The Smart Warehouse’s Time Has Come

Consumers they are a-changin’.

Companies now must contend with often conflicting desires of both an aging population and new-generation buyers. Consumers are more demanding yet also more fickle, making customer intimacy a compelling challenge for companies. Buying channels are fluid and options are growing, while traditional channels struggle to survive and adapt to new consumer realities. Combined, these put tremendous pressures on distribution operations, which are finally forcing warehouse management systems (WMS) to evolve after decades of stagnation.

A fundamental transformation is occurring in distribution operations, driven by consumers’ appetite for instant gratification. Eliyahu Goldratt first published, “The Goal,” in 1984. The book is a fictional story that tells the tale of Alex Rogo, the production manager at a plant that struggles because everything is always behind schedule. This business book became a blockbuster for manufacturing operations. Companies realized the value in exploiting constraint-based optimization to identify and eliminate process bottlenecks to help increase throughput and speed up production. Even in 1984, production scheduling was not new, but “The Goal” made it mainstream.

Over 35 years later, warehousing remains woefully behind manufacturing in adopting constraint-based planning techniques. Very few companies have even approached what has been common in manufacturing for several decades. At best, some of the more advanced aspects of WMS like wave planning or tasking interleaving are anything but sophisticated. Task interleaving, for example, is largely a “deal a deck of cards” heuristic process. Wave planning is largely a manual process with some systemic work grouping capabilities. Neither are very sophisticated.

These limitations might not be an issue if the complexities and demands on warehousing operations hadn’t changed so much over the last few years. Today, these rudimentary systems are not enough for high-velocity, high-volume and extremely short-cycle-time fulfillment operations. Gartner has customers shipping hundreds of thousands of order lines out of a single facility daily and these old approaches won’t cut it any longer. Much more sophisticated tools are needed, and needed now.

To address these challenges, we see a move toward what Gartner calls the Smart Warehouse. The Smart Warehouse leverages emerging capabilities that bring to warehousing what has been common in manufacturing for 35-plus years. We see leading-edge WMS providers introducing more predictive and prescriptive analytics capabilities that are being applied in a few areas.

First, these capabilities are being applied to work management, which is beginning to leverage much more sophisticated techniques. These techniques include conventional optimizations, as well as more recently leveraging artificial intelligence/machine learning to organize, bundle, prioritize, assign and execute work. For super-high volume/velocity environments, this can become a very sophisticated traffic management solution.

The second place for application is labor management. While basic labor management systems are mature and proven, it was largely an ex post facto reporting process that looked at how I did yesterday. This is still meaningful, and Gartner has seen a notable increase in interest in traditional labor management across our customer base.  However, this is not what we call smart — it is simply descriptive analytics (how did I do compared to how I should have done). What we are seeing now is far more interest in labor planning and forecasting that is forward looking and predictive.  This demand is being driven by companies needing to find new and better ways  to address growing labor shortages.

Finally, demand for automation is growing. Specialized use cases for what we describe as work planning above specifically relate to highly automated facilities and is often referred to as a warehouse execution system (WES). Many of the same needs to group and plan work exist in automated facilities, but the one additional characteristic of WES is automation awareness because work needs to be coordinated across various pieces of automation. So, for example, there might be hundreds or thousands of orders in the system, but the WES might only release at once as much work as can get through the put wall in a certain period of time.

The Smart Warehouse is not exclusively aimed at automated warehouses. While highly automated facilities must be increasingly smart, this is far from the only place we see the need for increased intelligence. For example, as mentioned above, labor planning and forecasting are in high demand in conventional human-driven warehouses because these warehouses have large workforces and lots of complexity and demand more robust capabilities.

Given its maturity, companies often have a good handle on what their basic requirements are for their next-generation WMS, but these requirements are often focused on the past and this is no longer enough. Companies looking at a new WMS should dust off a copy of “The Goal” as a refresher. This can be their guide to envisioning their next-generation Smart WMS.

C. Dwight Klappich,
Research VP and Gartner Fellow,
Gartner Supply Chain
dwight.klappich@gartner.com