turn, translates to such requirements as bar-code labeling, scanning and automatic data capture, real-time interface to the order-management system, and integration with the materials-handling system.
Another important part of the RFP-preparation process is to gather statistics on volume and other quantitative data for dissemination to potential vendors. This information allows them to provide an approximate cost for the hardware and ensure that their software can handle the defined needs. Relevant data include number of SKUs, number of bins/locations, storage types, size of the facility, number of associates using the system, cartons received and shipped, number of orders, and number of lines. These data should reflect both average and peak volumes.
Creating demonstration scripts and related evaluation criteria is another part of the RFP-development process. Demo scripts are the operational scenarios against which you expect the vendors to exercise their software. How well they perform here will be a key basis of comparison among the selected vendors. For a meaningful comparison of the demo scripts, the team needs a set of scoring cards. These cards should represent priorities, weightings, and partial credit procedures that the entire selection team has agreed upon.
These demo scripts may or may not include your own data and products. Usually, these come into play during the Conference Room Pilot. Yet any effective demo script will include the core processes and transactions that are critical to your operation's success. For example, if you have developed a lean receiving team that also doubles as the putaway crew doing live unloading, you'll want to see how the prospective WMS handles that process (number of screens, keystrokes, and so forth).
The demo scripts used in the RFP should be designed in concert with those developed for the Conference Room Pilot. The more complete CRP scripts will cover all operational concepts with normal and exception-handling situations. Their purpose is to uncover any software gaps, establish all configuration settings, and fully define interface requirements and screen needs. Going through a CRP with that level of script detail is the only way to have confidence in the projected cost, expected benefits, and eventual project timeline.
Consider Other Criteria, Create Scoresheet
In preparing the RFP and evaluation criteria, two final areas merit special attention: the nonfunctionality issues and the evaluation scoresheet. Up to this point, the discussion has focused mainly on functional needs and requirements. Equally important, though, are the nonfunctional criteria. To make an informed decision about these considerations, ask the following questions of and about the vendors:
- Performance record, number of resources, availability, and timing.
- Financial viability.
- Length of time in business.
- Complete list of installations.
- List of references.
- Cost/licensing structure.
- Project methodology.
- Software development process.
Finally, be sure to construct a vendor scoresheet before the RFPs are reviewed. Make certain that the scoresheet is understandable and easy to use. The entire selection team should be involved in this activity, particularly in determining priorities and weightings and clearly defining how to score "partial credits." Evaluation consistency becomes critical when comparing multiple vendors. Also, communicate to vendors your specific expectations on the timing of RFP responses, the format, and the binding nature of their responses.
Picking a Winner
Having laid a solid foundation, you are ready to proceed to the final phase of the software-selection process—picking a vendor. During this process, shown in Exhibit 5, you will move from the short list of vendors, to the top two or three candidates, and finally the winning vendor. Actual vendor responses to the RFP, vendor performance on demos, and site visits to the vendor's previous installations are the three components driving this activity.
Thorough analysis and evaluation of the RFP responses is a first step here. By using the pre-established scoring criteria, the selection team can more accurately gauge the completeness of the responses. Quickly follow up on any questions, discrepancies, and items that require clarification. This process provides an additional measure to assess vendor responsiveness. In reviewing the completed RFPs, consider such questions as: How accurate are the responses? Is appropriate attention to detail evident? Are the responses internally consistent?
Separately, develop a telephone reference checklist for followup clarification questions. To obtain more consistent and comparable evaluations, a single individual should conduct all the reference calls. In many instances, open-ended inquiries will trigger further "drill down" questions. Again, these questions are best asked by the same individual.
Clarification questions help you validate the vendor's responses. Pursue every avenue considered important to your implementation—quality of the vendor's personnel, responsiveness to problems and project timeline, methodology and approach, delivered vs. promised functionality, training support, documentation provided, help-desk support, project management effectiveness, and turnover of vendor project personnel.
RFP responses, followup information, and the telephone interviews should be combined to represent one of three scores given each vendor. At this point, you can eliminate any vendor that does not meet established minimum requirements. This reduces the time and effort invested in the next two scoring categories: vendor demonstrations and site visits.
Conduct Vendor Demos
Vendor demonstrations are an important part of the decision process. Because you've already developed the operational scripts, you control the pace and sequence of these demonstrations. Normally, a demo should last no longer than four to eight hours, including the predemo briefing of the selection team and the post-demo evaluation and scoring review. Evaluation can be simplified if the same individual on the selection team focuses on the same set of functionality across all demos.
Make no assumptions about how the software works. Request that everything be made explicit. In the long run this will benefit both the customer and the vendor. Is the vendor showing you the right screens? Count the number of keystrokes required to accomplish major operations. Evaluate only what you see, not what the vendor promises will happen. Ask the same question several different ways and see if you get the same answer.
At the end of the day, the selection team members need to reach some consensus on what they have seen. Merge scoring and overall impressions. Document everything while the demo is fresh in everyone's mind. If you wait a day or two, confusion begins to set in. Importantly, the demos afford another opportunity to eliminate any vendor that does not measure up. There is no point in keeping a lagging vendor in the running through the time-intensive site visits.
Make the Site Visits
This final stage of the selection process is in many ways the most important. It is your chance to observe, firsthand, how the WMS package under consideration works in someone else's facility. The vendor will, of course, prefer to select the site or sites for you to visit. Yet you would be wise to pick your own sites based on the complete installation list provided in the vendor's RFP response.
Choose sites that best approximate your own operation and business processes. Find facilities that face the same type of receiving, picking, storage, racking, shipping, and materials-handing challenges. Don't waste your time viewing the vendors' showcase trophies unless they are representative of your own WMS needs. And don't assume, for example, that because a vendor is effective in some complex distribution environment, it will be similarly effective in a much simpler one. Meaningful comparisons of like facilities are the only answer.
During the site visit, take the golden opportunity to interact with the people who use the system on a daily basis. Talk to the associates at the receiving dock, on the forklifts, and in the picking stations who are actually doing the work. Ask the supervisors how the system facilitates or hinders the management of their people and operations. How did the implementation go? Was the training effective? How is the RF response? How many keystrokes does it take to perform the job?
Also talk with the distribution center and IT managers. They can fill you in on the project timeline, methodology, hardware, and existing configuration (and how they compare with the vendor's original specifications). Productivity numbers—before and after the WMS implementation—are extremely instructive. How much productivity loss did they encounter during the implementation period and how long did it take them to recover? Did they achieve their expected key benefits?
Everyone in the visiting party should have a predesigned site evaluation form with priorities and weights in place. The form will cover functional, operational, and technical aspects of the visit. The objectivity of the form complements the more subjective observations and conversations that will take place during the visit.
Add in the Intangibles
At this stage in the selection process, you should have the final list of vendors with several key measures in place. The established priorities and weights will reflect how the selection team viewed the packages under consideration. Now, it is time to add the intangibles into the mix. These are the impressions from your many interactions with each vendor. The level of professionalism, the depth of talent, and the ability to deliver on promises are all important considerations. Where are their offices in relation to the implementation site? Is this an organization you want to have as a long-term business partner? Where do they fall across the risk quotient?
At this point in the software selection process, the team should name its number one and two vendors, including the rationale for those choices. After obtaining top management or executive steering committee approval for the selections, the team can pursue one or more of the following options:
- Initiate negotiations for a Conference Room Pilot; this will provide greater certainty about the project budget.
- If there is no significant difference between the top two vendors, negotiate for better financial terms and conditions.
- Go back to the business to revalidate the business case. Through your findings in the selection process, you may discover that your cost or benefit assumptions were very wrong—thus significantly changing your timelines and ROI.
- Outline a high-level implementation plan.
Successful implementation of a WMS project is a demanding and critical task—and really the subject for another article. Broadly speaking, this stage involves developing a detailed implementation plan, negotiating the contract, and executing the plan through startup. An experienced and dedicated team is central to any successful implementation. To keep the project on time and within budget, IT and logistics personnel must establish a relationship of trust and partnership.
As users proceed through the painstaking selection and implementation process, they can take heart in the knowledge that Warehouse Management Systems are coming of age. Vendors are more professional and exhibit greater discipline and maturity. They are developing more useful packaged solutions, global implementation capabilities, and a broader supply chain vision.
Yet even with these advances, a careful selection and evaluation process—spearheaded by a dedicated selection team—remains the surest way to acquire a software package that directly responds to your current and future businesses, logistics processes, and operations. The success or failure of a "bet the business" WMS implementation depends squarely on how committed you and your organization are to this process—and to the dedication of the necessary resources, budget, and time.
| Preselection Events | Software Package Selection | Implementation |
| Recognize WMS selection as a strategic business decision that melds operational flexibility, customer service, and facility design into competitve advantage. | Determine business and logistics requirements. | Develop implementation plan. |
| Develop the RFP. | Negotiate the contract. | |
| Outline implementation plan. | Go from drawing board to warehouse floor. | |
| Form selection team. | ||
| Develop a business case for WMS implementation. | ||
| Investigate options; upgrade existing system, custom solution, or package. |
| Author Information |
| Mohamed Y. Amer is a senior manager with Kurt Salmon Associates; Ronald D. Chase is an associate director of Hunt-Wesson Inc.; Chris L. Brumett is USF Logistics' manager of information systems. The article is an outgrowth of a joint presentation made by the authors at the 1998 Council of Logistics Management annual meeting. |
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