WMS Vendors Lure Smaller Firms
By Katrina C. Arabe
If you think a feature-packed warehouse management system (WMS) is out of reach, think again. Low-cost packages, with high-end features, are now available for small and mid-sized companies.
Warehouse management systems (WMS) are not just for the heavyweights anymore. Now, small and medium-sized companies can get their hands on affordable packages because WMS vendors are finally courting the low-end market. They are paying attention to this long-overlooked segment because Fortune 1,000 companies already have applications in place. That means that vendors must scramble to maintain revenues by pursuing other markets, and they’re doing so by scaling down their offerings and dangling attractive prices to entice small and mid-sized firms.
Penetrating new segments is important because the North American WMS market declined by 12% between 2000 and 2001, says Steve Banker, service director of supply chain management for ARC Advisory Group in Boston. Worldwide WMS software and service revenues may have hit $738 million in 2001 and is expected to climb to $1.17 billion by the end of 2006, but ARC anticipates that overseas markets will drive most of that growth. “The North American WMS market is mature,” says Banker. “Most of the 10% growth we’re forecasting over the next five years will occur outside of North America.”
Such projections have spurred WMS vendors like J.D. Edwards and Ann Arbor Computer to create low-end, Windows NT-based WMS packages for the small-to-medium firms. Companies with modest budgets can now choose from basic, software-only packages to feature-laden turnkey solutions that include the application, implementation and even hardware. Most systems are priced around $100,000, although some go for as low as $40,000 or as high as $300,000, depending on which features they integrate.
“WMS vendors are looking for ways to add more revenue to the bottom line,” says Tom K. Ryan, who runs his own supply chain consulting firm in Chicago. “They have the expertise and knowledge, so they’re taking the time to make the systems more applicable for small, simple operations that don’t need all the bells and whistles.”
Software vendors now offer several versions of their low-cost WMS solutions, from the very basic to feature-laden, increasing in price as they pack more functions. For example, Radio Beacon Inc. of Toronto has three versions of its low-end system—Radio Beacon Lite, Full and Pro. “They all do warehouse management, they just do more as you pay more,” says Dale L. Jeffries, Radio Beacon president.
Another vendor that is targeting smaller users is Washington-based Intek, which offers its Warehouse Librarian product for $50,000-$75,000 for 5 to 10 users. The exact price depends on hardware requirements, but all software and services related to the system are already included, according to Intek president Stan McLean. He says the package is ideal for manufacturers and distributors with yearly revenues in the $10-25 million range. The system tackles such warehouse functions as receiving, putaway, order management, shipping replenishment, order picking, and cycle counting.
North Carolina-based V3 Systems has also come out with affordable WMS solutions—the SCM and iSCM packages, which range from $40,000-$80,000. And because the systems are based on the same V3 architecture used by the vendor’s advanced and scalable solutions for larger companies, the low-cost packages can meet a company’s increasingly complex requirements. “Small to mid-sized businesses typically have looked to deploy the V3 solution in one or more distribution centers and scale the solution as their logistics needs grow or change,” says C. Ashley Campbell, V3’s president and CEO.
Even the biggest vendors, which have made their name with high-end, costly systems, are now pursuing smaller companies. For example, Denver-based J.D. Edwards & Co. offers a “foundation” product called Warehouse Management, which tackles warehouse basics and integrates financial software for accounts receivable, general ledger and other functions, for under $100,000.
Other large technology vendors with lower-end offerings are Manhattan Associates and Majure Data Inc., both based in Atlanta. Manhattan Associates makes PkMS Pronto, a system that integrates inventory management and radio frequency and starts at $75,000. Meanwhile, Majure Data offers RF Navigator complete for $150,000-$300,000. “It truly is a full-scale WMS,” says Patrick Majure, company vice president. “From replenishment to picking to loading trucks and everything in between, RF Navigator handles everything that needs to be done in a warehouse.”
Universal Supply Co., in New Jersey, can certainly attest to that. The wholesale building material distributor and supplier purchased and rolled out RF Navigator a year ago in its 100,000-square-foot warehouse with 9 workers. The company spent just under $200,000 for the entire system and has already made its money back, says Dante LaSasso, Universal Supply’s materials manager. “Our inventory has gone from being 85% accurate to 99.77% accurate,” says LaSasso. “Plus, we’ve reduced our warehouse staff by three full-time and one part-time workers, which means a $10,000-a-month savings in manpower alone.”
Indeed, such results are impressive, but before snapping up a low-cost WMS system, consultant Tom K. Ryan says that companies should address the following questions:
1) Does the low-end package fulfill your operational and functional needs?
2) Do you have to undertake various or difficult “workarounds” to make the system match your warehouse requirements?
3) Does the cheaper system integrate radio frequency and automatic data collection? These two features drastically reduce operator error.
4) Is the low-cost solution scalable?
5) Can the WMS meet growing needs?
6) Will it be able to manage increased transaction volumes or more complicated warehouse operations?
7) What support is the software vendor likely to give over the next few years?
Is the vendor financially stable?
9) What type of assistance will the vendor offer during the implementation of its software in the warehouse?
10) Can the vendor refer you to a third party for support with the system if necessary?
Also keep in mind, says Ryan, that lower-end WMS solutions are best suited for companies with 5 to 10 WMS users. They also work well with simpler operations, which can receive tremendous efficiency boosts from an automated pick, pack and ship system, particularly from automated inventory control. “A small operation can only reduce the number of employees by so much,” says Ryan. “But an even bigger benefit for such companies lies in the inventory control and inventory-level reduction that comes from an automated WMS system.”
And while every WMS package can manage warehouse basics such as picking and shipping, ARC’s Banker points out that not all low-end packages possess the features of their high-end counterparts. Small and mid-sized companies should also be aware that baseline software prices don’t cover hardware or implementation services, although some companies do include such services for a flat fee.
Overall, however, low-end packages have significantly advanced, packing many high-end features and often coming in at under $100,000. Vendors may offer widely varying features, service levels and prices, but the quality of these systems tends to be high because of three factors—a saturated high-end market, the ruptured technology bubble and vendors’ readiness to integrate complex features in their low-end products. In fact, according to Banker, most affordable solutions available today are real-time, RF-enabled, and execute the warehouse functions that companies find the most essential—receiving, putaway, picking and shipping.
