What Makes Supply Chain Companies Start Looking for a New WMS?

Reasons why 3PLs replace WMS include inability to handle omnichannel fulfillment, 3PL billing & integration capabilities

Q&A with Datex Blog

From time to time, we will post a blog that provides answers to some of the questions Datex team members are most frequently asked.  Feel free to email us, call us or send us suggestions for our blog via web chat.  We would love to hear from you!

Most 3PLs who contact Datex are replacing a current inventory management system or warehouse management system.  Sometimes it is software applications that they have had for many years.  It may be a warehouse management solution that was developed “in house” using their own development team.   

Regardless of how the warehouse management system was developed, there currently is a level of dissatisfaction with it (in other words, there is something it does not do or does do well). Today, 3PLs often use technology to differentiate their companies.  Providing supply chain management technology such as a warehouse management system, transportation management system, EDI, voice enabled software, RF hardware is often expected and key to attracting and retaining clients.  Being able to provide real time intelligence and visibility is also an expectation or requirement.

Whether the third party logistics provider is involved in global trade, actively managing the supply chain visibility of their clients or using an ecommerce platform, all 3PLs require a certain level of accuracy, visibility, accuracy and productivity in their warehouse, freight management and logistics operations.

3PLs frequently act as experts and advisors on transportation insight, logistic solutions and technology to their customers in order to produce cost savings so having top notch technology is of vital importance.

Here are some of the reasons why 3PLs begin the search for a new WMS:

1. 3PLs Using Legacy Warehouse Management Systems that are Outdated for Today’s Needs

Warehouse management systems that were developed years ago for operational logistics were designed to process inventory that was being handled, stored and transported in bulk, typically using pallets.  Although there may be a large number of individual units on the pallet, the number of transactions was reasonably small as all those goods typically stayed together, on the pallet.  Yesterday’s distribution strategies required the large scale movement of bulk goods to distribution centers and then to retails stores.

My how things have changed!  You may be tired of hearing this, but there has been more change to the supply chain in the past 3-5 years than in the previous 20 years.  Because consumers buy goods online and have so many ways to retrieve their purchases, the supply chain has had to change.

Now 3PLs and supply chain businesses have to process exponentially larger numbers of transactions if they deal with the consumer end of the supply chain.  Think of it this way, let’s say there are 200 items on one pallet. Before “the Amazon effect”, the goods would be kept together so there would be one transaction for the whole pallet of goods.  Now, there may be 200 separate and unique transactions, many happening at the same time or within minutes of each other. Traditionally, legacy WMS systems were designed to handle fewer transactions that were pallet or case based-not thousands of individual transactions that require goods to be picked, handled and shipped on an “each” basis.

Today, 3PLs need to have software that is highly flexible, customizable, feature-rich and easy to use to meet the needs of all of their customers.  Many companies buy new WMS in order to handle fulfillment customers or meet other specific client needs.

2. 3PLs are Tired of Leaving Money on the Table

Another very popular reason for shopping for a new WMS is that the third party logistics provider is frustrated by lost profitability.  Watching profits slip away is an experience that logistics providers do not want to have-ever!  Using technology to make sure this does not happen makes perfect sense.

 

Here are some of the challenges 3PLs tell us waste time, labor and money:
  • Inventory management: dealing with lost or misplaced inventory results in excessive labor costs
  • Identifying and correcting errors can waste time and labor and lead to other deficiencies
  • Inability to capture and bill for all the value added services the 3PL provides to its customers reduces potential revenue capture
  • Operational logistics: manual workarounds and inefficient operations (often because the software cannot handle the process that users need to execute)
  • Unnecessary costs due to dependence on the software vendor (changes to code, updates, customization of reports, etc.)
  • Labor management: poor labor practices and tracking results in inefficient operations and a less productive workforce
  • Inability to track and trace inventory to process product recalls efficiently wastes valuable time and labor dollars
  • Lack of real time business intelligence, reporting and dashboard tools-critical for timely, effective decision making
  • Inability to schedule dock door appointments increases wasted time and frustration

3. Inability to Handle 3PL Billing

One issue most 3PLs have in common is their challenges dealing with customer requirements and expectations.  In this regard, 3PL billing seems to be the single biggest problem about which our company hears complaints.  To 3PLs, there is no “one size fits all” when it comes to billing.
Not all 3PL WMS software makes billing easy or enables 3PLs to bill according to the contract terms they set up for their customers.  This not only wastes valuable time and causes a lot of stress but also results in errors, lost revenue and other issues.

Some 3PL WMS systems do not even handle anniversary billing, a basic need of third party logistics providers.  Having the ability to customize billing to meet the requirements of EVERY CUSTOMER is a business essential for every 3PL.

One issue most 3PLs have in common is their challenges dealing with customer requirements and expectations.  In this regard, 3PL billing seems to be the single biggest problem about which our company hears complaints.  To 3PLs, there is no “one size fits all” when it comes to billing.

Not all 3PL WMS software makes billing easy or enables 3PLs to bill according to the contract terms they set up for their customers.  This not only wastes valuable time and causes a lot of stress but also results in errors, lost revenue and other issues.

Some 3PL WMS systems do not even handle anniversary billing, a basic need of third party logistics providers.  Having the ability to customize billing to meet the requirements of EVERY CUSTOMER is a business essential for every 3PL.

4. Reduced Ability to Win and Retain 3PL Customers

According to the 2017 3PL Study, “IT services are becoming a differentiating factor that 3PLs use to their advantage.  Shippers continue to rely heavily on the IT services that 3PLs provide, and the ability to manage the provision of IT-based services is a necessary core competency of 3PL providers.”

Many times we have been told by 3PLs who are searching for new WMS that they were doing so to win an important new client.   In the course of courting new business, prospective clients told the 3PL that they were not interested in dealing with a provider that did not keep pace with information technology and considered this one of their foremost criteria in selecting a vendor.

5. Costly Upgrades, Development and Maintenance Costs for Existing 3PL WMS Software

Some 3PL logistics providers that are searching for new WMS technology are seeking to reduce ongoing dependence on the technology vendor and are examining ways to reduce coding, upgrade and maintenance costs.  3PLs need flexible technology that enables them to respond quickly to whatever changes need to be made in their operations.  Change can be costly, often requiring the time and expense for code to be developed. Today, time is at a premium.  3PLs realize that having the ability to customize processes quickly and affordably and make changes to the WMS software without relying on a third party vendor is highly desirable.

6. Lack of Information Visibility for 3PL Customers

Critical to keeping costs down, 3PLs frequently seek ways to provide excellent customer service but with a reduced workforce. Labor is one of the largest ongoing costs in any warehouse operation.
3PL customers need frequent access to information regarding their inventory, billing, orders, shipments and operations.  3PLs who cannot provide real time access to this information via a web portal rely on customer service representatives for these interactions.  This is time consuming, labor intensive and frustrating for all concerned.

Today, nearly all the 3PL prospective and existing clients with which we interact use web portals in order to provide a higher level and accessibility of information for better decision making.

7. Current 3PL WMS Systems Cannot be Integrated to Other Technology

Today, so much of what happens occurs outside the four walls of the warehouse. 3PLs need to have systems that can all execute seamlessly, communicating effortlessly and accurately. Years ago, having a WMS or an ERP and TMS was enough.  Not anymore!

As a technology vendor, we have seen a noticeable increase in the number of integrations required for even smaller 3PL businesses.  Today, supply chain businesses are more interconnected.  They are better able to “talk to each other”, to process vital information quickly across the world and in real time.

With the challenges with labor, many companies are seeking labor management software and new ways to optimize the effectiveness of their workforce and even to replace some manual work.  Material handling systems, wearable technology and voice enabled systems are common.

A 3PL company that relies on a WMS system that is not integration-friendly or challenged puts its operations at a disadvantage.

Conclusion:

According to the April 2017  “Annual Warehouse and Distribution Center (DC) Equipment Survey” by Peerless Research Group, the increase in spending on material handling systems and software such as WMS and ERP is likely related to “the unrelenting growth in e-commerce and the fulfillment pressures that exerts on operations”.

In 2017, 30% of the MMH survey respondents reported their intention to invest in software such as WMS, WCS and ERP over the next 18 months, up 5% from 2016.  Issues such as cost containment, trading partner collaboration, smaller, more frequent orders (omnichannel fulfillment), cycle times, and labor pressures were some of the reasons related to the purchases.

Today, 3PLs and other supply chain businesses rely on WMS to connect with other mission critical systems and provide real time, accurate information about operations.

Although the technology vendor does not necessary have to have received awards and recognition, the WMS must use cutting edge  information technology tools that are adaptable and which can be updated and enable 3PL provider users to meet customer requirements, especially for fast-paced omnichannel fulfillment and shopping cart operations.

To win and retain new business, 3PLs need WMS systems that enable visibility of orders, shipments, billing, inventory and more. Having a web portal helps to ensure that third party logistics (3PL) customers can make vital decisions without relying on customer service representatives for assistance. Whatever the reasons for the change, implementing the right WMS can have a measurable impact on operations and lead to greater visibility, accuracy and workforce productivity.

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