What You Should Know Before Buying A Supply Chain Execution System

By John M. Hill, principal, Esync

Labor Management Systems: A robust warehouse management system time and date stamps every task issued to and completed by warehouse operating personnel. It follows then that this data could be used to establish standards and monitor individual and team performance. Further, historical performance data can also be used to match available labor and equipment to the anticipated warehouse workload to prioritize and schedule those resources. An increasing number of leading WMS suppliers are incorporating labor management functionality into their packages to:

-- Monitor warehouse operator activity to establish realistic performance standards.

-- Match standards to planned activity for optimal scheduling and staff deployment.

-- Monitor team & individual performance for pay and incentive purposes.

Transportation Management Systems

While WMS and LMS optimize the use of available space, handling equipment and staff for order fulfillment, the supply chain equation is not solved until customer deliveries have been successfully completed.

TMS optimize the use of transportation resources to manage inbound, outbound and internal shipments at the lowest cost consistent with customer service standards and trading partner requirements. Features include:

-- Order / load planning

-- Carrier selection, rating & load tendering

-- Shipment consolidation

-- What-if analyses

-- Appointment scheduling

-- Shipment status tracking

-- Freight payment & audit

-- Claims management

-- Carrier performance measurement

The SCES System Hierarchy

As depicted below, the addition of labor and transportation management have expanded the breadth of functionality available from contemporary supply chain execution packages.

The SCES Market

In 1999, market pundits at AMR Research projected an exciting 40% annual growth rate for the SCES sector through 2004.According to ARC, however, growth was dramatically lower than that projected for either 2001 or 2002, except for TMS which actually passed WMS in total revenues. Further, given the economic slowdown that is just now appearing to change course, prospective WMS users continued to be cautious throughout the first three quarters of 2003. The outlook for the next few years remains modest except for AMR's prediction of explosive growth for supply chain visibility and event management systems (SCV/EM) in 2006.

Slower market growth has forced suppliers to focus attention on addition and refinement of features that will enable them to more effectively differentiate their offerings. This trend bodes well for prospective users. The challenge, of course, is "how does a company proceed with opportunity analysis and the development of a compelling investment proposal?".

SCES Roadmap

Some years ago, a focus group assembled by The Material Handling Industry of America, Inc. tackled the question: What are the characteristics of a successful integrated material handling system? The consensus answers to this question are equally applicable to SCES implementations and might well serve as appropriate targets for future initiatives.


-- Support operating strategy

-- Reflect the culture of the operation & user readiness for ownership

-- Link material and information flow

-- Meet throughput, accuracy and reliability goals

-- Incorporate well defined interfaces

-- Trade on widely endorsed standards

-- Support timely communication with customers/suppliers

-- Accommodate expansion and change

-- Meet schedule and financial objectives

The question, of course, is how do you get there? The myriad alternatives available to tackle a logistics system opportunity have been the strength and weakness of the industry -- frequently contributing to user confusion, lengthy project cycles, unnecessary and risky customization, and higher costs. Indeed, the preface to a text on systems management in the 1980's noted that "..the pernicious cynicism about software is often a result of the mediocre performance that follows only after lengthy delays". It need not be so.

Implementing a WMS

As a case in point, let's take a look at WMS implementation. Success with a warehouse management system is not a fortuitous accident. It is, rather, the result of solid preparation, rigorous attention to detail, a clear vision of where the WMS fits within the enterprise system hierarchy and a corporate-wide commitment that builds organizational ownership from the time of opportunity identification to and through installation, acceptance and operation. Gifford Pinchot once observed that: "Intelligent organizations are created by employees who collaborate across all boundaries to deal with complex whole-systems issues in a locally appropriate and globally sensitive way".

There are no shortcuts, but, given the organizational commitment, there is a road map that will increase the probability of "on-time, within budget" successful execution. Its elements include:


Project team led by the user, but including representation from all elements of the organization that may be impacted by the WMS.


Comprehensive assessment of warehouse operations begins with mapping and comparing material and information flow.

You cannot develop a warehouse management system in a vacuum! Development of a WMS without a hard look at facility layout, handling systems and methods will almost certainly produce a sub-optimal implementation. To begin the needs identification process, map material and information flow -- and, then, compare them. Frequently, there's a lack of correlation between the two -- material goes in one direction and information, another. The disparity is further complicated by time lags that impact the accuracy of information on inventory availability and affect order processing efficiency. Disparity analysis lays the foundation for identifying opportunities and development of a functional requirements statement.

Next, look at the potential impact of the WMS on process flow as well as the efficiencies that might be realized in terms of space, equipment and people. Indeed, minor changes to layout, material flow, storage and picking procedures will often produce benefits before WMS installation. Given these changes, the WMS then ties it together in a cost-effective package that truly marries material and information flow. Finally, the relationship of the WMS to corporate level financial, planning and order management systems is critical. Examine and define the linkage that will be required to ensure that they are effectively integrated.


Valuation of the impact of accurate, real-time data upon operational efficiency & implications for cost reduction.


Delineation of task by task WMS performance requirements including material/data flow, human & machine interfaces, schedule, etc.


Review of 3rd party WMS products as well as in-house IS resources, experience and workload. Development of budgetary estimates.


Determination of best approach to meeting performance & schedule goals. Final justification & budget approval.

In determining resources to be used for WMS development, look at your internal information systems resources to assess whether or not they have the skill set, experience and time to tackle the project. Material handling experience is definitely a requirement. An understanding of the role the WMS will play in supply chain management as well as its relationship to other corporate systems is important. An appreciation of the differences between real-time execution systems and archival, batch data processing systems is critical. If a decision is made to pursue procurement of a WMS, recognize that it will require as much attention to detail as if the project were undertaken in-house.


Formalization of requirements statement, issuance of requests for proposal to pre-qualified suppliers, bid evaluation and contracting.


System design, software development, integration & testing with active user-driven project/milestone management. Parallel activity: preparing employees for system ownership.

Managing risk is an important component of the system development process. A recommended approach involves review of the functional specification with MIS, financial and operating personnel to identify what could possibly go wrong -- and, the development of appropriate back-up procedures. Step through every system element, determine the probability of problem occurrence and the cost of resolution. At the end of the process, you'll have a lengthy document that details what might go wrong, solution cost and whether or not the risk warrants an additional investment. Adjust the specification and equipment configuration accordingly. A by-product of the process is a plan that permits continued facility operation in the event of a minor problem or major system failure.

Operators can make or break any system. Accordingly, they play a significant role during initial requirements analysis and throughout a project. After the system specification and WMS hardware configuration have been completed, consider development of a WMS "walk through". Use the specification to script WMS tasks for all distribution center personnel. Use props to designate system components (e.g., RF terminals, bar code labels and readers, printers, etc.) and their locations. The "walk - through" is a role playing session that runs operators through a typical day with the WMS -- receiving, storage, picking, order consolidation, truck loading, shipping -- the entire process.

In addition to being an effective training device and "ownership builder", the "walk through" normally reveals procedural flaws -- nothing dramatic, but fine points that, if modified, can improve system performance. Most of the changes will involve system equipment location and the integration of physical and data entry tasks rather than information processing. Changes should be made to the specification and implemented during development and before the system is shipped to the site.


System functionality and performance testing prior to release for delivery to the site.


Site preparation, installation, training.

Another component of risk management is the Conversion Plan that addresses preparation for cut-over to the new WMS. The conversion plan provides a step-by-step procedure covering everything from the part master data base build to laying cable, training employees and system start-up. A conversion plan may wind up being half the length of the full specification, but, properly managed, it's worth every page.


Functional, reliability & performance testing by user to assure that WMS meets expectations.


Final specification, system design manual, as-built software pro-grams manual, hardware specifications and maintenance, user and operator manuals.


Periodic post-installation audits of system performance to document actual versus expected results.

System Sizing Considerations

Of particular significance during the needs identification and analysis phase of the process is collection of that data and identification of those WMS performance characteristics that will determine the size and type of hardware platform required. To obtain the response times that a real-time system should provide, prospective users must pay particular attention to the following areas in charting their requirements:

Transaction Volume

Number of discrete transactions (receipts, puts, internal moves, transfers, picks and shipments per hour, shift, day) at peak.

Number of Users

Number of personnel who will be interacting with WMS including warehouse staff, customer service, administration and management.

Data Entry Devices

Number of bar code scanners and other ADC devices, radio frequency data communications terminals, and CRTs/VDTs.

Equipment Interfaces

Interfaces to controllers for conveyors, carousels, AS/RS, guided vehicles and pick-to-light systems.

Systems Interfaces

Host and other systems interfaces, anticipated transaction frequency.

Response Times

Expected amount of time the WMS will take to process radio data terminal transactions (2 seconds or less typical) and CRT/VDT inquiries, report requests, etc.

Computer hardware is relatively inexpensive. Clear definition of the foregoing will ensure that it is properly sized to provide the level of performance needed in the contemporary warehouse.

The WMS Time Line

Once you have determined that a WMS will provide the tangible benefits required to justify an investment, how long will it take to install? Schedules vary dramatically with the size and complexity of the system, the thoroughness with which the homework has been done, the level of effort invested in employee training and management's commitment to the project.

1. Small System: Basic WMS functionality (receiving, putaway, picking and shipping) with no or minor modifications. Low transaction volume; i.e., 2. Mid-Range System: Basic WMS functionality with some site or user-specific modifications. Moderate transaction volume (200 to 1000/hour). Ten to forty users. Ten to twenty radio data terminals. Standard reports plus report writer. System runs on a mid-range computer platform or workstation in a client-server environment. Host interface plus simple material handling device interface or link to standard manifesting subsystem.

3. Complex System: Full range of WMS functions plus significant user-specific modifications. Large number of products with moderate to high transaction volume (1000 or more/hour). Forty or more users. Twenty or more radio data terminals. Standard and custom reports as well as report writer. Large computer platform with host, material handling device controller and manifesting subsystem interfaces.

"Not So Final" Thoughts

All too frequently, the most severe effects of technology have come from applying it too late rather than too soon. In all likelihood, there will be order of magnitude SCES advances during the next several years with further development and refinement of data collection, communications, and modeling tools and the Internet. Now as then, however, the challenge for users will be avoidance of the trap implicit in romancing current problems with tomorrow's solutions -- and drawing from the existing arsenal those tools that will address today's problems today.

Realization of the benefits of supply chain integration are not so much technology constrained as they are stymied by the inability of the organization to logically and cost-effectively implement them. Clearly, success with supply chain execution systems is not for want of technology. In order to maximize their potential, however, you need a solid plan and a broad commitment to:

Think "globally"

Analyze before design

Design before selection

Clear specifications

Realistic performance expectations

Well-defined user/supplier roles

Project/milestone management

Structured, modular, scalable software

Measurable acceptance criteria

Training, training, training!


ASN/EDI/XML: Advance Shipping Notification (from or to suppliers, carriers and consignees) via Electronic Data Interchange or the Internet (XML).

Conventional: Manual/lift truck handling of receipts with key entry or bar code/RFID scanner input of relevant data.

Automatic: Receipts moved via conveyor/AGV past automatic scanner.

Purchase Order: Receipts checked against user's purchase order.

Lot: Item lot numbers recorded as part of the receiving process.

Serial Number: Serial numbers recorded as part of the receiving process.

Vendor: Files maintained by and receipts logged by vendor.

QC Sampling: Samples pulled from incoming shipment for QC with balance of receipt quarantined until samples released.

Receipts Tagging: Receipts tagged with unique number ("license plate") to facilitate storage, picking and tracking using bar code and/or RFID scanners.

Crossdocking: Backordered or hot items spotted at receiving and moved directly to shipping.


Conventional: Material moved manually or by lift truck, pallet jack, etc.

Mechanized: Material moved by conveyor, guided vehicle (AGV) or automated storage system (AS/RS, mini-load, carousel, etc.).

Operator Directed: Operator selects storage location and manually enters into warehouse management system.

System Directed: System selects storage location and produces putaway ticket or transmits to operator terminal.

Dedicated Storage: Zones and/or slots dedicated to particular SKU's/products.

Random Storage: Zones and/or slots not assigned to specific products; i.e., system selects storage location based upon item characteristics and activity profile.

Forward Pick Area: Area typically located near shipping and reserved for fast moving item storage and picking.

Verification: System requires operator to verify putaway location using RF-linked, handheld bar code or RFID reader.

Quarantine: System can inhibit puts to and picks from any location.


Units of Measure: System accommodates multiple UOM and conversions.

Shelf Life: System monitors product expiration dates.

QC Hold: System quarantines received materials until quality control release.

Bulk Stores: System maintains bulk/non-conveyable inventories by location.

Lot Tracking: Lot integrity maintained and managed by system.

Consolidation: System utility for consolidating partial pallets of same SKU.

Relocation: Utility that permits operator to execute and record material moves from one storage location to another.

Replenishment: System manages inventories in forward pick locations and replenishes as necessary to ensure material availability before pick task release.

Cycle Counting: System supports anomaly-driven and routine inventory & location checking.


Conventional: Orders processed by host computer and downloaded to warehouse management system for filling.

Local Terminal: Order entry via warehouse terminal.

Emergency: Override utility that permits insertion of emergency order ahead of scheduled picks.

Back Orders: System handles back orders.



Conventional: Operators, lift trucks, pallet jacks, etc.

Mechanized: AS/RS, conveyor, pick-to-light, etc.

Pick Generation: System, not person, generates and allocates picking tasks.

Stock Allocation: As part of pick generation, the system allocates specific inventory by storage location to an order.

Picking Labels: System generates pick labels.

Picking Strategy: System supports picking by order or in batches, clusters or waves.

Pick Types: System supports case, split case, pallet, tote and kit picking.

Negative Picking: Utility that supports pulling full pallet and returning small number of items to location when pick quantity exceeds a threshold (normally 65% or more of the pallet).

Cartonization: System selects proper shipping carton size(s) for a given order.

Sortation: System can be linked to automatic carton sortation sub-systems.

Restrictions: System controls operator access to screens, reports and warehouse assignments as well as equipment access to specific warehouse areas.

Verification: System requires operator to verify pick location using RF-linked, handheld bar code or RFID reader.

Pick Retasking: System provides secondary location when stock cannot be found in primary or is damaged.


Order Verification: System requires manual or automatic (bar code scan) verification of order content before shipment release.

Anomaly Handling: Routines provided for handling shortages, exceptions, etc.

Manifesting: System produces manifests.

Bills of Lading: System produces bills of lading.

Freight Rating: System maintains tables and calculates rates.

Shipment Labels: System produces shipping labels.

Product Sizing: Size and weight tables maintained by SKU for trailer load sizing before pick release.

Carrier Scheduling: System selects and schedules carriers.

Yard Management: System manages inbound & outbound traffic, spotting trailers in the yard and at shipping docks.


Reports/Screens: System provides standard and user-specific reports and screens including event-driven exception reports.

Host Interface: On-line link to user's host computer system for bi-directional data transfer.

Returns: System manages returns disposition.

VA Processing: System supports execution of special labeling, pallet builds, repackaging and other customer "value added" requirements.

John M. Hill

(831) 722-9806 email: [email protected]

30 years of experience in manufacturing, warehousing and distribution management systems. Former CEO of data collection and warehouse management systems firm with over 100 successful SCES installations. Founder of the Automatic Identification Manufacturers (AIM) Trade Association. Charter member of AIDC 100, an organization of recognized industry pioneers and leaders. Former president of the Material Handling Education Foundation, Inc. and the Material Handling Institute, Inc. (MHI). Co-founder of MHI's Logistics Execution Systems Association (LESA). 1997 recipient of the Norman L. Cahners award for contributions to the U. S. material handling industry and material handling education. Inductee into Modern Material Handling magazine's 20th Century material handling Hall of Fame. Named in 2003 as a Logistics Rainmaker by DC Velocity magazine. Current member of the Board of Governors of the Material Handling Industry of America. Principal and member of the Board of Directors at ESYNC, a consulting and systems integration firm focused upon supporting clients with innovative solutions for supply chain management including facilities planning and design, logistics network optimization, AIDC technology deployment, warehouse, labor & transportation management systems, and enterprise systems integration.

Hide comments


  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.