Published December 8, 2021
What is the best way to approach a warehouse management system (WMS) selection? There is no single answer to this question that will work for all distribution operations. The key drivers behind why an organization is pursuing a new WMS will shape the best approach for selection. They will dictate the duration, team composition, focus and effort required to successfully perform the selection. A WMS selection that covers dozens of distribution centers (DCs) varying in size and function will look different from a single site selection for a relatively small operation. An organization that is moving from a non-automated to a highly automated facility with new processes and material flows will likely have a different focus than one that is looking to replace an end-of-life WMS solution for what is essentially a manual process.
Despite the many differences, there are common elements for a successful selection that span across the various drivers and rationales for pursuing a new WMS. The depth and structure of these elements are certainly shaped by the selection drivers as well as enterprise procurement practices and culture. However, any organization that is considering acquiring a new WMS needs a clearly defined game plan for the selection process that includes the following components:
- Justification – There should be a prima facie business case for deploying a new WMS. Depending on the drivers behind the selection, it may be very succinct (e.g., needing a WMS for a new, highly automated DC). It doesn’t have to be a full-blown analysis, especially since all of the cost and benefit details may not be fully defined until the selection is completed. This can be done downstream-if there are reasonable doubts about the need to replace the legacy system supporting warehouse operations then a WMS assessment should be performed first. A properly done assessment will determine if the effort and cost to pursue a new WMS is warranted as well as establish an initial business case.
- Team – The size and complexity of the distribution operations generally shape the composition of the WMS selection team. A large, highly complex operation will require more resources and inputs for the selection than a smaller, less complex operation. However, any selection should center around two key team members. First, it needs a project champion who has the organizational clout to move the final recommendations through the approval process. Second, it needs a project manager (PM) to oversee the administrative details and take responsibility for the deliverables.
The remainder of the team should be structured based on need and corporate culture. Generally, there is a core team consisting of key operations and IT stakeholders and subject matter experts (SMEs). Core team members should participate in all selection activities, providing guidance, review and approval for each step. All these roles are part time. Depending on the required effort level, a full-time business analysis or comparable resource may be needed to compile and document key deliverables such as requirements, requests for proposal (RFPs), vendor demonstration scenarios and reference call summaries.
Many organizations should consider enlisting the help of an experienced consultant to do the detailed work. A consultant can also provide expert insight on the WMS marketplace and vendor capabilities as well as an outside view on best practices when establishing requirements.
- Understanding of the WMS Marketplace – The project team needs to have a basic understanding of the WMS industry and where their distribution operations fit in the WMS marketplace. The WMS industry can be segmented a variety of ways, including industry verticals served, revenue, installed base, product line (ERP, supply chain suite, pure-play WMS, etc.), technology platform (multi-tenant cloud, public cloud, private cloud, on-premise, etc.), and geographic regions served.
When it comes to a WMS selection, the ability to support complex operations is an important factor. Operational complexity includes a mix of material handling automation, workflow sophistication, business rules variations, work optimization capabilities and extended WMS features such as dock management, labor planning and management, and slotting optimization. The more complex an operation is, the more it requires a solution capable of supporting this complexity.
The penalties for selecting too light or too complex of a solution is severe. They can include budget overruns, negative impacts on operational performance and the inability to efficiently scale to meet future growth. The key objective here is not to have an in-depth understanding of the WMS marketplace and its underlying nuances, as there is industry analysis that can help. However, it is important to have a basic understanding of where your organization fits into this view of the marketplace as it will shape what set of vendors should be included in the selection.
- Key Requirements – There is very limited value in compiling and publishing an exhaustive list of requirements. This is especially true when comparing solutions from vendors that support the same level of operational complexity. The WMS industry is mature, and vendors in any given segment are going to support core warehouse functions from inbound receiving to outbound loading.
A better approach is to concentrate on key or mission critical requirements that represent significant pain points or differentiators for your distribution operations. These key requirements should be developed based on operational and IT input and include future directions as well as existing needs. This should be a limited list as it will serve as the basis for vendor demonstrations.
This doesn’t mean that additional detail is not needed. For example, if you are a wholesaler shipping to retailers, then a list of retail compliance requirements is certainly relevant. But soliciting input on generalized requirements in a check list structure generally doesn’t provide value.
- RFP Document – Every selection needs some sort of request for proposal (RFP) or request for quote (RFQ) document which provides instructions to the vendor on how to respond to the solicitation. Of course, any corporate procurement policies governing content and structure need to be accommodated. Otherwise, the RFP should be concise, focusing on key content necessary to evaluate each vendor’s offering. There is no need to publish an exhaustive list of questions that is only going to elicit vague or incomplete responses. Organizations should request relevant functional and technical collateral and concentrate on diving into details during vendor demonstrations and follow-up sessions. Sample contracts, service agreements and other relevant legal documents should be requested and reviewed to ensure there are no incompatibilities with corporate policies.
The RFP document needs to provide a high-level description of operations as well as necessary background parameters such as users, order volume and the external system integrations required so that the vendor has a basis for their bid. This background should include as-is and future state over a relevant planning horizon (e.g., five years). Combined with the key requirements list, this description should give the vendor an indication of the complexity that must be supported so that they can estimate the professional services and level of application extensions and modifications required to implement the system.
- Vendor Shortlist – In the early days of the WMS industry, it was not uncommon to issue an RFP to dozens of vendors and then narrow the list down to a reasonable number of vendors for further evaluation. This isn’t necessary anymore if you understand your position in the WMS marketplace and have compiled your key requirements and RFP document accordingly. Generally, three to four vendors is sufficient, although there are circumstances where more are merited.
Occasionally, one or more vendors get an automatic invite, such as when the incumbent ERP vendor has a WMS solution. The vendor pool should be pre-qualified through direct contact to gauge their willingness to bid. While WMS vendors are typically eager to participate in a selection process, it is not a given. Participation requires an investment which any vendor is going to assess against the likelihood of winning and the available resources they must devote to the effort.
- Demos and Vendor Interaction – Once the RFP is issued, vendors should be offered a tour of your DC. This can either be virtual or on-site. The selection process should provide opportunities for direct vendor interaction to get the most complete response from each vendor.
Make vendor demonstrations the heart of your selection process. These should be based on published scenarios that focus on the key requirements. Like facility tours, these can be on-site or virtual. The latter may be preferable for large, complex operations where a day or more would be required for a single, on-site presentation. Virtual demonstrations allow content to be broken up into manageable and digestible chunks. They also reduce the inevitable scheduling and logistics challenges.
Make sure that a schedule with allocated time for each scenario is published. The allotted time for each scenario should be sufficient for questions and answers as well as diving into the details. Offer to review the scenarios with each vendor prior to their presentation to ensure alignment and that expectations are addressed. Appoint a timekeeper for each presentation to monitor demo progress against schedule and record any topics requiring further detailing on a parking lot list.
- Reference Calls and Site Visits – Most WMS selection teams want to do reference calls as part of their decision-making process. This is fine if they recognize that vendors are only going to provide success stories. Additionally, the reference candidates that are most likely to match your operational profile may be direct competitors who don’t necessarily want to talk to you. Therefore, reference calls should play a secondary role in your decision-making process.
Draft a concise set of questions that the vendor can send to each reference before the call. The list should include questions on their implementation (e.g., planned versus actual schedule and budget) and post-implementation (e.g., support performance, upgrades and enhancements) experiences. Make the calls short and structured. Customer site visits for the finalists can provide an opportunity to see the solution in action, but these are extremely difficult to arrange (especially on a tight schedule). It is one thing for a customer reference to take a 30-minute call, but it is a whole different game to invite you into their facility.
- Evaluation Structure – As soon as the RFP is issued, organizations need to develop a scoring mechanism for rating vendor responses. Once again, this should be concise and focused, and should reflect that the decision-making process for the team is essentially a qualitative one. Elaborate scoring mechanisms are not going to make it otherwise. Additionally, organizations need to have a framework for comparing vendor bids. It should include professional services and internal resource requirements as well as subscription and license fees. These will likely need to be normalized to give the best apples-to-apples comparison.
- Recommendations and Final Report – The evaluation structure should provide the basis for the team to make its final recommendation. This should include a preferred vendor and a runner-up. It is not uncommon for vendors to be dropped from consideration after their demos. The final decision-making process can vary but a team workshop where every member has a voice is an excellent method to achieve alignment. Results should be documented in a short report or presentation that can support the final approval process.
- Negotiation Strategy – Once the decision has been made, negotiations can begin on finalizing a contract. It is generally a good idea to take two vendors-the preferred and runner-up-into negotiations. This will provide an alternative in the event that negotiations with the preferred vendor hit an impassable roadblock. It can also keep the process competitive. Have a strategy that identifies what areas to focus on before launching into negotiations. Realize that getting the best price isn’t likely going to pay off in the long term.
How well you perform your WMS selection will directly impact the success of your WMS deployment. The selection process should be more than an attempt to identify the best fit vendor. Done correctly, it can establish a partnership with the selected vendor as well as provide the foundation for a successful implementation.