In at least two aspects, 2002 was a notable year for the largest suppliers of best-of-breed warehouse management systems (WMS).

To begin, suppliers of enterprise resource planning (ERP) software are stepping up their game and going after end users with improved WMS functionality. That, in fact, may be the most important news in our third annual survey of the 25 largest, best-of-breed WMS suppliers.

But not to be overlooked is the fact that 2002 was a surprisingly good year for these systems despite a near depression for other segments of supply chain software.

Steve Banker, service director, supply chain management, at ARC Advisory Group (781-471-1000), estimates that the worldwide best-of-breed WMS industry grew 5% last year to an estimated $737 million in software and services.

That is a big improvement over 2001, when Banker estimated that WMS revenues shrank 6% worldwide and 12% in North America.

Putting together Modern's annual WMS survey is a mixture of science and art. With more than 200 companies offering inventory management solutions, we focused on those suppliers that implement a best-of-breed WMS solution with deep order fulfillment functionality.

For that reason, ERP providers have not made the list in the past. That changed this year, and now includes SAP.

In addition to deep order fulfillment functionality, a supplier must do business in the United States to be considered. And vendors must be willing to report their total worldwide revenues from WMS, including licensing, support and services for all supply chain execution offerings.

That presents a challenge. Today's leaders are broadening their footprint to offer total supply chain execution solutions that include transportation management, collaboration tools, and event planning capabilities. Meanwhile, Swisslog and Irista are also leading providers of materials handling control systems that direct the equipment in automated facilities.

The result is that no two companies report their revenues the same way. While we report a company's total supply chain execution software sales, we have noted that some companies' sales include control systems and other products. And while the revenue numbers provided Modern are self-reported, we compare them with leading analysts who also survey the market to verify their accuracy.

But to get a truer sense of a supplier's position in the industry, a user might also look at the number of systems installed last year. A company that reports a very high revenue figure, but a limited number of systems in comparison to a market leader like Manhattan, RedPrairie or EXE is probably generating a lot of revenue in non-WMS products.

Looking at the performance of individual companies tells an interesting story about the current dynamics of WMS.

For instance, the vast majority of last year's growth came from stellar performances by just four companies:

• Manhattan Associates grew from $155.6 million to $175.7 million in 2002 to easily retain the number one spot.
• RedPrairie not only changed its name, but grew from $65 million to $75 million to take the number two position in WMS sales for the first time.
• HighJump Software increased revenues from $23 million to $28.15 million, and jumped from number 14 to 11 on the list.
• Finally, SAP made significant inroads in the WMS market this year. While the ERP leader reported over $400 million in revenues from supply chain execution software solutions, Banker estimates SAP's revenues from WMS at $43 million. Still, that was high enough to rank number four.

The rest of the suppliers treaded water. 'Take out those four companies and the market shrank by 10%,' says Banker. 'For most WMS suppliers, it was a flat or down year.'

SAP's addition to our list points to another trend, according to Banker and Jeff Woods, principal analyst at Gartner (203-964-0096): the strong vendors are getting stronger, with the ERP players gaining market share at the expense of smaller providers.

'A number of our clients have told us that they have made a strategic decision to go with SAP across the enterprise, including the WMS system,' says Woods. 'I'm aware of a number of deals where best-of-breed vendors weren't even invited to submit a bid.'

That represents a significant shift. For years, SAP, Oracle, J.D. Edwards and PeopleSoft were content to sit on the sidelines while the best-of-breed WMS suppliers implemented state-of-the-art solutions. That is no longer the case.

For WMS providers to prosper, they will need to provide deep functionality in specific verticals; continue to extend their solutions with fully integrated applications beyond WMS; and lead the way in the development and deployment of RFID solutions, say industry experts.

In the end, the competition is good news for WMS users who can expect more functionality, lower licensing fees, and faster implementation times.

Click on the icon to see the chart on what the leading suppliers offer.

Click on the icon to read last year's WMS report.

Top Supply Chain Execution Software Suppliers