Business Accent

RFID-enabled WMS

Anand Chatterjee

RFID can be used to turn a WMS into a real-time system. This new possibility has invigorated the WMS market

The scope of a Warehouse Management System (WMS) has undergone a sea change in the last few years even though its primary objective remains the same. As the name suggests, a WMS is meant to efficiently manage the resources of a warehouse. It not only manages material flow and the resources of a warehouse such as equipment, labour and space, but also manages the flow of information and plays a vital role in the supply chain. Even though the core functionality of a WMS still consists of picking, replenishment, and putting away, its role is continuously evolving and expanding to include new areas such as light manufacturing, transportation management, distribution, order management and even the accounting system. Some vendors have gone a step further by adding workflows, EDI and OLAP reporting modules.

This evolution of WMS is not an isolated case. Over the years, even enterprise resource planning (ERP) packages have undergone a change and added business intelligence, supply chain management, warehouse management and other capabilities. ERP is now slowly giving rise to ERP II. Similarly, the diffusion of roles and expansion of functionalities is placing WMS in the same league as other enterprise packages like ERP, supply chain management, and advance supply chain planning. But this is creating confusion in the market, and it is apparent that some segments will shrink as they make way for the rest. Thus, WMS is finding it increasingly difficult to position itself in the fiercely competitive enterprise application market. According to one survey, the market for WMS has shrunk by almost 3 percent.

WMS and RFID

Although Radio Frequency Identification (RFID) has been around for almost 15 years, it is only recently that the world has woken up to its immense potential. One of the obvious applications of this technology lies in tracking inventory with RFID-enabled tags. (Wal-Mart has already directed its suppliers to gear up and supply goods with RFID tags.) The US retail supply chain, which is today spending around $200 million on RFID, is expected to spend around $1,300 million by 2008.

RFID can be used to turn a WMS into a real-time system. This new possibility has invigorated the WMS market. RFID-enabled WMS will not only reduce operational costs but will also increase warehouse productivity by optimising storage and resource utilisation. RFID-enabled WMS can help implement collaborative sourcing strategies through the real-time flow of information to and from suppliers.

The use of RFID is not limited to goods in a warehouse. It can also be used at the supplier’s side to send an advance ship notice (ASN). This early flow of information helps organisations to plan efficiently by determining lead-time in an accurate manner. RFID can streamline the handover process by removing human intervention in reconciling goods received with purchase orders, and goods dispatched with sales orders. Suppliers can ship goods with RFID tags at both the case and pallet level. FIFO, LIFO and other concepts in inventory can easily be implemented through RFID. Effective slotting logic can now be implemented through active RFID tags in a warehouse. An RFID-enabled WMS can automatically route goods to line-haul vehicles, saving time in the loading process. Distribution centres will be RFID-enabled; this will help track outbound logistics. Providing updated information and tracking returned or rejected goods is one of the vital tasks of a WMS; RFID holds considerable promise in this area. Thus, RFID-enabled features will increase the average selling price of WMS systems, and open the gates for a host of other value-added services that can be provided by WMS vendors.

Three options to choose from

WMS vendors have three options to manage this change. The first will be to build new RFID-enabled WMS modules that can be bolted on to existing systems. The other approach is to upgrade an existing WMS to bring in RFID features. The final method will be to build a new RFID-enabled WMS which will eventually replace the existing WMS. (Vendors can work in partnership with suppliers who have already been asked to become RFID-compliant.) The first two approaches can be used to help suppliers who are under immediate pressure; the third approach is suitable for the long-term. Most organisations will not be able to reap the benefits of RFID unless it is used create a pull across the entire supply chain.

The WMS market will slowly crystallise and cluster as standard warehouse management systems continue to be used, warehouse management modules become part of ERP packages, and RFID-enabled WMS components arrive.

The challenges of incorporating RFID

Of course, RFID technology can create new challenges, and there are a number of technical difficulties that need to be tackled before the dream becomes reality. WMS has to be integrated into RFID readers; for greater efficiency, they will have to read RFID tags in bursts rather than sequentially. Also, the volume of data is going to be enormous, which is going to stretch the limits of a WMS. Making business sense out of the enormous volume of data is also a big challenge which has to be overcome. Error Proofing is another technical hurdle that needs to be surmounted. Accidental and inadvertent reading of adjacent RFID tags can result in incorrect data. Different materials like metals and liquids interfere with reads. It is believed that excessive exposure to radio frequency (RF) can lead to certain ailments. Even though this has not been proved scientifically, there have been cases where workers have resisted RFID implementations. The effect of RF on food and drugs still needs to be explored.

Standardisation has to be brought to the RFID reader and printer market. Without this, making a WMS capable enough of interfacing with all possible readers and printers is going to be a near-impossible task. Unless such standardisation is brought in quickly, it may even kill this promising market.

Losing out to ERP?

In spite of the potential, all is not quiet on the WMS front. There are important issues that need to be addressed before the market gets rejuvenated. ERP is slowly eating away the niche positioning of WMS. Already, popular ERP vendors are including RFID-enabled WMS modules in their applications. This may lead to consolidation in the WMS market through acquisitions. The realisable potential benefits through RFID-enabled WMS may not be the same across regions and industries, hence WMS vendors need to narrow down to the promising regions and industries. Retail, distribution, logistics and manufacturing are some promising sectors. Only time will tell if WMS will come out victorious with RFID-enabled features, or if it will eventually be a victim of the market.

That said, it is clear that RFID is revolutionising the way WMS functions.

The views expressed in this article do not necessarily represent the views of PricewaterhouseCoopers

Chatterjee is a consultant with PricewaterhouseCoopers. anand.chatterjee@in.pwc.com