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Impact of Warehouse Management System in a Supply Chain International Journal of Computer Applications (0975 – 8887) Volume 54– No.1, September 2012 14 Impact of Warehouse Management System in a Supply Chain Ramaa.A R V C E Dept. of Industrial Engg and Management, RVCE, B’lore. K.N.Subramanya R V C E Dept. of Industrial Engg and Management, RVCE, B’lore T.M.Rangaswamy R V C E Dept. of Industrial Engg and Management, RVCE, B’lore. ABSTRACT In a supply chain, warehousing function is very critical as it acts as a node in linking the material flows between the supplier and customer. In today’s competitive market environment companies are continuously forced to improve their warehousing operations. Many companies have also customized their value proposition to increase their customer service levels, which has led to changes in the role of warehouses. This paper highlights the findings of the study carried out to evaluate performance levels and enhance productivity of the manual warehouses by developing a WMS framework and cost benefit analysis. General Terms Supply chain, Warehouse Management system. Keywords Warehouse management system, supply chain, cost benefit analysis, value stream mapping. 1. INTRODUCTION A warehouse is a facility in the supply chain to consolidate products to reduce transportation cost, achieve economies of scale in manufacturing or in purchasing [1] or provide value- added processes and shorten response time [2]. Warehousing has also been recognized as one of the main operations where companies can provide tailored services for their customers and gain competitive advantage. There are various types of warehouses: they can be classified into production warehouses and distribution centers [3] and by their roles in the supply chain they can be classified as raw materials warehouses, work-in-process warehouses, finished good warehouses, distribution warehouses, fulfillment warehouses, local warehouses direct to customer demand, and value-added service warehouses [4]. Fig 1. Typical warehouse functions As mentioned above the heterogeneous warehouses have different operations. However, most of them share some general pattern of material flow, and typical warehouse operations include: receiving, putaway, internal replenishment, order picking, accumulating and sorting, packing, cross docking, and shipping (Figure- 1) [5] Warehouses have been going through various challenges such as – supply chains are becoming more integrated and shorter, globalized operation, customers are more demanding and technology changes are occurring rapidly. In order to cope up with these challenges organizations are adopting innovative approaches such as warehouse management system. A warehouse management system or WMS primarily aims to control the movement and storage of materials within a warehouse and process the associated transactions, including shipping, receiving, put-away and picking. A warehouse management system (WMS) is a database driven computer application, to improve the efficiency of the warehouse by directing cutaways and to maintain accurate inventory by recording warehouse transactions. The systems also direct and optimize stock based on real-time information about the status of bin utilization.. It often utilize Auto ID Data Capture (AIDC) technology, such as barcode scanners, mobile computers, wireless LANs (Local Area Network) and potentially Radio-frequency identification (RFID) to efficiently monitor the flow of products. Once data has been collected, there is either batch synchronization with, or a real- time wireless transmission to a central database. The database can then provide useful reports about the status of goods in the warehouse. The primary function of a warehouse control system is to receive information from the upper level host system, most often being the warehouse management system, and translate it for the daily operations. A common goal is to ensure a situation where warehouse employees never have to retype information because it already lies in one system or is collected automatically. Warehouse control system is usually the interface that is used to manage processes, people and equipment on the operational level. Based on warehouse control system, literature distinguishes three types of warehouse management systems [6]: Basic WMS – This system is apt to support stock and location control only. It is mainly used to register information. Storing and picking instructions may be generated by the system and possibly displayed on RF- terminals. The warehouse management information is simple and focuses on throughput mainly. Put away Cross docking P u t aw ay Replenishment Replenishment Storage in the reserve area Inspection and receiving Shipping Case picking Broken case picking Sortation, Accumulation and packing International Journal of Computer Applications (0975 – 8887) Volume 54– No.1, September 2012 15 Advanced WMS – Above the functionality offered by a basic WMS, an advanced WMS is able to plan resources and activities to synchronize the flow of goods in the warehouse. The WMS focuses on throughput, stock and capacity analysis. Complex WMS – With a complex WMS the warehouse or group of warehouses can be optimized. Information is available about each product in terms of where it is located (tracking and tracing), what is its destination and why (planning, execution and control). Further, a complex system offers additional functionality like transportation, dock door, and value added logistics planning which help to optimize the warehouse operations as a whole. Warehouse management systems can be stand alone systems or modules of an ERP (Enterprise Resource Planning) system or supply chain execution suite. The primary purpose of a WMS is to control the movement and storage of materials within a warehouse. The WMS can be deployed as a paper- based, RF/wireless based or combination of both. 2. LITERATURE REVIEW Warehousing takes up to between 2% and 5% of the cost of sales of a corporation [7] and with today’s highly competitive global business environment organizations are emphasizing on Return on Assets, and hence minimizing warehousing costs has become an important business issue. Many firms are automating their basic warehousing functions to achieve the increase in throughput rates or inventory turns required for their warehousing operations to be cost effective. It is necessary to allocate warehouse resources efficiently and effectively to enhance the productivity and reduce the operation costs of the warehouse [8]. One vital area determining the efficiency of warehouse is the determination of the proper storage locations for potentially thousands of products in a warehouse. Various factors affecting the storage assignment like order picking method, size and layout of the storage system, material handling system, product characteristics, demand trends, turnover rates and space requirements are been extensively studied. It has been suggested that selecting appropriate storage assignment policies (i.e. random, dedicated or class-based) and routing methods (i.e. transversal, return or combined) with regards to above factors is a possible solution to improve the efficiency [9]. Various decision support models and solution algorithms have also been established to solve warehouse operation planning problems [10]. The use of information systems for warehouse management is studied extensively in literature. Complexity of warehouse management is indicated among others by amount and heterogeneity of handled products, the extent of overlap between them, amount and type of technology as well as characteristics of associated processes. As the complexity increases it becomes necessary to use Warehouse management systems for handling warehouse resources and to monitor warehouse operations. The warehouses with a high amount of processed order lines and amount of stock keeping units will be best supported by customized software. It is difficult to update daily operations of inventory level, locations of forklifts and stock keeping units (SKUs) in real- time by using the bar-code-based or manual-based warehouse management systems [6]. RFID technology is adopted to facilitate the collection and sharing of data in a warehouse. Tests are performed for evaluating the reading performance of both the active and passive RFID apparatus. Implementing RFID technologies requires a thorough cost and benefit analysis of implementation. The costs of RFID implementation include tag reader costs, communication costs and other infrastructure costs. RFID can improve the automatic checkout process at a retail store, so it can reduce inventory costs as a result of more efficient shelf replenishment. RFID technologies can support the redesign of business processes; improve data quality; real- time data collection; synchronization and information sharing between the players of supply chain [10]. RFID implementation can also bring about additional benefits such as reduction losses due to shop lifting and increased use of point of sale applications [11]. Implementation of Warehouse Management System (WMS) will necessarily provide an increase in accuracy, reduction in labor costs if the labor employed to maintain the system is less than the labor saved on the warehouse floor and a greater ability to service the customer by reducing cycle times. WMS will not only lead in inventory reduction but also in greater storage capacity. An increase in accuracy and efficiency of the receiving process might lead to reduction in level of safety stock required. But the consequence of this reduction will hardly be visible to the overall inventory levels. WMS might just not affect the factors (lot sizing, lead times and demand variability) controlling the inventory levels. However WMS is instrumental in more efficient and organized that leads to increased storage capacity [8]. The implementation of WMS for a company demands significant investment and time period (several months) which has to be justified with the benefits obtained after implementation. The justification involves the excellent analysis of the current situation of the warehouse and warehouse operation for a specific period of time tuning the WMS. The firm should be prepared to change the entire process and system storage. Only WMS implementations without changing processes show that does not lead to cost savings or efficiency improvements, it will only reduce errors due to human factors. 3. WAREHOUSE PERFORMANCE MEASUREMENT Measuring warehouse metrics is critical for providing managers with a clear vision of potential issues and opportunities for improvements. Metrics are tied directly to the business strategy and operation’s success drives the financial results of the organization. If warehouses