Think WMS (warehouse management system) and most warehouse and logistics professionals think of leading best-of-breed providers like Manhattan Associates (770-955-7070) and RedPrairie (877-733-7724) or ERP giants like SAP (800-872-1727) and Oracle (800-633-0738).

There's a reason those companies are warehousehold names: They excel at meeting the high-throughput rates and complex order fulfillment requirements demanded by Tier 1 companies. That's why Modern Materials Handling publishes an annual list of the top supply chain management and execution providers.

Not every supplier, however, is a Tier 1, and not every user needs that level of functionality. "If I'm a smaller company, I may not want to pay for a solution that includes a lot of functionality I don't need," says Steve Banker, service director for supply chain management at ARC Advisory Group (781-471-1000).

In fact, there's another WMS market running parallel to the top best-of-breed providers that specializes in meeting the needs of smaller companies as well as targeted industry verticals. You may not have heard of them, says Greg Aimi, director of supply chain research at AMR Research (617-542-6600), "but some of the smaller WMS providers have hundreds of customers and solutions that are very deep in a particular industry sector."

Deciding whether to go with one of these alternative approaches is often a matter of your company or facility size, the size and budget of your proposed project, and your internal resources to manage and maintain an IT system after the sale.

"If you're a large customer in the portfolio of one of the smaller WMS companies, you're going to be a significant source of their revenue and a marquee customer," says Aimi. "They're going to be able to give you a little more hand-holding and service than a Tier 1 supplier."

Here's a look at how the other WMS market operates.

Low-cost WMS: The most obvious difference between the Tier 1 providers and the other WMS market is price. "Smaller solutions tend to go in faster and cheaper and they cost less," says Aimi.

That lower cost leads to a faster return on investment (ROI). "The payback for a high-end WMS is typically two years, and a lot of that payback comes from better labor productivity," says Banker. "The payback for a low-cost system is a year or less."

That payback comes from the improved inventory control that comes with a real-time system. "When you ship, you're shipping the right stuff," says Banker. "And you're not re-ordering inventory you already have because you have better visibility."

Pitney Bowes (800-888-6226), best known for its parcel management solutions, is one example. "When we talked to our customers about shipping and mailing compliance solutions, we discovered an unmet need to provide packing accuracy for small-to-medium size warehouses," says Johanna Boller, vice president of enterprise software product management.

Designed for distribution centers up to 250,000 square feet that have to meet packing and labeling compliance, the WMS is optimized around picking, packing and labeling processes, especially carton picking.

"We have a single point of integration to an order management or ERP (enterprise resource planning) system through our shipping system," says Boller. "Once shipping requirements are determined, the orders go into the WMS for picking and packing. This is a five-figure investment that gets you up and running with a very fast ROI."

On-demand WMS: How does $500 a month for a WMS sound? That's the selling point for on-demand WMS. "This is still an emerging product in the WMS market," says Banker. "But the price is so low that the segment will grow."

Unlike a traditional licensed WMS, on-demand WMS systems are hosted by the software provider, which is also responsible for maintenance and upgrades. Users pay a monthly subscription fee to access the system over the Internet.

While transportation management solutions have been offered in an on-demand model for years, the WMS market is just now catching on. For instance, SmartTurn (888-667-4758) a wholly-owned division of Navis (510-267-5000), is offering an on-demand solution for $500 per month, regardless of the size of the facility, the number of users or the number of SKUs.

"We are trying to commoditize WMS and bring that functionality to the masses," says Jim Burleigh, SmartTurn's senior vice president of products.

Who is SmartTurn's target customer? "Anyone with a simple to moderately complex inventory process," Burleigh says. "We think in terms of 10,000 to 120,000 square feet, but we have one customer running a 400,000 square foot warehouse with our system."

Leveraging off-shore talent: In recent years, some foreign WMS providers, like Finland's Aldata Solution (404-355-3220 have entered the North American market. On the other side of that coin, some new WMS providers have sprung up that leverage off-shore talent. "They're smaller providers and keeping their costs low by working with off-shore programmers is the basis for their business strategy," says Banker.

That was the concept behind 7Hills (866-910-3249), where the motto is: If it can be done in India, let's do it in India. Not only is programming done in India, so is the testing and development of new systems during implementation. "That alters the implementation cost tremendously," says Bob Kennedy, executive vice president of business development.

Having used the Internet to leverage off-shore development, 7Hills is now leveraging the Internet to offer its products in an on-demand model. "We have an integrated suite of products designed for third party logistics (3PL) providers, including WMS, yard management, labor management and transportation management," says Kennedy. "A customer doesn't have to invest a couple of hundred thousand dollars to get that functionality."

Customized WMS: Every distribution center has its own secret "sauce," processes and services that differentiate it from its competitors. Sometimes those processes can be handled by tweaking a packaged WMS solution. But that's not always the case. "If you run your business differently from your competitors, or if you're in an industry that hasn't been done a lot and where there's room for improvement, you may want a custom warehouse," says Aimi. "There are WMS providers out there that have the experience to take on those jobs."

That's an area where HK Systems (800-457-9783) has carved out a niche, developing WMS solutions that integrate with highly automated warehouse control systems (WCS). These systems give a new definition to the concept of a warehouse.

HK, for instance, installed one of the first WMS systems in a newspaper printing plant and at a large construction site. Today, HK is installing WMS systems in several logistics ships for the U.S. Navy.

"A few years ago, we stepped back and looked at what we're really good at," says Bob Carver, vice president of logistics software. "With our experience at designing and implementing highly automated materials handling and shipping systems, we realized what we really do differently from the competition is a comprehensive supply chain solution that involves more than just software. That's what allows us to put a WMS in a highly automated environment, but also allows us to create WMS solutions for areas where it's not been used before."

Deep functionality: Just as some vendors have made their mark providing custom solutions, others differentiate themselves by providing deep functionality for specific industry verticals. "These providers have often developed solutions that are deep in a particular industry after working closely with a customer in that area," says Aimi. "Because they're smaller, they can be very targeted about who they go after, and they often market themselves at a very granular level through industry association meetings or word of mouth. They get known within the industry."

That's the approach taken by Cadre Technologies (888-599-5868), formed in 2001 by a group of warehouse management and logistics professionals to focus on small-to-mid-size 3PLs offering order fulfillment and value-added services. To reach that market, Cadre acquired LDS, a 3PL-focused WMS provider, and added enhanced functionality used by larger 3PL companies. Applications include fully-integrated voice technology on multimodal devices and a hosted, on-demand visibility tool.

Serving Tier 2: It used to be that lower levels of compliance and service were expected from smaller suppliers. Today, big box retailers and major manufacturers have the same expectations of their Tier 2 and Tier 3 suppliers as they do of their Tier 1 suppliers.

Those companies, however, often lack the financial and IT resources to implement a major ERP or supply chain execution solution. That has created an opening for ERP providers like Epicor (949-585-4000) and WMS providers like Accellos (719-433-7000) to enter that market.

"Our target market is the growing manufacturing and distribution company up through the division of a Fortune 500 company," says Rod Winger, a senior product marketing director for Epicor. "Our biggest selling point is that we provide an entire application and support from one company at a total cost of ownership the mid-market can afford."

That is also the approach of Accellos, which has partnered with Microsoft and SAP to provide warehouse, transportation and third party logistics fulfillment solutions to Tier 3 and Tier 2 distributors and e-tailers.

"Our processes are built for the small company that needs a flexible solution," says Ross Elliott, executive vice president. "Still, we can provide voice and RFID applications as well as integration to automated materials handling systems."

Manufacturing meets distribution: Some manufacturers build to stock. Others, faced with shorter cycle times and lean inventories, are focused on eliminating inventory – either crossdocking incoming materials directly to the manufacturing line, finished goods to a final customer, or both.

Apriso (877-246-9393) has brought both manufacturing execution (MES) and WMS functionality together in one application. "We specialize in the warehouse associated with a manufacturing enterprise," says Tom Comstock, senior vice president of marketing. "The value proposition is that by bringing the two together, you reduce inventory and improve customer satisfaction by synchronizing operations, especially in a build-to-order environment."