The Edge Factor - Mar 2016

 

Contributions by: Chandresh Lachuriya, Neha Uttam, Jagannadha Naraparaju, Mayank Kumar

 

Warehouses in India

Need of the hour – Effective Implementation of WMS

WMS has a potential to reduce inventory carrying cost by 27% and operating expense (people and infrastructure) by 35%

Resurgence of sectors like e-commerce, modern retail & arrival of foreign players in auto and pharmaceutical sector has raised hopes of improvements in infrastructure, working conditions and manpower productivity. Warehouse, which was considered only as a four walled structure with lack of ventilation, light & racks a decade ago is now being considered as a key business growth driver. Given this new focus, warehousing industry is looking at a robust solution to reduce cost and improve operational efficiencies.

Warehousing has three critical areas i.e. People, Infrastructure and Inventory. Typically a warehouse management system (WMS) directly addresses areas of inventory and people in order to increase productivity and throughput of warehouse. A WMS has a potential to reduce inventory carrying cost and operating expense (people and infrastructure) by 27% and 35% respectively.

Warehouse Management System – The Challenges

WMS typically has three major components i.e. Software, radio communications and automatic identification technology. Major problems arise in defining and gathering the data from these components.

Typically, the software implementer proposes modifications in existing processes to suit the software functionalities leading to no/low software customization. Whereas, warehouse operators expect data definition & collection to support their existing processes. This gap widens as the WMS goes live. In a hurry to fill the gap, the companies end up spending more in the areas of training and consultation. However, if WMS is built on right assumptions and processes, the above mentioned scenario can be avoided.

A successful WMS implementation requires significant time & effort with process & technology customization

As a striking example, NIKE saw its share price drop 20% and lost $ 100Mn in a quarter after implementing WMS.

In Indian context, since most of the warehouses are unorganized, they lack basic infrastructure and do not have simple discipline of cycle counting, storing and picking. Typically, a successful WMS implementation requires significant time & effort with process & technology customization.

Way Ahead

As per a study by Total Logistics Solutions Inc., 50% of warehouse cost is represented by picking and putting away of goods, which are directly impacted by inventory policies and warehouse space design. These areas should be first streamlined through process re-engineering so that the foundation can be set for WMS implementation.

We, at CGN, have worked with an e-tailer with warehouse throughput and productivity challenges. Issues related to system inventory inaccuracy, poor visibility on in-flow and out-flow and lack of process standardization were affecting their product mix, picking and put-away capabilities. Improvements started by redesigning the layout to improve product flow followed by small low cost automations to improve throughput of assembly lines. The next stage of improvement is planned to bring about by improving inventory accuracy, training, defining KPI and monitoring them to continuously improve the process.

As Indian customers are becoming demanding in terms of delivery and quality of products and supply chains are becoming more and more responsive; the importance of warehousing is only going to increase. Though the warehousing sector is still fragmented, a lot can be achieved in terms of supply chain efficiency and customer responsiveness if the WMS equation is solved skillfully.

REFERENCES:
https://www.kpmg.com/Global/en/IssuesAndInsights/ArticlesPublications/Documents/Logistics-in-India-Part-2.pdf
http://www.ey.com/IN/en/Services/Transactions/EY-The-Indian-Warehousing-Industry-An-Overview
http://articles.economictimes.indiatimes.com/2012-04-26/news/31410337_1_warehouse-tonnes-service-providers
https://www.pwc.in/assets/pdfs/publications-2011/building-warehousing-competitiveness-india.pdf
http://www.supplychain247.com/article/5_ways_to_improve_order_picking_productivity/MWPVL_International
http://www.inboundlogistics.com/cms/article/choosing-a-wms-that-wont-get-you-fired/
https://books.google.co.in/books?id=NileTsN6SJgC&pg=PA48&lpg=PA48&dq=payback+period+of+WMS...
http://www.varsitylogistics.com/pdf/news/wms_by_the_numbers.pdf

Something we found interesting

"An interesting whitepaper on justification of WMS cost."
 

Read full article at: http://www.smartturn.com/pdf/roi-whitepaper.pdf

 

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