Warehouse Management Software
BuyerView | 2014
Every year, Software Advice speaks to hundreds of businesses that are searching for the best warehouse management system (WMS) to fit their needs. These interactions give us tremendous insight into the needs of WMS buyers across a wide assortment of industries. We recently analyzed a random selection of 385 of these interactions to examine the main reasons buyers are seeking new WMS software.
When we asked buyers what methods they were currently using, many said they were still relying on Excel spreadsheets, pen and paper and other manual methods to manage their warehouses (35 percent). Seventeen percent of buyers sampled sought to replace their existing commercial WMS software, and 15 percent were using software that was built in-house.
These proprietary systems have proven problematic for some buyers. One buyer describes his company’s custom-built software as “old” and “archaic,” exacerbated by the fact that the programmer who designed it had retired. As such, the buyer feels “handcuffed,” because he cannot make modifications to the system.
Another buyer, representing a 3PL firm, says that while the firm’s current in-house system is “adequate” for smaller clients, it is not robust enough to handle the needs of bigger clients, which the firm is gaining more of.
Among the 17 percent of prospective buyers who currently use “non-WMS software,” Quickbooks was the most commonly used. Many of these buyers indicated that Quickbooks lacks many of the necessary features that come standard in WMS software, particularly if their company was experiencing growth.
Buyers that have no system in place whatsoever—or that subcontract out their warehouse management to a 3PL firm—fall into the “nothing” category, comprising 14 percent of the sample.
Unsurprisingly, the most commonly requested features among all buyers were inventory tracking (67 percent) and “pick, pack and ship” capabilities (62 percent). Barcoding was also requested by slightly more than half of all buyers.
Small businesses (defined here as those with $100 million or less in annual revenue) made up 83 percent of our sample. Large businesses (those with over $100 million in annual revenue) comprised a combined total of just 17 percent of our sample.
Forty-eight percent of the buyers we spoke with were from 3PL firms, and 96 percent of these 3PL firms were categorized as small businesses. On a national scale, however, the 3PL sector is dominated by big players: The top 50 firms generated more than two-thirds of estimated total revenue for the entire domestic 3PL sector.
As a growing number of businesses are relying on 3PLs for their warehousing and distribution needs, smaller 3PLs are gaining more opportunities—but they are also facing much stiffer competition from the big players. Maximizing efficiency is essential in order to remain afloat, so it makes sense that these firms would seek software to assist with this.
The next-largest industry segments were consumer goods and industrial (22 percent and 15 percent, respectively), with food and restaurant supply (9 percent), medical (4 percent) and government (2 percent) comprising the smallest segments.
In terms of features requested, there were a few notable differences between what 3PL firms wanted compared to other industry segments. In particular, more than one-quarter of 3PL firms requested EDI capabilities, compared to 8 percent of all other types of companies.
EDI is often critical for 3PL firms, as it streamlines and automates communication between warehouses, suppliers and clients that all use disparate systems; it reduces the need for manual data entry, while producing fewer errors. Conversely, EDI tends to be less essential for businesses that insource their warehousing, since these firms often have everything synced on the same network.
Similarly, 15 percent of 3PL firms requested a client portal feature, compared to just 2 percent of all other firms. The portal feature allows a firm’s clients to view their inventories and stock levels in real time. The handful of non-3PL firms that requested the portal feature were consumer goods wholesale distributors that wanted to make their inventories visible to their clients—a feature largely unnecessary for the rest of the non-3PL companies.
While most buyers, regardless of business size, had similar requests when it came to features, there was a notable discrepancy when it came to barcoding and RFID capabilities.
Large businesses (those with over $100 million in annual revenue) overwhelmingly requested barcoding and scanning capabilities in their WMS (72 percent). Conversely, only 47 percent of small businesses (those with $100 million or less in annual revenue) requested this feature. For small businesses with limited product offerings or more manageable inventories, barcoding might not be as essential—or cost-effective—for their operations.
Among big businesses, 18 percent specified RFID capabilities, compared to just 2 percent of small businesses. RFID can be very cost-prohibitive for smaller businesses due to its associated up-front costs; it’s unsurprising that bigger businesses showed a greater desire for the feature, as it’s more likely to result in a sound return on investment for them.
Three-fourths of buyers indicated that they wanted one “best-of-breed” warehouse management solution, as opposed to an “integrated suite” (23 percent) or multiple best-of-breed applications (2 percent). A best-of-breed solution refers to a single software application, while an integrated suite is a software package that includes multiple applications.
As so many buyers are struggling specifically with their current WMS solution, it makes sense that they would want one new application to handle that specific aspect of their business, rather than overhauling their entire system for an integrated-suite solution.
Many businesses indicated that their current warehouse management solution is “clunky” or not robust enough to handle their changing needs. As such, 38 percent of the buyers we spoke with specified that they needed a “more modern system,” and 16 percent indicated that growth was the top reason they were looking for a more robust WMS.
The overwhelming majority of buyers (75 percent) want to deploy their new WMS within six months of their initial outreach to Software Advice. Of the 385 buyers we analyzed, 5 percent did not indicate any preference, or were just exploring their options without any time frame in mind.
According to a recent report from Gartner, the overall market for supply chain management software is expected to increase by 12 percent in 2014, to reach $10 billion. As warehouse management is a fundamental aspect of a firm’s broader supply chain, this presents a significant opportunity for WMS vendors seeking to capitalize on the sector’s growth—evidenced by the fact that so many prospective buyers in our sample are replacing outdated manual methods or a non-WMS software system.
A recent industry report indicates that 3PL firms are maintaining their dominance, with 65 percent of shippers outsourcing their logistics needs to them. Despite shippers’ reliance on 3PL firms, however, only 12 percent of them believe that their 3PL partners are “aggressively” investing in information technology solutions, according to that same report. As we see in our findings, a significant number of 3PL firms want EDI and client portal capabilities in their WMS, which might reflect a growing effort on their part to bridge the IT gap with their clients.
And there is good reason for 3PL firms to want software that will make working with clients easier and more efficient. Robert Bowman, managing editor of SupplyChainBrain, says in a recent Forbes article that while 3PL firms are seeing more business, they are also shrinking in numbers.
“The trend is toward fewer, larger players,” Bowman says. In other words: competition is fierce. If your WMS is lacking, you better start packing—or, you can give Software Advice a call.
Software Advice regularly speaks with buyers who contact us seeking new warehouse management software. To create this report, we randomly selected 385 of these phone interactions from 2014 to analyze. These findings exclusively represent those buyers who contacted Software Advice for guidance on software selection, and may not be indicative of the market as a whole.
If you’d like to further discuss this report or obtain access to any of the charts above, feel free to contact me at firstname.lastname@example.org.