bridging the gap between legacy and best-of-breed...
TRANSCRIPT
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© 2012 Material Handling Industry®. Copyright claimed as to audiovisual works of seminar
sessions and sound recordings of seminar sessions. All rights reserved.
Welcome to Session 304
Sponsored by: Presented by:
Heather King , VP of Supply Chain Group
Norm Saenz, VP of Supply Chain Group
Bridging the Gap Between Legacy and
Best-of-Breed WMS
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Agenda
WMS Levels
Functionality Walk
Is ERP an Option?
Latest and Greatest
Why & How to Modify your Legacy WMS?
BOB Landscape
APL Logistics – Case Study (keep legacy)
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WMS Levels
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Warehouse / WMS Levels
Low Volume Tier 3 WMS
Picking-paper directed
Rider truck / cart picking
Hand picking from flow rack, shelving
or decked racking
Discrete order picking
1+ storage fixture types
Manual consolidation
Medium Volume Tier 2 WMS
Radio frequency
Pick & pass (zone route)
2+ storage fixture types
Small batch picking
Pick to light or voice directed
Carousels
Sliding shoe sorter
High Volume Tier 1 WMS
More automation-hybrid
Radio frequency
Wave picking
Higher speed conveyors
Increased versatility
3+ storage fixture types
Greater accumulation
Cross belt & tilt tray
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WMS – Memory & Tier 3
Memory
No location address
No automated sorting of orders
Tier 3 - Paper/Stock Locator
Location address
Record putaway location
Typically fixed forward pick locations
Batch processing
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WMS – Tier 2
Tier 2 - RF / Stock Locator / ERP Level
Real-Time
Auto-ID
Operator directed putaway
May have pre-routed pick lists
May have cycle counting
Radio Frequency allows the Stock Locator /
WMS to process information real-time.
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WMS – Tier 1
Tier 1 - RF / Best of Breed WMS
System directed tasks
Task-interleaving
Continuous cycle counting
Labor planning
Cross docking
Cartonization
Re-warehousing
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More Tier 1 Functionality
Order Planning & Scheduling
Unit of Measure Conversion
Location Management / Slotting
Inventory Allocation
Shelf Life Monitoring
Lot & Serial Number Tracking
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More Tier 1 Functionality
Cycle Counting
Replenishment & Consolidation
Task Assignment & Monitoring
Reverse Logistics
Scalability & Configurability
Upgrade Support
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Ramp-Up Your WMS
Provide real-time view of inventory by SKU, quantity, lot number, serial number & shelf life by location.
Facilitate a quick match of available resources to current & expected inbound, replenishment & outbound workload.
Select the best operators & equipment for tasks based upon proximity, skill sets and task priority.
Direct operators to immediately store or cross-dock receipts.
Support returns processing & reverse logistics.
Use task interleaving to minimize deadheading.
Optimize order consolidation, wave planning, inventory allocation & pick sequencing.
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Ramp-Up Your WMS Identify consolidation opportunities to free space and reduce
outside storage requirements.
Support bill of material, work order and value-added processing.
Update inventory records as events occur.
Provide accuracy that allows replacement of full physicals with scheduled and anomaly-triggered cycle counts.
Time stamp each transaction and identifies the operator who performed it.
Measure workforce performance and provides input for incentive programs.
Support supplier and carrier performance measurement.
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Functionality Walk
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Match LP to ASN or Retrieve PO
Validate Receipt
Resolve Exceptions
Check Demand
Issue Task
Update Inventory Records
• Stage
• Crossdock
• QC Move
• Putaway
• (Print & Apply LP)
• Stage
• Crossdock
• QC Move
• Putaway
RFDC
• Key-Enter Order #, Product
ID, Quantity & Condition
• (Pre-Printed License Plate)
RFDC
• Operator Assigned to Receiving
• Bar Coded Pallet ID (Scan or Key-Enter)
• (Verify Product, Quantity & Condition)
WMS
Receiving
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Putaway / Move
RFDC RFDC
WMS
Validate Location
Resolve Exceptions
Issue Drop Instruction
Update Inventory
Issue Next Task
• Storage
• Crossdock
• Quality
• Returns
• Other Confirm Drop
Await Next Task
• Operator Assigned to Putaway / Move
• Scan License Plate
• Move to Designated Location
• Scan Location Bar Code
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Inventory Management
Lot, Date Code & Serial Number Tracking
Shelf-Life Monitoring & Rotation
Catch Weighing
Routine & Exception Cycle Counting
Full Physicals
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Replinshment
Forward Pick Locations
Floating Forward Pick
Replenishment Trigger Controls
Demand Replenishment
Batch Replenishment
Re-slotting
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RFDC RFDC
Picking
WMS
Validate Location
Issue Pick
- - - - - - - - - - - - - - - - - - -
Validate Item / Quantity
Resolve Exceptions
Update Inventory
- - - - - - - - - - - - - - - - - - -
Issue Next Pick
• Operator Assigned to Picking
• Ready for Next Pick Task
• Scan Item Bar Code/LP
• Pick / Confirm Quantity - - - - - - - - - - - - - - - - - -
• Await Next Pick
• Move to Location
• Scan Location Bar Code
•Display Pick Location
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Staging / Shipping
Trailer Scheduling / Processing
Staging Location Management
Staged Load Confirmation
Door / Truck Verification
Shipping Labels
Manifests / Bills of Lading
Shipment Confirmation
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Slotting
Improve Space Utilization
Reduce Travel Times
Increase Pick Rates & Throughput
Optimize Replenishment Activity
Reduce Damage
Improve Safety
Simplify Retail Restocking
Use order & SKU activity profiles to deploy upon historical &
anticipated volume.
01 04 02 03 01 04 02 03
{ Golden
Zone
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Slotting – Off The Shelf
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Is ERP an Option?
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What about our ERP?
Can we get the job done with our ERP?
We have heard that it will cost less than a best-of-
breed solution and will enable us to avoid all of
the hassles associated with interfaces and
integration.
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Traditional Hierarchy ENTERPRISE SYSTEM
PLANNING
Demand Mgmt
APS
Customers
Suppliers
Carriers
Customers
Suppliers
Carriers
ADMIN/FINANCE
Purchasing
Order Management
EDI /
WEB
EDI /
WEB
Material Handling Device Control Data Entry Devices
Task
Mgmt
Order
Plan/
Release
Inventory
Mgmt Shipping Receiving Storage
Staging
Loading
Picking
Replen
WMS LABOR
MANAGEMENT
YARD
MANAGEMENT
TMS
W i r e l e s s o r L o c a l A r e a N e t w o r k
E n t e r p r i s e N e t w o r k
MANUFACTURING
MRP
MES
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The Lines Are Blurring
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Latest and Greatest
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What’s New?
Simplified Updating &
Configuration
SOA & WEB Services
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What’s New?
Dashboards
Richer
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Hosted (SAAS) solutions with basic WMS functionality
Initially developed to provide affordable solutions for small to
medium size warehouse operations
Now being considered by contract manufacturers & 3PL’s
Pricing models:
• Subscription fee ~ $500/month
• Monthly fee based upon number of users
• Subscription fee plus transaction fees ~ $195/month plus $.25/transaction
On-Demand WMS
READY FOR PRIME TIME?
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Why & How to Modify your
Legacy WMS?
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Why Improve your WMS?
Inventory Accuracy & Turns
Space Utilization, Stock Rotation
Order, Lot & Serial Number Tracking
Backorder Handling/Crossdocking
Resource Planning & Scheduling
Labor & Equipment Productivity
Performance Measurement
Customer Service
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Why Improve your WMS?
Damage/Shrinkage
Lost Stock & Safety Stock
Search Times & Deadheading
Paperwork/Human Error
Physical Inventory Taking
Labor, Equipment & Utility Costs
Courier/Delivery Costs
Outside Warehousing
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How to Improve? – Start by Mapping
Receiving
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How to Improve? – Do a RoadMap Don’t overlay WMS on flawed layouts & processes - it’s a certain
prescription for disaster.
Do the homework necessary to build a detailed, defensible value proposition & business investment case.
Get back to basics – look at how WMS can improve receiving, storage & picking – add functionality as confidence grows.
Avoid customization – it adds cost, lengthens implementation time & increases risk.
Depending upon your in-house background & expertise, recognize
that the “educating the prospect” component of the supplier’s sales cycle is not free.
There are few shortcuts – successful deployment requires solid preparation, commitment & management.
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BOB Landscape
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BOB Value Proposition FEATURE ADVANTAGE BENEFIT RISKS
System-directed,
interleaved put, pick,
consolidation, relocation &
replenishment
Reduced deadheading,
increased throughput &
efficiency
Better labor tracking;
lower labor &
equipment costs per
task
Worker acceptance of system-
directed mode of operation
Client personalization &
functional tailoring
Meet specific needs
without “force fitting ”
generic solution
Clients receive the
functionality they
specify
May deliver sub-optimal
answers for certain tasks;
added cost, possible delay.
Scheduled & exception-
driven cycle counting.
Real-time inventory
management
Increased inventory &
storage location
content accuracy
Balancing & prioritizing cycle
counting with other tasks.
FDA, NAFTA & other
regulatory compliance
functions
Field proven modules as
opposed to custom
development
Lower costs to comply;
shorter deployment
time.
Completeness of fit with
client’s specific needs; staying
current with regulations.
User Training &
Certification
Depending upon the supplier,
comprehensive programs for
ensuring operator readiness
Self-evident Trainer familiarity with client
environment & application
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The WMS Market
294
110
130
27 21
8 4 3
0
25
50
75
100
125
150
175
200
225
250
275
300
# Warehouses (000's)
<5,000
<10,000
<25,000
<50,000
<100,000
<200,000
<500,000
>500,000
TOTAL WAREHOUSES: 597K
TARGET MARKET: 63K to
90K
CURRENT USERS: 35K Sites
Sq. Feet
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BOB WMS Revenues
0
200
400
600
800
1000
1200
1400
1250 1195 1205
1290 1325 1400
2008 2009 2010 2011 2012 2013
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APL Logistics – Case Study
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APL Logistics – Project Scope
APL/Bobcat commissioned TranSystems to conduct a distribution center assessment to determine:
• Is overall worker performance at or near 100%
• Can a new WMS, or LMS, or integrated WMS / LMS provide the tools to improve worker performance such that the labor savings can justify the capital investment for the new technologies
APL also wishes to understand if there are any areas of the operation where improvements in productivity or accuracy are available
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Benefits of a New WMS / LMS
The existing APL WMS Application is delivering many of the benefits that a new WMS would provide because many of the fundamental inventory controls with bar code scanning are already in place.
An optimistic labor reduction for a new WMS would be a head count reduction of 5 FTEs and similarly, an optimistic reduction of 3 FTEs would be associated with a new tier 1 LMS application
Accuracy would improve marginally but not enough to place a hard dollar value on it.
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5-Yr Cash Flow Analysis
for a New WMS
0 1 2 3 4 5
Estimated Labor Savings -$ 189,527$ 192,844$ 196,219$ 199,653$ 203,147$
Maint. & Support Expenses from WMS -$ (94,875)$ (94,875)$ (94,875)$ (94,875)$ (94,875)$
Learning Curve Labor Ramp-Up Penalty -$ (50,000)$ -$ -$ -$ -$
Depreciation -$ (179,583)$ (179,583)$ (179,583)$ -$ -$
EBIT Impact -$ (134,931)$ (81,614)$ (78,240)$ 104,778$ 108,272$
EBIT Impact -$ (134,931)$ (81,614)$ (78,240)$ 104,778$ 108,272$
Adjust for Non-Cash Items
Depreciation -$ 179,583$ 179,583$ 179,583$ -$ -$
Total Non-Cash Items -$ 179,583$ 179,583$ 179,583$ -$ -$
Income Tax -$ 52,488$ 31,748$ 30,435$ (40,758)$ (42,118)$
Net Cash Flow Impact -$ 97,140$ 129,717$ 131,779$ 64,019$ 66,154$
Capital Investment (1,463,280)$
Total Cash Flow Impact (1,463,280)$ 97,140$ 129,717$ 131,779$ 64,019$ 66,154$
5-Year
Net Present Value (@ 13%) 986,066-$ WMS will reduce head count by an estimated 5 FTEs
Total 5 Year Cash Flow 974,471-$
Cash Flow Analysis for WMS Investment
Key Assumptions
Financial SummaryCash Flow Impact by Year
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5-Yr Cash Flow Analysis
for a New LMS
0 1 2 3 4 5
Estimated Labor Savings -$ 122,242$ 124,381$ 126,557$ 128,772$ 131,026$
Maint. & Support Expenses from LMS -$ (31,750)$ (31,750)$ (31,750)$ (31,750)$ (31,750)$
Learning Curve Labor Ramp-Up Penalty -$ (10,000)$ -$ -$ -$ -$
Depreciation -$ (45,333)$ (45,333)$ (45,333)$ -$ -$
EBIT Impact -$ 35,158$ 47,297$ 49,474$ 97,022$ 99,276$
EBIT Impact -$ 35,158$ 47,297$ 49,474$ 97,022$ 99,276$
Adjust for Non-Cash Items
Depreciation -$ 45,333$ 45,333$ 45,333$ -$ -$
Total Non-Cash Items -$ 45,333$ 45,333$ 45,333$ -$ -$
Income Tax -$ (13,677)$ (18,399)$ (19,245)$ (37,742)$ (38,618)$
Net Cash Flow Impact -$ 66,815$ 74,232$ 75,562$ 59,281$ 60,657$
Capital Investment (271,700)$
Total Cash Flow Impact (271,700)$ 66,815$ 74,232$ 75,562$ 59,281$ 60,657$
5-Year
Net Present Value (@ 13%) 8,085-$ LMS will reduce head count by an estimated 3 FTEs
Total 5 Year Cash Flow 64,847$
Cash Flow Analysis for LMS Investment
Financial SummaryCash Flow Impact by Year
Key Assumptions
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APL Recommendations
1. A new WMS is not cost justified and should not be
pursued on the basis of economic value to the firm
2. The business case for a new LMS is not compelling
enough to justify the investment and should not be
pursued unless management decides that there other
intrinsic advantages to investing in an LMS
3. Existing labor standards should be tightened up to
reflect the realities of the environment:
• E.g. A full inbound container of tires may require 4
hours to unload for 2 FTEs which is not related to
the number of receipt lines being processed
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APL Recommendations
Recommendation Description Financial
Benefits
FTE
Equivalents
Eliminate MUIDs
Multiple inventory records based on PO lines cause the
picking and packing operation duew to slow down to extra
pick tickets that need to be processed
$ 10,712 0.3
Eliminate commingled
SKUs
Renumber the warehouse such that each bin location has a
unique location name and bar code to minimize search
time and to improve accuracy
$ 44,520 1.1
Slot Fast Movers in
Golden Zone
Reslot about 2500 "A" and "B" SKUs from the back of the
warehouse into the golden zone to ensure that 75% of the
order lines are putaway and picked closest to the receiving
and shipping dock to minimize travel time
$ 134,295 3.3
Total $ 189,527 4.7
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