How quickly do you react to pain? If you're like the proverbial frog placed in a pot of tepid water, you start out pretty comfortable. As someone turns up the heat a few degrees at a time, you hardly notice, until you boil to death.
If you get too comfortable, running a warehouse management system can be like that. While the system stays the same, business conditions can gradually come to a boil.
This article is about "frogs" that jumped from an enterprise resource planning (ERP)based system to a "best-of-breed" warehouse management environment. Each had a different motivation for making the jump, but these operations had things in common:
- The company is on the threshold of dramatic growth;
- Customers are demanding better service; and
- it's time to escape from old, manual processes.
Time to Get Lean at Timex
Andrew Ledesma, manager of distribution engineering and worldwide transportation for Timex Corp. (www.timex.com), likes his logistics lean. That's hard to accomplish when you're in charge of thousands of SKUs, each of which has different packaging configurations for the different global markets the watchmaker serves. That could mean as many as 20,000 inventory items.
Starting in 1996, Timex began looking to reduce supply chain inventories to the minimum it could handle while retaining a good fill rate and service level for customers. The company had multiple distribution centers around the world, one each in Canada, the United States, and Mexico, and several in Europe and Asia.
Today it serves the world's major retailers and drugstore chains from a new global distribution center in the Philippines' Mactan Economic Zone. The $13 million, 46,000 sq.-ft. facility is equipped with technology and systems to pack and ship 170,000 watches a day, which are sent off in 16 jumbo airline containers to stores worldwide. Eighty percent of its sales are in the United States.
Before it got to this point, however, Timex produced watches to sales projections, which resulted in duplicate inventories. To help manage its labor, inventory, and transportation, the company relied on home-made software programs, interfaced to its ERP system from Oracle (www.oracle.com). To meet the demands of international markets, it was assembling watches six to eight weeks before it ever got an order for them. These generic watches were repackaged to meet customer specifications once they reached the distribution center in each market region. That meant pulling watches out of their packaging, then repackaging and relabeling them to store specifications.
Working with St. Onge (www.stonge.com), a supply chain engineering consulting firm, Timex managers concluded that by consolidating its manufacturing and distribution into one location in the Philippines and relying on air freight and JIT delivery from there, the company could enjoy major supply chain efficiencies and convert to a build-to-order philosophy.
"When they elected to do that there was a complete business reengineering," explains Dan Hanrahan, CEO of the Numina Group (Burr Ridge, Ill., www.numinagroup.com), the system integrator Timex selected to help structure its material handling flows. "The business rules, and how they handle the orders, schedule the orders, build the order waves, and schedule the final assembly of watches that then become the goods that go into the shipping distribution center, is done with a best-of-breed SSA Provia WMS in conjunction with the supply chain management system." (In late July SAA was acquired by Infor, www.infor.com.)
Timex now has a 48-hour window in which to assemble products to order and ship by air via UPS or Fedex. Once shipments hit the ground in the United States, they arrive at customers' stores within seven days.
"Direct shipping from a single facility eliminates inventory in between facilities," says Ledesma. "We have improved fill rates due to assembleto-order using a common base of inventory at the source. We have also reduced logistics costs to deliver the product. We deliver the right product at the right time a higher percentage of the time than we could in our U.S. facility."
In Pursuit of Inventory Accuracy
Darren Creasey is the warehouse manager for Authentics Ltd. (www.authentics.co.uk), a U.K.-based retailer of designer household goods. Authentics relies on a 16,000 sq.-ft. warehouse in Hersham, Surrey, England, to store more than 1,000 SKUs ranging from bathroom accessories, handmade glass items, home decoration items, and giftware. The company's products are shipped throughout the world to a customer base of both large and small retailers. The company also takes orders online directly from individual customers.
As Authentics' customer base grew, its paper-based warehouse management procedures couldn't keep up. In 2004 it began to search for a warehouse management system to help them better run their warehouse. The facility was already using SAP's Business One accounting system, but that wasn't enough to handle the company's logistics needs.
"If we had stayed with the ERP approach it would have meant staying with all manual picking," says Creasey. "There wouldn't have been any scan guns. We were working with a program called Authenticator, an all manual system. People used a piece of paper to pick orders. It relied on the operators knowing where lots of stock was. It wasn't very good for accounting, so we decided to go with a best-ofbreed system."
That system was RadioBeacon (www.radiobeacon.com). The major benefit of going with this WMS was inventory accuracy.
"We used to take just over a week to do a full stock count," Creasey says. "The most recent one only took us a day and a half. This year's stock check was the best ever in Authentics' history. We were only 52 pounds down [in currency] instead of a couple thousand."
Authentics still uses SAP for purchasing and dispatch, but the addition of a best-of-breed WMS has given the company more inventory visibility and better picking and order accuracy. Carl Marin, vice president of Radio Beacon, says by blending the WMS with the SAP system, his company helped Authentics establish employee buy-in.
"To help overcome that best of breed stigma we've embedded it within most of the accounting software applications, so when you're looking at the software you don't know whether it's SAP or RadioBeacon," he explains. "There's a single source look and feel to this best of breed technology."
Shifting from Manual to Automated
Sportsman's Warehouse (www.sportsmanswarehouse.com), based in Salt Lake City, replaced all of its retail point-of-sale systems in 2003, going from an antiquated dial-up system to a thin client model which gave it real time visibility into everything in its stores. In 2004 it was the logistics department's turn for an update. With 50 stores, Sportsman's didn't have a WMS. It had an inventory control system.
"We had a bunch of product in the warehouse and when we received something we would manually key the receipts in," explains Chris Utgaard, chief operating officer for the hunting and fishing chain. "We would make notations on a packing slip to verify we got everything the vendor said they shipped us, manually key those receipts into the system and when a sales order came in we would print it off as a pick sheet and go into the warehouse seeking the merchandise."
The warehouse stored items sorted by manufacturer and then the manufacturer's part number. All the Winchester merchandise, for example, was stored using Winchester's part numbers. Employees would write down whether merchandise was in stock or out of stock, then they would manually key in shipments and generate an invoice. For a chain growing 50% each year, that system couldn't last long.
"We knew we wanted directed picks and better inventory control, and to utilize radio frequency," Utgaard says. "The warehouse system we were using was a mini ERP for small businesses. The choice was either go to one of the big ERP systems or figure out how to integrate what someone else had to what we had. We're on track to be $1 billion in revenue by 2008 so we recognized we were reaching a breaking point with that software."
Sportsman's worked with Q4 Logistics (www.q4logistics.com), a Southern California consulting firm, to rescue its DC from its inefficient layout. Then the consultants helped narrow down a list of WMS candidates. Sportsman eventually went with Highjump Software (Minneapolis, www.highjumpsoftware.com).
"Highjump gave us the flexibility to make the system perform exactly as we wanted it to," says Utgaard.
"Material handling processes add a certain level of complexity as we're doing more and more control of those systems, including the routing of product via conveyors and sortation lines," adds Chad Collins, director of product strategy for Highjump. "Once you establish the business rules the next step is mapping them to the specific process objects in the system. We spend more time on the up front definition of business rules with the customer."
The new system helped Sportsman's grow another 50% before it finally had to increase headcount at the warehouse.
The Do-it-Yourself Approach
While some supply-chain leaders might take comfort in leaving best-ofbreed WMS integration to the software provider or integrator, others prefer a do-it-yourself approach. That's easier to do if you're both the CIO and CFO of a company, as Kevin Lehoullier is. He heads up Arthur Schuman Co. (www.arthurschuman.com), a family run, third generation cheese importer based in Fairfield, N.J. The company specializes in hard Italian grating cheeses and enjoys a 40% share of that market in the U.S.
Schuman has 400 active stock items. That translates into a total of 3,000 SKUs, because the company is also a converter. A third of its business is retail which includes club stores, a third is in food service and restaurants, and a third is industrial sales.
Since 2001 Schuman had been using the WMS component of Great Plains' ERP system (now known as Microsoft Dynamics GP, www.microsoft.com/dynamics/gp/). The software did basic rudimentary functions like warehouse slotting, shipping and billing, but with projected business growth of 30% by 2007, Lehoullier knew his company would need the directed work, labor management, cross docking and customer visibility tools that come with a best-of-breed WMS. He chose Red Prairie (Milwaukee, www.redprairie.com).
"RedPrairie is being used by a major customer and partner, Sargento Foods, in Plymouth, Wis.," says Lehoullier. "We were impressed with how they used it. Their catch weight functionality is also better than others I've seen. Most systems I looked at would either catch weight on the inbound or outbound, not both. My vendor sells us wheels that are a random weight, so every time I buy a pallet of cheese it doesn't weigh the same amount. You have to catch those weights on the inbound, during cycle counting, and on the outbound."
Lehoullier and his team integrated Red Prairie to their Great Plains system using stored procedures and triggers within tables in each database. He's glad they did, because their Great Plains will eventually morph into another system from Microsoft, and that will have an impact on his integration.
"However they modify the inventory and point-of-purchase tables, then I'll have to change my scripts," he says. "But the way we approached it, it will be less costly in the long run and we'll understand what's happening as opposed to leaving it in the control of someone else. With the tools available to do this, I can pay a $60,000-a-year guy—once I've developed [the system]—to manage it, change it and understand it. It's a lot cheaper just to build your own little tool."
A best-of-breed warehouse management system is only as good as the enterprise and business processes to which it interfaces. Laying that groundwork may be challenging, but the pain it requires will be a lot less than the agony that eventually comes from doing nothing.