The worldwide market for WMS software is experiencing a boom thanks to an improving economy, e-commerce growth, proliferation of WMS add-ons and increased adoption in emerging markets, according to a new ARC Advisory Group report.
"The growth rate over the last couple of years has been well above the longer term trend. This, we believe, is due [in part] to a post-recession rebound," said Clint Reiser, an analyst with the Dedham, Mass.-based consulting company and the author of the report.
The primary purpose of a warehouse management system (WMS) is to manage a warehouse's resources, including space, labor, equipment, tasks and material flows, according to ARC. The company further defines a WMS as a real-time solution that utilizes voice recognition, radio frequency identification (RFID) or real-time location systems.
According to Reiser, the worldwide WMS market has grown by roughly 10% per year over the last two years, compared with 5% to 8% annually over much of the preceding decade.
One of the U.S. industries where companies are investing in WMSes is the automotive industry, which has thrived recently after years of disappointing sales. WMS investments are occurring in industries like food and pharmaceuticals due to traceability requirements that WMS software can satisfy, according to Reiser.
"Demand for WMS is likely to remain strong in those industries," Reiser said.
Warehouse management system add-ons fuel growth
Many vendors already offer a range of add-ons, and others are developing them, which is helping drive the WMS market, according to Reiser. One of the areas experiencing the largest demand involves workforce management systems and warehouse analytics, he said.
Manufacturers will have a growing number of options to choose from as the WMS add-on market continues to grow, according to Reiser. In some cases, companies seeking greater functionality can turn to their current WMS vendor.
"At this time, it may not be available, but next year it may be," Reiser said.
E-commerce expansion drives demand for WMS software
The expansion of c-commerce and multichannel retailing is also spurring demand for WMS software, according to Reiser, especially for supporting piece picking, packing, labeling and other processes affected by the high labor costs of e-commerce fulfillment.
"This increase in e-commerce has provided additional opportunities for WMS suppliers to assist retailers and direct-to-consumer manufacturers with distribution efficiencies," the report states. "Multichannel retailers are integrating what used to be separate brick-and-mortar and e-commerce distribution channels in an attempt to streamline costs and provide a consistent view to the customer."
The Canadian version of Amazon.com
One company that recently updated its WMS software is Toronto-based Indigo Books & Music Inc.
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Indigo, which runs SAP ERP, had been using a specialized warehouse management application for roughly eight years, according to Sumit Oberai, the company's chief information officer. The software had long since outlasted its usefulness for a number of reasons, according to Oberai.
"It was a bad implementation," he said. "There were a lot of data issues, integration issues. Even though it supposedly had a certified connector to SAP, [we had] an inventory accuracy rate that simply wasn't acceptable."
Those "disconnects" created an endless number of headaches -- inventory recalculations, out-of-stocks, not ordering enough inventory or ordering too much -- according to Oberai. Those problems have been solved with the current deployment of SAP Extended Warehouse Management (EWM).
It decided to go with SAP EWM over "best-of-breed" niche vendors, even though doing so meant less functionality and significant customization to make it retail friendly, which has delayed part of the deployment. But the choice also means improved total cost of ownership, Oberai said.
"It does it on exactly the same technology, the same platform, the same skill set, that we have already," he said, adding that integration was easier. "We don't have to go and learn something new. We can use the same labor pool to manage multiple systems. Going from ERP to EWM, it's the same programming language; it's the same underlying infrastructure that we have running this on. That's a huge win."