Some manufacturers giving SaaS warehouse management systems a shot

Software as a Service (SaaS) warehouse management systems (WMS) are piquing the interest of manufacturers who don't want the warehouse management costs associated with large in-house WMS software.

Associated Global Systems (AGS), a global shipping and logistics company headquartered in New Hyde Park, N.Y., needed warehouse management system (WMS) software that would allow it to execute a strategic initiative to create more warehouse services, including a warehouse service that would allow its customers to position inventory in its various warehouses for drop shipping. The company, which has 94 U.S. locations and a worldwide network of overseas partners, wanted to streamline the pick, pack and shipping process of an item in inventory as it expanded its third-party logistics (3PL) line of business.

However, the company's existing WMS "was an old dinosaur and just wasn't up to the task," said Fred Ruffolo, director of technical information and quality control for AGS.

When the company started to compile a short list of WMS software solutions, it wanted to avoid products from the larger, more established WMS vendors because "we didn't want a big system," Ruffolo said. Yet the company still needed a solution that could deliver full WMS functionality out-of-the-box and would be able to accommodate evolving customer demands.

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In the end, AGS turned to a SaaS WMS solution from SmartTurn, a startup software vendor in San Francisco. Version 2.0 of the vendor's SmartTurn Inventory and Warehouse Management System allows companies such as AGS to deploy a WMS with just a browser, as opposed to running the software on a server.

Uploading whatever inventory AGS already had in electronic format into SmartTurn proved no problem. All that AGS had to do was write a small piece of code in-house to connect SmartTurn with its shipping software and other back-end systems.

"We don't use all the SmartTurn features now," Ruffolo said, "but customers may have other service requests that will [require us to use them]." AGS is now in the process of deploying SmartTurn enterprise-wide, meaning across 75 locations.

SaaS WMS software offerings a fraction of traditional warehouse management system cost

Companies like SmartTurn and Orem, Utah-based 3PL Central are bringing the prices of SaaS WMS down to rock bottom. The monthly charge for the SmartTurn Inventory and Warehouse Management System starts at $500 per warehouse facility or distribution center, with unlimited users and unlimited transactions. 3PL Central's 3PL Warehouse Manager SaaS solution is designed for third-party logistics companies that deal with issues of multiple customers, each with different practices, processes and billing schedules. The on-demand WMS service is offered for less than $500 per month.

Compare those prices with those of conventionally licensed WMS software products, which can cost as much as hundreds of thousands of dollars. For instance, a manufacturer could get a SaaS WMS product for $3,000 to $30,000, depending on its number of users, according to Joseph Mallozzi, vice president of transportation and warehouse management solutions at Descartes Systems Group, a Waterloo, Ontario-based provider of logistics management solutions.

Descartes Systems Group manages its Global Logistics Network of transportation providers and their customers and uses value-added SaaS applications to offer messaging services to its partners. The company recently added WMS capability to its list of SaaS functionality through its acquisition of Scancode Systems Inc.

Lack of vendors, customers keeping SaaS WMS market small

The market for SaaS WMS is still relatively small, however. "Today, there are a few players that account for less than 1% of the market," said Steve Banker, service director for supply chain management at research firm ARC Advisory Group.

Many companies are not ready for or interested in on-demand WMS software. When the Sylacauga, Ala., manufacturing facility of Blue Bell Creameries, the maker of Blue Bell brand ice cream, opened its nine-level unmanned freezer storage warehouse, the company also moved from its antiquated in-house WMS to an automated storage and retrieval system. That system was Savanna.NET, a Microsoft .NET-based WMS product from Westfalia Technologies Inc., in York, Pa.

Blue Bell Creameries briefly considered a SaaS product but decided they "were not interested in an on-demand system," says Jim Crace, Blue Bell's warehouse and distribution manager. It was a matter of opting for the familiar, he said, versus the new and untested.

That doesn't surprise Randy Flamm, president and founder of IQMS, which offers an ERP software designed expressly for manufacturers. WMS functionality is an integrated component of its EnterpriseIQ software. "In the end, I'm not sure that SaaS is cost-effective," Flamm said. "[What they call SaaS today] we used to call timeshare. But back then, computing power was very expensive and [the timeshare model] made sense."

ERP, WMS integration becoming easier

The market for warehouse management software is relatively mature. According to some analysts, many key issues, such as integration with ERP systems and the supply chain, have been resolved. After being beaten up on the issue by customers, ERP vendors have gotten much better at exposing their APIs and providing integration hooks, according to Banker.

The issue of multi-warehouse support has also been resolved. "All major vendors support multiple warehouses in one instance of the WMS," said Greg Aimi, director of supply chain research at AMR Research.

So it may be that price and convenience of deployment will be key factors from here on in, now that cloud computing has emerged as a factor in the warehouse management software market.

But in a challenging economy, where some companies need to lower overhead costs just to survive and where others are designing new business strategies that may require WMS support, SaaS WMS may prove more disruptive than previously thought.

Alan Radding is a freelance writer.

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