SYSTEMS INTEGRATION – How to Get Your House in Order

In a perfect world, every company that operates multiple warehouses would run them like Staples does theirs. The $10.7 billion office superstore’s retail distribution center in the sleepy town of Killingly, Conn., for example, is typical of all four of Staples’ warehouses. It’s typical because five years ago Framingham, Mass.-based Staples standardized on a single warehouse management system (WMS) from EXE Technologies that integrates with the rest of the company’s operational systems.

Inside the 307,060-square-foot Killingly warehouse, forklifts, palette jacks and clamp trucks weave through aisles of metal shelving. Turret trucks, guided by sensors in the concrete floor, heft wooden pallets stacked with boxes by the dozen and, instructed by the company’s inventory management system, deposit them in exactly the right spot on the shelves. One and a half miles of conveyor belt grinds along a serpentine path bearing cardboard boxes of everything from binders and three-hole punches to lamps and file cabinets. Women in jeans, T-shirts and sneakers scan pick tickets with laser guns, which instantly populate LED screens on the long, multilevel metal racks before them with numbers that indicate the quantities of PDAs, boxes of pens, mobile phones and toner cartridges they need to pick. The entire operation runs 24 hours a day without a hitch from Sunday to Saturday?shutting down for about six hours every Sunday morning.

The benefits that Staples gains from working on a single platform are many splendored. Running just one WMS enables the company to establish consistent procedures for distributing merchandise to stores, transfer products from one distribution center to another and have a dynamic, enterprisewide view of its inventory. Jeff Klingensmith, Staples’ vice president of retail distribution operations, says that while it’s hard to put an exact figure on the money his company saves, “I see savings in licensing, maintenance agreements and in the [cost of] custom configuration of base [WMS] code.”

Ah, if only every business was born fully integrated, with warehouses and corporate headquarters and factory floors feeding into ERP systems, providing perfect, seamless visibility at every point in the supply chain. Then all a CIO would have to do is tilt his chair back, put his feet up and dream up ways to turn his company’s IT into revenue streams while delegating to some systems operator the task of making sure that the conveyor belts of data are running smoothly.

But life, as we know, is not like that.

Living In the Real, (Dis)Integrated World

In reality, many companies, including household product manufacturer Sunbeam Products, Cott beverage company and Nexcom, a $2 billion mass merchant that supplies the U.S. Navy with everything from clothes to the products that clean them, are forced to run multiple WMSs, either because they’ve acquired companies that deploy different packages themselves or because decentralized business models give their various warehouses the liberty to decide which WMS is right for them.

“The vanilla-flavored world where all systems are the same just isn’t an immediate reality for a company like Cott that’s growing very rapidly through acquisitions and organic growth,” says Douglas Neary, CIO of the Toronto-based company.

Running more than one WMS causes headaches. Make that migraines. Ed Janowsky, vice president of information technology at Sunbeam in Boca Raton, Fla., says that running two WMSs in 12 warehouses compromises his company’s efficiency and drives up its operational costs. “You have a duplication of software licensing and maintenance fees,” among other expenses, he says.

Mitch Long, Janowsky’s director of IT applications, says that running two different WMSs puts pressure on the IT staff at Sunbeam because they have to write additional interfaces between the company’s two WMSs and its back-end systems. “We need multiple people with different skill sets to support those products,” says Long.

In addition, running multiple WMSs can lengthen a company’s fulfillment cycle, according to Anthony Venuti, vice president of CDM, a consulting company based in Cambridge, Mass. Also, Long says, Sunbeam’s inventory accuracy varies because it is running multiple WMSs. And if the WMSs are not well integrated with the order processing system, orders can get lost because there’s no consistency as to how orders are fulfilled and how the facilities are run, says Venuti. To top it all off, when you’re not running a common WMS across distribution centers, it’s harder to move warehouse employees from one location to another because every time you do you need to train them on a foreign system. Businesses also miss out on the benefits of shared methodologies and best practices for using the system and for running the warehouse.

But despite those problems (or, rather, because of them), Cott, Nexcom and Sunbeam have developed best practices to mitigate the cost and disadvantages of running multiple, unintegrated warehouse systems.

To guard against errors, Cott’s Neary compares information across his company’s three warehouse management systems and two ERP systems, and conducts hand counts of the finished goods to ensure that the inventory data is consistent. And, where possible, he writes interfaces between his WMSs and his ERP systems so that the two can share information without the need to enter data manually.

One of the ways Sunbeam keeps operational costs at bay is by replacing the printed instructions for picking merchandise with radio frequency (RF) technology for advanced material handling that tells warehouse employees exactly what to pick and where. The RF devices eliminate the need for them to have to stop at a central location in the warehouse to get their pick assignments. To prevent the warehouse from running out of stock, Sunbeam is in the process of standardizing its replenishment method, which it calls assemble to order (ATO). The company is setting up standard, mathematically calculated safety stock levels, reorder points and reorder quantities across its 12 facilities. Standardizing on business and warehouse processes, even without standardizing on WMSs, also lets Sunbeam transfer warehouse employees and operations from one location to another without incurring training costs, and it offers the company greater visibility into its supply chain.

“The more standardized the approach, the more common the terminology that’s utilized, the better the different [warehouses] can talk with one another, the better the visibility the people in corporate have into what exactly is in those locations. Then they can do a better job of forecasting and planning,” says Janowsky. And though it may not sound like a terribly high-tech best practice, Kean Westcott, director of field systems for Nexcom, and Cott’s Neary both advocate visual checks and manual counts to ensure both the accuracy of shipments and the accuracy of the data ultimately being fed into the WMS and the ERP system.

Those methods for dealing with multiple WMSs are applicable to any situation in which a business finds itself unavoidably dependent on disparate systems that are less-than-optimally integrated. “A CIO can do this kind of standardization in any particular aspect of the business,” says CDM’s Venuti.

Best Practices For Running Multiple Systems

Find a tool to cross-reference your data. One of the biggest hassles associated with running multiple WMSs is having to make them interface with an ERP system?a task that gets even more complicated when it’s necessary to interface multiple WMSs with multiple ERP systems. Such is life for Cott and Sunbeam. To compensate for a lack of integration, data has to be manually keyed from one system into the other. But the more systems into which data must be entered manually, the greater the risk of screwing up. And when the numbers are wrong, products can get logged into the wrong physical locations in the warehouse; warehouse employees can’t find goods they need to ship because their instructions tell them the blue widgets are in lot #18 when they’re actually in lot #21; inventory counts can be inaccurate, and the business risks overcharging or undercharging, short-shipping or over-shipping customers for merchandise they may not have ordered.

So if the business is running multiple WMSs that don’t interface with its ERP system, the CIO must establish some checks and balances to make sure that the data is identical across systems.

One such check and balance Cott’s Neary uses to prevent data from being corrupted is to triangulate, as he calls it, inventory counts from three sources: the data captured from scanning the bar codes of finished and raw materials, the hand counts of goods in the warehouse and the numbers in the ERP system. By triangulating, the 46-year-old CIO means comparing. He says the company double-checks to make sure that all billings in the ERP system match all shipments in the WMS and that all goods received match all invoices. “When you’re able to triangulate data, your systems can identify inconsistencies right away,” he says.

To compare billing, shipping and invoicing information across different systems, Neary has configured his systems so that they automatically synchronize with one another on a regular basis and feed a data warehouse. He uses Web-based business intelligence applications from Hyperion (Essbase and Analyzer) to recognize any anomalies in the data. Inconsistencies between the ERP system and the WMS are automatically flagged when information is extracted from the data warehouse, and transformed and loaded into the business intelligence application. Neary uses translation tables and cross-reference tables to ensure that similar brands, package types and flavor types coming from different systems all map appropriately to the rules established in the business intelligence application.

And in about half of Cott’s warehouses, Neary has written interfaces between the legacy ERP system and WMS. Though writing interfaces is one of the headaches of having to support multiple WMSs, having the interface has eliminated the need to manually rekey inventory transactions into the ERP system, he says.

Standardize wherever and however you can. Sunbeam runs two different WMSs, as well as a few custom programs for its 12 distribution centers. For Sunbeam?like a lot of companies?running multiple WMSs is the lesser of two evils. Although doing so drives up cost, right now the company has chosen not to standardize because of the high implementation cost. Vice President of IT Janowsky says that for Sunbeam, the benefits of standardizing on one WMS don’t outweigh the cost. During the past several years, the company has been in acquisition mode. If it had to implement a standardized WMS in each new warehouse it took over, that would be all he’d have time and money to do, Janowsky says. Instead, Sunbeam standardizes on the business process end.

“Standardization [of business and warehouse processes] enables us to put together a simple, straightforward planning and training process that’s easily transferable to various locations,” says Janowsky, addressing the problem of training workers when they move from one warehouse (and one WMS) to another.

For example, the the company is currently deploying a single ATO process across all of its warehouses. That means each warehouse has the same processes for handling shipments of incoming goods and raw materials and for handling outgoing shipments of finished goods to its retail customers.

As for replenishment, the distribution centers all use the same process for calculating safe stock levels so that they don’t run out of goods. So if the company had to move an employee who worked on the loading dock of the facility in Hattiesburg, Miss., to the facility in Waynesboro, Pa., the individual wouldn’t have to learn a new process for getting shipments onto trucks, for unloading shipments into the distribution center or for reordering merchandise.

Standardizing on a single ATO process effectively allows Sunbeam to establish best practices for running its warehouses as well as benchmarks for comparing each facility’s performance?two activities that can be impossibly difficult, or simply impossible, when a company is running multiple WMSs, according to CDM’s Venuti. If a company’s five distribution centers are running different WMSs, he says, they’ll all have different perspectives on how a facility should be run, how orders should be fulfilled and what the best staffing levels are. You can’t benchmark their performance, since they’re managed inconsistently.

Janowsky disagrees. “Having a standard ATO process helps us measure the effectiveness [of each warehouse], and by having a standard approach for measuring our effectiveness, we can tell what the proper staffing requirements, storage requirements and overhead expenses would be for a particular location,” he says.

To further facilitate moving warehouse employees from one location to another, Long says, the IT department has configured software from J.D. Edwards that’s used in several of the distribution centers so that the menu options to print pick tickets, shipping labels, shipping confirmation, print manifests and bills of lading are identical across locations.

“The closer you get to the cookie-cutter approach, the more interchangeable and useable you make people,” says Janowsky.

If all else fails, get your hands dirty. When battling with multiple systems, sometimes your best strategy will be to rely on good, old-fashioned human sweat. If you can’t trust your systems to generate proper orders, use your employees to double- and triple-check shipments and inventory levels. After all, you can hold them accountable for mistakes and foster a “we try harder” spirit among them much easier than you can a computer.

Westcott says Nexcom, with the U.S. Navy as its sole client, has its employees pull cases off the conveyor belts, scan the labels, visually check that the product in the cases corresponds with what’s on the label and verify that the quantity of items in the case matches the packing slip. That labor-intensive process is the price one pays for running more than one WMS, but it’s cheaper than ticking off the U.S. Navy by messing up the orders.

Nexcom, which operates two WMSs and uses its merchandising system to run seven distribution centers and four smaller warehousing facilities all over the globe, also employs inventory control groups that go around the warehouse counting products in various locations. “In most cases, that’s done in reaction to a person going to pick a product and finding that it’s not there,” Westcott says.

Cott CIO Neary also advocates manual counts and holding employees accountable for them. No matter what an employee’s position is in the warehouse, everyone has to do manual counts, and their performance is measured based on whether their manual counts match up with the counts in the WMS.

“You’d be amazed at how well this works,” says Neary. “When you hold people accountable to a standard, they do it.”