Wireless Warehousing's Real Driver

WiFi-barcode systems are low cost, easily implemented, and are transforming wholesale distribution

March 9, 2006

7 Min Read
Wireless Warehousing's Real Driver

While supply-chain technology based on RFID grabs headlines, it's simpler and less costly barcode-and-WiFi systems that are increasing productivity in America's small and medium-sized warehouses.

Two ready-made cases in point:

  • Based in Tacoma, Wash., Stellar Industrial Supply is a wholesale distribution company specializing in industrial and safety supplies, with seven locations, around 100 employees, and about $30 million in annual revenues.

  • Founded in 1955, Indiana Supply, based in Fort Wayne, Ind., distributes HVAC (heating, ventilation, and air conditioning) supplies throughout the Upper Midwest from its three locations. Indiana Supply (IS) handles about 100,000 invoices a year.

    Both companies went wireless in their warehouses in the 2001-2002 time frame. Indiana Supply runs a system from Infor, comprising TechLogix handheld barcode scanners connected over an 802.11 network (with five access points in the warehouse) to the company LAN. Stellar has recently begun shifting over from a legacy system from Pathguide Technologies to a solution from Activant Solutions, which last year acquired warehouse and distribution software maker Prophet 21. With handheld devices from Symbol, the Activant system (known as the Wireless Warehouse Management Solution), also connects up to the company's backend servers via a wireless LAN.

    "In the last couple of years employee numbers have been flat in the distribution industry," says Tom Gale, publisher and editor of Modern Distribution Management. "But revenues have increased sharply. What's happened is that technology has allowed distributors to lower their physical inventory and manage information better.

    "In a sense these systems are rudimentary. But they're not a huge investment, and you can get darn high returns. It's not sexy at all, but it's having a big impact on efficiency, sales, inventory counts, and customer service."

    20 minutes, guaranteed
    After opening its third branch in July 2001, in South Bend, Ind., Supply realized that its reputation for customer service was not keeping pace with its expansion.

    "The impetus [to going wireless] was to work out a way to help improve our customer service," says director of IT Larry Haskett. "We probably have 80 to 85 percent of our orders go out on truck deliveries on a daily basis. There were delays trying get those customers taken care of, and we were also finding that with this growth spurt, our accuracy as far as tracking orders on paper was just not where it should have been."

    In 2002 IS spent in the $125,000 range to install a wireless network that sends information from handheld scanners back into the company's enterprise-resource planning (ERP) database. Pickup (i.e., pulling out orders for customer delivery) and put-away (storing delivered items in the warehouse) are now totally controlled by the scanners; the system tells warehouse workers where to put each item and how to navigate through the warehouse (IS's biggest facility is 80,000 square feet) most efficiently, and tracks orders and shipments in real time.

    "We were tracking errors during that [2000-2001] timeframe, and at that point we were doing $50,000 to $60,000 a year just in errors that we could track ourselves," says Haskett. "The real number was probably higher."

    The Infor system brought the cost of errors -- in handling, in getting the right products to the right customer, and so on -- down to around $5,000 a year. "If you figure we're saving $45,000 a year just in errors alone," says Haskett, "the system paid for itself in the first three years."

    That does not include savings in efficiency. For instance, in the pre-wireless days each warehouse would essentially shut down for two to two-and-a-half days every year for a physical inventory, something no longer needed with the scanners keeping track of every item in and out -- or in customer goodwill.

    "We had customers who complained that their drivers were waiting up to an hour or more to pick up orders," says Haskett. "Now we guarantee them 20 minutes from the time the system gets the order to when the customer drives away, and since we're tracking that on a daily basis, I'm able to say with a high degree of confidence that 95-96 percent of orders are out within 20 minutes."

    One-day learning curve
    Rene Savage, CTO at Stellar, found after going with a Pathguide warehouse management system in 2001 that it was actually too complex and had too many bells and whistles for her company's needs.

    "If it went down, we'd come to a standstill," adds Savage. "People no longer knew how to to process the material manually."

    So, in early 2005, Savage went looking for a simpler and more customized solution. She wound up with the wireless warehouse management system (WWMS), Prophet 21, which in late 2005 was acquired by Activant.

    Having gone through a harsh recession in 2000-2003, suppliers of IT software and services to the distribution industry have basically consolidated into a Big 3: Activant, Infor, and Intuit-Eclipse. Activant, which says it serves 3,800 wholesale distributors across North America, developed its warehouse management solution to integrate seamlessly with the Prophet 21 enterprise software package.

    The result, for Stellar, has been a system that virtually eliminates inaccuracies in pickup and put-away and is extremely easy for new employees to learn. As with the Infor system, the Activant software not only directs workers to the appropriate locations within the warehouse but guides them on the most efficient route. Newly trained employees can walk into the warehouse and be pulling orders the same day, says Savage; previously it could take six months to learn the locations of items, particularly in Stellar's flagship Everett location, which comprises three warehouse floors under one roof.

    What's more, she says, "it gave us low cost of ownership, and it's fully integrated -- if it goes down there's no disruption of service because the software is connected to our business system and can revert to manual [processing] easily."

    To do a controlled initial implementation, Stellar installed the new wireless network first in its Pasco, Wash., location, a relatively small 12,000-square-foot facility with just seven employees. In the next two months two more warehouses will come online, including the 40,000-square-foot Everett warehouse. Savage hopes to have the Activant system running in all seven facilities within the next 18 months. Total budget for the changeover: under $200,000.

    "I was talking to a warehouse manager yesterday, and she's extremely happy with the process now, but at first she had to step back and think about what she was trying to do," Savage explains. "Initially she found it slower at pickup and put-away, but the accuracy and the efficiency gains on the back end more than make up for that. We have less inventory adjustment and fewer customer returns, because we're getting the product right the first time."

    Revolution postponed?
    According to the "2006 Wholesale Distribution Economic Factbook," published by Pembroke Consulting, between Dec. 2004 and Nov. 2005, revenues for the industry increased by 8.9 percent while employment stayed almost flat, rising by just 1 percent. Nevertheless, as a whole, distributors are not flocking to new wireless warehouse technologies.

    Scott Ellenson, Infor's director of industry marketing, sees the wholesale distribution industry taking another five years, at least, to near a saturation point with the more basic barcode-plus-WiFi systems in place at IS and Stellar. Despite the proven efficiences, says Ellenson, "small and medium-sized businesses are not adopting radio-frequency [systems] as quickly as you'd think they would."

    So where does that leave the ballyhooed RFID revolution?

    "With the cost barriers to RFID, who knows?" asks Tom Gale of MDM. "The primary factor is that customers aren’t driving it yet. Until the end-customers start demanding it, it won't get penetration, because the manufacturers won't, and the distributors don't have an incentive to."

    That will change, Ellenson says, as end-users recognize the benefits of RFID and providers like Infor develop new and more powerful solutions: "Our goal is to be out front pulling our customers along."

    — Richard Martin, Senior Editor, Unstrung

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