Dennis Gerard, TNT Logistics North America and Joe Vernon, ConAgra Foods (Logistics Distribution Warehousing 2006)
If you have decided to introduce a warehouse management system (WMS) to your business enterprise, the next question is: Where do we go from here? In the planning and execution of a WMS project, there are a few essential elements that you and the WMS vendor must co-manage.
Selection of a WMS software package to help run your distribution center is more of a software vendor selection process. Depending on the level of complexity and the anticipated transaction volume, the top five WMS software packages can all deliver a good result. As such, choosing a partner is the more pivotal element in this process.
The WMS product sales cycle provides the first opportunity to feel out which vendor can most effectively function within your culture and manage to your expectations. Everyone will show you features and functions, but look at their personnel and ask challenging questions that stimulate ad-hoc conversation and a more in-depth, engaging interaction. Drawing out the professional and personal qualities of the vendor and relating them to your organization will make for a more dynamic and successful project experience.
Each WMS vendor will offer a choice of releases and versions. Some of these versions are stronger than others, and the differences are sometimes difficult to discern.
First, discuss with the vendor the finer points of these differences. Ask for a version-to-version comparison sheet that lists specific improvements and features that enhance the product's value to your business. Have the vendor spell out in writing which aspects of a certain release would be a good match for your business and which features may require modification. For those that require modification, have the vendor qualify the level of modification required as high, medium, or low. This language should make its way into the "Scope of Services" document under the heading Key Assumptions.
Second, score the version similarities in terms of general process flows, transaction volumes, user counts, and - most importantly - estimated hours of modification.
In the course of the above processes, attempt to ascertain the confidence level and capability of the vendor and its employees. Further, ask the vendor to support its claims with real-world examples of customers that shared a similar set of deliverables.
The success or failure of a launch is a shared responsibility. Since it is the WMS vendor's business to write contracts that allow for egress, apply due care in constructing contract addenda that closely link the vendor to your success or failure. Some vendors will even partner with you on ROI targets. Their willingness to do so provides a built-in hedge against the risk of poor product performance. The WMS must hit on all cylinders to allow for the operation to function as projected and hit the ROI targets, which are typically based on labor projections. Here is where you can construct a set of incentive-based deliverables.
Refer to the operational process, WMS product features, and ROI assumptions. These specific cost and delivery elements can be tied to incentives and written into the contract. An example of a WMS product feature is the ability to cross-dock product. If the vendor states that the WMS will allow you to cross-dock material as part of standard functionality, any costs incurred around implementing the cross-dock feature can be refuted or at least called into question.
For labor-based ROI assumptions, the WMS implementation can be pegged to a total operational labor FTE (full-time equivalent) projection. If WMS functionality does not effectively mesh with operational objectives or is less user-friendly than expected, more bodies may be required to get the product through the warehouse. The extra labor costs can be set out as a penalty against overall billing. System reliability and uptime can drive additional penalties as well.
Such a "pay for performance" approach lends itself to team-member bonus programs and greatly mitigates the risk of a budget bust and spoiled relationship. Both sides will be financially motivated to deliver.
One other effective way to hedge your selection process is to look for an offering that another company like yours has already implemented.
To keep to schedule, generate a timeline with your vendor and ask for a commitment in writing to keep the project team together. Continuity is the key. Specifically name the resources in the agreement. Agree on an estimate of how much work there may be three to six months before going live. Explore some scenarios for slippage based on seasonality factors and your gut feel for "unknowns." Common timeline factors include holidays, vacation, physical inventories, scheduled shutdowns, and your overall enterprise change control mechanism. Larger IT groups may not allow for changes during all times of the year.
Add to the project timeline a period of several months after go-live and title it Stabilization. This will be your estimate of how long it will take for your organization to take control of the new WMS system. Include in this estimate a contingency for custom reports. The metrics derived from a WMS can lend themselves to operational improvements and strategic insights. Reports can easily generate 200-300 extra hours of development.
Even if you plan to take over the application 100 percent, keep the vendor team close at hand through stabilization.
on what you need delivered at "go-live" and allow other things to come
later. Think of it as leaving the top tier of the cake unfinished.
users get their hands on the system and start to acclimate to how it
really works, they will eliminate some of the prior requirements and
introduce some new and better ways of doing things. This is especially
true if you are handling product in a new way in a new building on a
new system. That last 5-15 percent of functionality (most of which
users think they need prior to go-live) has a tendency to
over-complicate the project scope and generate code that can be
obsolete within the first year.
Here is where you rely on the
strength of the engineering and project leads to formulate a
progressive solution as you tie the operation and WMS together. Allow
the last bit of coding to be developed and executed after go-live. It
will save you time and money and make your overall coding efforts more
a WMS relationship, it is important to create a conduit into the upper
echelon of the vendor organization. Let them understand the importance
of your project, match them up with someone on your side who is of
similar stature, and arrange for periodic reviews. If allowed, the
vendor will have a tendency to drop you off with a project manager and
restrict your interaction with senior management.
regular upper-management meeting every quarter. Strive to make these
meetings substantive and avoid getting wrapped up in billing
conversations. The periodic "across the table" reinforcement of
expectations with decision makers on both sides leaves little room for
push-back at critical junctures in the project when longer hours and
extra resources may be required. These meetings and regular checkpoints
can help set a tone for which circumstances might compel you to seek
credits on billing for things not explicitly captured in the contract.
The Project Team
Project lead and project engineer: Get the most intelligent, capable
project leader and project engineer you can get your hands on. They
will lay the foundation upon which your WMS solution will rest. The
wrong people in these positions can literally cost you your company.
Vendors can provide some good resources, but this is not necessarily
their core competency or ultimate responsibility.
and the project lead must be smart, operations savvy, and have
experience with some start-up/go-live pain. Scrutinize that aspect of
their qualifications. Quantify how they have fared on prior projects
against the following criteria: on time, on budget, and WMS performance
in relation to client expectations. Did some of the design elements
they introduced become part of the standard product? Did they play a
role in avoiding wasted code, CRP surprises, modification rewrites, and
- most importantly - go-live "grid-lock" scenarios?
out the project team: Whether you use a company to help you implement
the WMS (an advisable strategy) or do it yourself, be careful of people
"cutting their teeth" on such a project.
WMS looks simple.
Vendors can sometimes be motivated to give you the lowest-level person
that they can make billable. Your job is to weed out those people. You
can accept someone who is a little less experienced as long as you are
also given a superstar and can negotiate a lower blended billing rate.
company will want to put some bodies on the project team as well. But
use caution - there are subtle differences between staffing a WMS
project and managing the business enterprise. The business community
tends to believe that you can run your supply-chain project with the
same personnel that run day-to-day operations. This misconception has
brought many WMS and other system launches to their knees.
putting together cross-functional teams, the project manager needs to
be alert for other managers or the WMS vendor dumping the wrong people
onto the team. Execute some form of a jury screening process.
Individuals with a prejudice against change or a new system will
undermine the project's ability to succeed. Avoid "last
assignment"-type people with one year left before retirement unless
they have the proper motivations and incentives. A good mixture of
young, aggressive team members and some senior managers will normally
provide the right balance of experience, urgency, curiosity, and
diligently to craft a closely knit fixed-cost solution for your
organization. Licensing, professional service hours, project manager
hours, training, and coding hours can come at you in a variety of
creative ways; it is the essence of how software vendors make their
margin. Attempt to understand and quantify all the hours and effort
that will deliver 95 percent of the project, and then roll this up into
a fixed-cost proposal. The 5 percent of the project left out of the
fixed bid relates to the post go-live stabilization period.
the modern-day WMS implementation rarely results in a meltdown. The
points covered above are intended to lend themselves to a higher
quality launch with minimal negative impact to your business. The
customer, WMS vendor, and any third-party consultants are equal
partners in the outcome. Like any good business venture, smart people,
solid products, and strong leadership give you the best chance for
Dennis Gerard is
director of operations services at TNT Logistics North America. He can
be reached at (904) 928-1571. Joe Vernon is logistics project manager
at ConAgra Foods. He can be reached at (402) 932-1464.