Darwinism benefits end users
By Staff -- Modern Materials Handling, 3/1/2000
Warehouse management systems are the most widely used of the execution systems today. They will continue to manage operations within the four walls of the warehouse even as they begin to reach out to other areas of the supply chain.In the not too distant past, WMS vendors posted the kind of explosive growth numbers associated with some of today's hottest technology companies. While there is still a robust market among mid-tier companies implementing their first WMS system, the overall U.S. market has slowed, especially among the Fortune 1000 companies. Then again everything is relative. This slower growth is still a fairly healthy 15 to 20% as year.
"Other industries would kill for those kinds of numbers," says Steve Banker, director of research, supply chain solutions, at ARC Advisory Group."But what it tells us is that the WMS market is now maturing."
Competition is a powerful tool, and in a slower WMS market, the competition for market share has never been more fierce. This is especially true since no single supplier dominates the market. In fact, the top 15 WMS vendors accounted for only 36% of the market in 1998 with no one vendor holding more than a 6% share, according to AMR Research. And there wasn't any sort of sea change in that during 1999.
One result of that competition has been industry consolidation. Larger vendors have merged with or acquired smaller vendors. Enterprise resource planning (ERP) giants have purchased stakes in some WMS companies. Meanwhile, supply chain planning vendors are forging alliances to strengthen their offerings.
The benefit to the user in the warehouse has been not only more robust solutions but lower systems costs. In a recent survey, John Hill, a consultant with Cypress Associates and a WMS pioneer, found that the average price of a complete WMS solution had dropped from $513,000 to $275,000 in just 5 years.
But that is an average cost: fully functional WMS solutions for smaller companies can be implemented for considerably under $100,000. "Today's tools are more plentiful, easier to use, and cheaper than anything we've seen in the past," says Hill.
What has made these lower software costs possible is a transition from project to product. Early systems were projects that were customized for an individual user's needs. But like a tailor-made suit, custom-programmed software is expensive to implement and even more expensive to maintain. Upgrading or changing a program when your needs change require another round of custom programming.
Today's WMS is an off-the-shelf product, a change the market demanded. "Our customers want product solutions, not custom solutions," insists Greg Aimi, vice president of industry strategy and product management at McHugh Software International. "They want a solution that is based on a product where they can leverage someone as their technology vendor and get on an upgrade path with that vendor."
Off-the-shelf software is easier to install, easier to service, and easier to upgrade. Moreover, many of today's solutions are modular in nature, allowing users to choose only the features they need.
Programs that are easier to install are also easier to integrate with other systems, a key feature as companies look to break down the barriers between their trading partners.
This has been achieved through integrated suites of warehouse related modules, and through alliances between "best-of-breed" applications and ERP providers.
"Many of the challenges to integrating within the four walls of your business have been mitigated," says Eric Peters, associate partner, supply chain practice, Andersen Consulting. "The more interesting issue is going to be integrating information systems from different supply chain partners."
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