WMS: To ERP or Not to ERP - Part 2 (Tier 1 ERP Vendor Landscape)

Market demand for a single-vendor integrated enterprise resource planning/warehouse management system (ERP/WMS) solution has motivated Tier 1 ERP vendors to respond with increasing levels of WMS functionality. While a number of best-of-breed (BOB) WMS vendors are still doing well, the need for companies to support a more tightly integrated fulfillment life cycle will aid ERP vendors in taking a larger percentage of the WMS pie for all but the most sophisticated environments.

META Trend: Through 2003/04, Global 2000 companies will augment their current application portfolios with narrowly focused, high-ROI supply chain components. During 2005/06, emphasis will center on improved decision making and visibility, with increasing interest in SCM planning solutions. By 2006/07, increased intelligence delivered in supply chain execution systems will shift importance from infrastructure repair to process optimization.

Historically, warehousing has been viewed as a standalone business function, with WMS applications focused on automating the warehouse’s facility-specific business processes (e.g., receiving, storing, picking, shipping). The work the warehouse performed was considered independent of other enterprise functions (e.g., order management, purchasing, manufacturing), and communication between warehouse and enterprise systems was typically batch data transfers. Although historically satisfactory for many organizations, the high-velocity, high-visibility supply chain demands more tightly integrated fulfillment life cycles. Few organizations can survive with a WMS black hole; they must be able to better link enterprise and warehouse functions (Figure 1).

Contributing to this problem has been that WMS was almost exclusively a BOB market - which, by its very nature, separates processes between the ERP and WMS layers. BOB WMS vendors recognize this liability, and many offer improved integration tools and visibility capabilities to facilitate process monitoring. ERP vendors also see the desire for integrated fulfillment process flows favoring them - assuming they offer reasonable WMS capabilities.

Driving toward integrated fulfillment will increasingly be the goal for many companies, which favors ERP vendors. However, companies will have to carefully assess the tradeoffs among functional depth, breadth, and vendor domain expertise that will favor BOB WMS vendors through 2005/06, and tighter process integration, which will favor Tier 1 ERP vendors (e.g., SAP, Oracle, PeopleSoft, SSA) beginning in 2003. Starting in 2003 and continuing through 2006, market contraction in BOB WMS will highlight vendor viability issues, which will first and foremost favor ERP vendors but will also result in the consolidation to a small, stable list of BOB vendors (e.g., Manhattan Associates, Red Prairie, High Jump, Provia).

ERP: WMS Landscape

• Oracle: A later start on WMS has helped Oracle, enabling it to adopt the kind of adaptable architectures deployed by leading BOB WMS vendors (e.g., Red Prairie, High Jump). Oracle built its first-generation WMS by combining a rule-based architecture with its workflow engine, giving it one of the more configurable WMSs among Tier 1 ERP vendors. Oracle WMS currently supports warehouses up to Level 3, with some reach to Level 4 after adding task dispatching/management in 11.5.8 and further enhancements in 11.5.9 - the current release - leveraging its Task and Labor Planning Control Board. It trails somewhat in adding other value-added capabilities (e.g., yard management, dock scheduling) that would take it further to Level 4, but Oracle’s product road map includes many of these items in future releases (2004/05 delivery). Consistent with its integrated, single-instance ERP message, Oracle espouses a centralized implementation and operation of WMS using networked connections to remote facilities. Although this is adequate for some companies, those that do not want or should not have (e.g., due to poor network connections) centralized WMS must understand Oracle’s bias when considering WMS, and possibly choose BOB if disconnected WMS is required.
• PeopleSoft: Given the recent merger of PeopleSoft and JD Edwards, PeopleSoft’s WMS situation is more complicated. Premerger, both PeopleSoft and JD Edwards supported Level 2 and some Level 3 warehousing that was fully integrated with their respective ERPs. JD Edwards had product plans to move further into Level 3 and, later, Level 4, while PeopleSoft strategically drew a line in the sand by constraining its WMS strategies to Level 2 and Level 3 and forming a strategic alliance with Manhattan Associates for upper Level 3 and Level 4 operations. Through 2004, companies with Level 2 and Level 3 operations and that are committed to either PeopleSoft Enterprise (i.e., PeopleSoft 8) or Enterprise One (i.e., JD Edwards ERP 8) should evaluate only the WMS of their current ERP systems and fully leverage the benefits of common architecture and integration. While the merger marginally confuses the WMS strategy, another vexing challenge for PeopleSoft will be articulating its strategy for wrapping core WMS functionality with other capabilities, such as data collection and transportation. By early 2004, we believe PeopleSoft will articulate an updated WMS strategy. Until then, companies with Level 4 or greater needs should focus on BOB solutions (e.g., Manhattan Associates).
• SAP: Currently, SAP has built the most comprehensive, fully integrated WMS of the Tier 1 ERP vendors and now approaches BOB vendors in WMS functionality. With SCM 4.0, SAP can support some Level 4 warehouse processes, having introduced some value-added capabilities (e.g., task and resource management) combined with its performance and event management capabilities. Also, SAP has been deeply involved in emerging technologies - specifically RFID. SAP has a holistic view of where RFID fits and is building capabilities that will enable it to have more flexibility in how RFID is applied for specific customer requirements. SAP’s concept of a “handling unit” (i.e., a uniquely defined entity that can capture a cascading setup of subelements, such as a mixed palette or multiple items in a case) will enable it to deploy technologies such as RFID at various levels (e.g., palette, tote, case, item), which will be important as RFID matures. SAP’s handling unit construct can be used in various areas that would enable companies to enable RFID at atypical points in the process. For example, it could be applied in warehousing, manufacturing, and transportation and at touch points between them (e.g., shipment verification in WMS to manifesting in TMS to proof of delivery in TMS). SAP also integrates workflows between production and warehousing processes, giving it advantages in manufacturing linkages to WMS (e.g., production line replenishment, cross-dock from receiving to production line). Although functionally rich, SAP WMS is not as user friendly as some BOB solutions, and we believe SAP must now focus on improving usability. Companies that have fully committed to SAP’s ERP system should consider SAP’s WMS. Those that do consider it must also pay particular attention to sources of implementation services to understand what SAP’s capabilities are, who might be partners, and what their methodologies and experience are with SAP WMS.
• SSA: Other Tier 1 ERP vendors built WMS fully integrated in a common architecture with their respective ERP systems; SSA bought a BOB WMS vendor - EXE. While sacrificing some benefits of a unified platform, we believe this benefits both EXE and SSA customers. First, EXE was once a top-five BOB WMS vendor, but recent financial difficulties raised viability concerns for customers and prospects. As part of a larger, more financially stable vendor, viability issues are reduced, which will improve acceptance by existing SSA and EXE customers and prospects. Second, because of its ERP vendor consolidation strategy (e.g., SSA, Baan, Infinium, CA), SSA’s customers do not run on a common ERP platform - so, by offering a BOB solution, SSA is actually in a better position to offer WMS to its clients than if it built WMS as part of any one of its ERP systems. Indeed, EXE has Level 4 BOB functionality, though it is less tightly integrated than its ERP competition. Existing EXE customers can take comfort from the improvement in financial viability, and can also consider some of SSA’s other components (e.g., Caps Logistics, transportation routing and scheduling). SSA’s customers, though now having BOB WMS as part of an integrated portfolio, should pay particular attention to pricing and implementation as well as SSA’s integration strategy and timeline. Since SSA’s WMS is a separate product, customers must ensure that there are contractual provisions for support and upgrades (including interoperability).

Bottom Line: ERP WMS has now matured to where it can consistently address up to Level 3 warehouses, with some vendors now offering Level 4 support. While the advantages of an integrated WMS are obvious, customers should pay particular attention to product depth and breadth, which could suggest BOB WMS as a more viable alternative. Companies in heterogeneous ERP environments should continue to give preference to BOB WMS solutions and carefully plan integrations to ERP systems.

META Group originally published this article on 14 November 2003.