How will the world be without warehouse management systems?
Once, I came upon this phrase on Linkedin, 'No Shipping, No Shopping'. The creator of this phrase is a maritime professional, merchant navy experienced in worldwide trades, transports and logistics services.
It really got me to start thinking - if there wasn’t logistics(transportation) by land, sea, or air…how would goods arrive at where they need to be?
Never was this more true in 2020, when country borders had to shut down to contain dangerous infections. As a result, goods were not allowed to enter, and for a while, there was a shortage of some produce and products that were not native to the country.
Logistics within the country was also disrupted - can you remember what happened when there was a shortage of toilet paper and Gardenia bread?
If you were in Malaysia, where I live, at the time, you may recall the mad scramble for groceries during the 1 to 2 days before everyone had to go into scheduled lockdown.
Overall, there had been a major supply chain disruption such that the world had never seen before. Slowly but surely however, logistics and supply chain discovered their workarounds, and goods started to move again, domestically at first, and then between borders. Some would beg to differ, but that’s a story for another day.
This time also, logistics is being spurred on by voracious e-commerce demand.
All that time in lockdown had led to Malaysians and Asians in Southeast Asia at least, developing a taste and penchant for clicking items into virtual carts.
The long spate of lockdowns that began in 2020, has made a majority of us become all too familiar with online shopping. We only need to pick out what we want to put in our shopping cart, go through a checkout process, and voila! Our goods should arrive at our doorstep in a matter of days.
Behind the scenes
From the description above, it seems as though magic had just happened. Some would say, this is what great customer experience is - a seamless journey of products from the source to the hands of the consumer.
For those who are familiar with logistics, they may already know the role warehouses play in the fulfillment of a customer order. There is also an important component usually found in warehouses, to ensure the smooth flow of products within the area - Warehouse Management Systems.
What would a world without warehouse management systems (WMS) look like? Would shopping as we know it right now, come to a grinding halt?
According to founder of AC2 Group, Aw Yang Uei, that is not entirely true.
'Shopping can mean many things. If I intend to sell just one product, I won’t need WMS, but nobody wants to sell just one product,' he said.
He pointed out that no matter what retail outlets sell - pharmaceuticals, or groceries, or clothing - one would very easily spot the difference between retailers that have WMS, and retailers that do not.
'For example, items or SKUs are constantly out of stock, or there are very low stock levels, or goods are very disorganised.'
'The idea is real-time inventory visibility - no store wants to be out of stock on items, or over-stocked with it. It is a fine line to balance between the two,' Aw said.
Scaling selling operations, scaling brands
Aw, also an entrepreneur and supply chain strategist, observed, 'In my opinion, when you start a business, you may start small. You carry a bit of product and try to reach as many people as possible.'
During this phase, he said it is possible to operate efficiently without warehouse management systems.
The crunch comes when the customer base starts to grow beyond a certain number and the business owner realises, ‘I already have all these channels, with a base that trusts and buys five different products from me. Why can’t I increase my product range from 5 to 50, or 500, or 5000?’
Aw said, 'The moment you start scaling your business, you then realise your supply chain isn't ready for it.'
So, the phrase that a world without WMS would halt shopping, is not exactly true or untrue.
A business has many phases to go through during their life cycle, and it really depends on the phase that it is at. But one thing is clear - when you want to do well in your supply chain, you will need a good warehouse management system to help out.
Aw explained, 'Five to 20 SKUs are still manageable, but also as long as your business is not too big.'
'To have a good variety of products, both the stores and the warehouse need to manage more items. Without WMS, they won’t be able to manage too many items.'
Personalisation and recommendation
Personalised products and services are very strong drivers for customer loyalty, because of their ability to create brand stickiness and eventually, a customer following.
Warehouse management systems could keep track of personalisation of products, and allow operations to pick the product accurately for the end user. But, it does not necessarily enable personalisation.
Aw observed personalisation happening a lot for luxury items. For example, luxury handbag brands like Hermes and Chanel could personalise their items for celebrities, by adding a unique feature or item like a different colour, or a simple tag, or a unique stitching, and so on.
Then there are recommendations, a useful shopping feature which depends on the data about customers. You may have noticed how after buying an item online, there would be recommendations of similar, or complementary items appearing on the website.
This does not only happen in the online world.
Recommendations are very clear on the floor, or in the way items are organised in physical retail outlets and hypermarkets. One evergreen example is Walmart which placed baby diapers next to the shelf with beers. This was based on their study of buying patterns and how people shopped.
Of course, beers next to diapers is a formula that is applicable in the United States. In Malaysia, beers can only be found in the Non-Halal section, while in China, beers are next to snacks. It differs country to country, and consumer culture plays a role in how a hypermarket chooses to place items so they can sell more.
Data for strategy
'That is floor strategy,' Aw said and he added, 'Recommendations always come with data and analysis. You do need big data in order to offer recommendations.'
Aw also wanted to point out there is a difference in floor strategy at the hypermart and what goes on in warehouses with warehouse management systems (WMS).
'The warehouse operations do not look at how products are being sold with another products, they focus on the velocity of the product, as in how fast it needs to move through the warehouse, which products should be located nearer to the dock for loading into delivery trucks. For example, faster moving goods.'
'So, WMS looks at data but differently, which is in terms of the velocity of the product, not the pairing or bundle of products that can sell more. You don’t have to display the products in the warehouse like how they are displayed in the selling floor, and you shouldn’t.'
WMS during the pandemic
The pandemic definitely accelerated e-commerce in Malaysia. If a brand did not have an e-commerce component or platform to sell from before, they must quickly adapt to add e-commerce capability, many did, some struggled, a few gave up.
And the take-up rate by consumers was staggering. There was simply no choice but to use online platforms to make purchases. And it was up to the supply chain to do the rest to get the product to the consumer.
This had necessitated the use of software, and Aw observed the prevalence of systems that were not WMS but called themselves so, in the market.
He said, 'For me, there is more confusion about the word ‘WMS’ in the market, now.'
'Many don’t have WMS, but they call it WMS because their system is able to link to online shopping aggregators like Lazada, or Shoppee.'
In his opinion, WMS must be able to know real-time stock levels, details about inventory status, enabling strategies and the abilities to seamlessly execute warehouse operations, and give visibility into other pertinent details about the stock and operations.
'There could be many different status for SKUs in warehouse - it could be damaged, it could be expired, it could be an incorrect flavour, type, or version, or reserved for a specific customer.'
In most cases, the consumer ends up being unhappy and Aw observed many such episodes happening during lockdowns in Malaysia.
“When e-commerce volume is not as high, businesses may still ableto fulfil orders, but all businesses want to scale, and when they do, many realise they aren’t ready.”
In countries like Thailand, Malaysia and Singapore, Aw saw that our e-commerce capabilities has accelerated. This trend may decrease slightly after lockdown is lifted, as people are slowly venturing out into shops, malls, and retail outlets again.
He concluded, 'But e-commerce is here to stay, so upgrade your warehouse capability, increase the use of technology, and get ready to scale your business.'
By Catherine Yong