Apply an Architectural Framework to Stratifying

Warehouse Management Systems

Published 2 February 2017 - ID G00324225 - 18 min read
ARCHIVED This research is provided for historical perspective; portions may not reflect current

conditions.

By Analyst(s): Dwight Klappich

Initiatives: Supply Chain Technology Strategy and Selection

Companies must understand and document each of their

warehouses' operational characteristics. This will ensure they
select a warehouse management system that maximizes
functional fit while minimizing the shelfware potential. Supply
chain leaders can use this research to help codify this insight.

Newer version of this document

7 May 2021 Apply an Architectural Framework to Stratifying Warehouse Management

Systems

More on This Topic

This is part of an in-depth collection of research. See the collection:

■ Supply Chain Guide to Assessing Complexity and Stratifying Warehouse Operations

for Effective WMS Deployment

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Overview
Key Findings
■ Not all warehouses, even within the same company, are alike from a people, process
or technology perspective. Their needs, from simple to complex, can vary widely.

■ Core warehouse management system (WMS) functionality is mature and

approaching parity across WMS vendors, addressing the needs of most warehouse
environments worldwide from simple to moderately complex. However, innovation
continues as business requirements evolve and to support user needs by strata of
warehouse.

■ More-sophisticated and complex WMS environments need greater depth in core

functionality and require more breadth with supplementary extended capabilities.
Although functionality is the primary focus, the need for enhanced agility and
adaptability is forcing more scrutiny of the WMS technical architectures.

Recommendations
Supply chain leaders focused on technology and solutions for supply chain operations:

■ Prioritize your warehouse functional needs before beginning a WMS selection

process by using Gartner's WMS architectural functional framework to stratify your
warehouse operations across facilities, lines of business and regions.

■ Stratify warehouse facilities individually to ensure that your organization

understands the possible differences in needs among your various facilities. Identify
a single solution; the soundest solution might be to have different WMSs supporting
different strata of warehouse.

■ Ensure that solutions provide the necessary flexibility and agility to enable the WMS
to respond to changing business conditions by focusing your attention on the
adaptability tools provided with the WMS technical architecture.

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Analysis
The WMS market is evolving from being independent-software-vendor (ISV)-dominated to
one in which other types of vendors offer reasonable WMS solutions for varying levels of
need. As a result, companies must have realistic requirements to determine the right
shortlist of vendors. Furthermore, as new deployment models such as cloud and software
as a service (SaaS) mature, they further complicate the selection process. For many
companies, a realistic needs assessment of each individual warehouse will allow for an
ERP/WMS alternative, while others should only consider ISV solutions or a hybrid
combination of ISV and ERP WMS.

At a high level, other than highly automated facilities, most warehouses appear the same
and therefore would have similar functional requirements. A common misnomer is that a
small warehouse is just a simpler big warehouse and has all the same needs. However,
this is likely not true. Many factors influence the requirements of a specific warehouse,
and then a combination of factors determines the appropriate functional capabilities
needed by facility (see "Understand the 10 Dimensions of Warehouse Complexity Before
Evaluating WMS Solutions").

Most midsize to large product-centric businesses operate multiple warehouse facilities. In

some cases, these facilities are quite similar and in others they are radically different. In
one example, a Gartner client had two large and highly sophisticated facilities (what we
would call Level 4 warehouses below) plus more than 100 very small service parts depots
(what we would call a Level 1 warehouse below). The client tried to take the system that
worked well in its large complex facilities but found it was too complex, difficult to use,
hard to maintain and expensive for its small facilities that had very rudimentary needs.
This customer eventually chose a hybrid solution where it had one solution running in its
Level 4 facilities and a different far more rudimentary system in its Level 1 facilities.

When considering WMSs, it's not good enough to just look at common, basic warehouse
management capabilities, or what Gartner calls "core" warehouse business processes
(that is, receiving, put away, storage, counting, picking and shipping). In general, although
there are similarities across strata of warehouse, notable differences also exist in the
depth and breadth of needs across those strata. Consequently, systems that work well in
one level might or might not work at another. Too complex is, in many cases, just as bad
or worse than too simplistic. The goal is to find the balance to get the system just right.

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The Evolving WMS Functional Framework
Gartner breaks down WMS into core WMS capabilities and extended WMS capabilities
(see Figure 1). Core WMS capabilities are pervasive and approaching parity across
various WMS offerings, from solutions targeted at small or midsize businesses (SMBs), to
WMS offerings from ERP vendors, and to the robust offerings provided by ISV WMS
vendors. While approaching parity, the core offerings continue to vary in terms of overall
depth of functionality, number of options (such as number of picking methodologies), and
ability to configure and customize the WMS functionality to specific user needs. Although
core WMS capabilities are mature and largely common across strata and WMS offerings,
significant differences remain with regard to extended WMS capabilities across WMS
offerings and user needs. Extended WMS capabilities remain a significant differentiator
across classes of WMSs and WMS vendors.

Figure 1. WMS Functional Framework

QA = quality assurance

Source: Gartner (February 2017)

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WMSs share many characteristics, but there are also distinct differences across the strata
of the warehouse environment. Thus, there are also differences in the requirements that a
WMS must support. These can be broken down into five levels, from the simplest to the
most sophisticated and automated (see Table 1). Although not the only factor, complexity
is a key determinant of warehouse stratification (see "Understand the 10 Dimensions of
Warehouse Complexity Before Evaluating WMS Solutions").

Table 1: The Five Levels of WMS

(Enlarged table in Appendix)

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Level 1: Storeroom
Level 1 offers rudimentary bin-tracking or single storage location systems, which some
users do not even call true WMSs. However, they support basic WMS and inventory
management functions (such as perpetual inventory, receiving, storage, picking and
shipping/requisitioning), but the overall depth of these capabilities is very limited.
Because of the single storage location nature of these systems, they are appropriate in
places such as storage or stockrooms, service depots, sales offices and retail stores. Also,
they can be used in simple manufacturing environments where the common denominator
is the storage location, which is predefined and typically fixed. Most of the processes are
manual and not system-directed. So for example the user might have a simple tool like
doing a similar product look-up when putting products away, but short of that they would
select the put-away location and just use the system to capture where they put the
product. Virtually all ERP systems can support some Level 1 needs. Although the same is
true for ISV WMSs, they would often be overkill in these environments. Gartner has seen a
growth in interest in solutions for Level 1 operations driven by a couple factors. First,
multichannel commerce is increasing the number of stocking points companies need to
manage, but the majority of these locations are small and simplistic. The other factor is
that shortening lead times are forcing companies to expand their distribution networks,
often adding small customer-facing facilities that can support same-day delivery.

Level 2: Rudimentary Systems Directed Work

This is the first level at which multilocation inventory storage and tracking is introduced.
It's typically supported by a rudimentary stock locator capability where, in the system, it
begins to direct some work activities such as put-away and picking, but the options are
limited. Again, core functions (such as receiving, storage, picking and shipping) are
supported, but the depth of coverage is limited to a few simple options (for example, order
pick, pallet movement and put-away zones). These are often paper-based, with limited
work verifications (for example, pick verify and ship verify), but most systems will provide
mobile device interaction.

Level 2 systems are appropriate for minimally complex facilities that need some, but not
extensive, WMSs. Examples include remote satellite warehouses and simple
manufacturing environments. All ISV solutions, as well as most Tier 1 and Tier 2 ERP
systems, can handle this level. Gartner also finds that some SMBs with small warehouse
operations fit this strata.

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Level 3: Advanced Systems Directed Work
At Level 3, increasingly sophisticated features are introduced that enable the system to
more intelligently and automatically direct work with a focus on improving physical
warehouse execution processes. Concurrently, it introduces more options and greater
levels of inherent flexibility. Level 3 systems are more robust than systems in the previous
levels. They have rule-based locators that provide more out-of-the-box options. The more
sophisticated locators provide customization through rule definitions, workflows or
scripting languages (not coding). This is the level where the systems start to
automatically direct user activities by exploiting the locator, workflows and configuration
rules to help the user more effectively perform tasks. For example, a workflow might
indicate that a product that was just received needs to go to QC before being put away
Then, once cleared for put-away, many rules would be considered in determining the "best"
location to put the product away. This is commonly called systems-directed put-away.

Although some processes might remain paper-based in Level 2 warehouses, a key

requirement at this level is automating work issuance and verifications through the use of
mobile RF devices. Depth of features/functions is also greater, with more options and
sophistication in processes (for example, cross-docking, multiple pick and put-away
methodologies, serial/lot control, pallet/case license plating, packing, and cycle counting).
Most ISV WMS solutions can support many of the functions required by Level 3
warehouses, but applications can vary in terms of depth of functionality, breadth of
functionality and how configurable and tailorable are the WMSs. Because complexity is
greater and functional requirements are more demanding at this level, customers must be
particularly diligent in defining their requirements and evaluating the functional
capabilities of various vendor offerings. Since the goal at Level 3 is to push more
functional responsibilities to the system, customers must pay particular attention to work
management capabilities such as task interleaving and wave planning. Some, but not all,
ERP vendors have reached this level. Most ISV WMS providers will support basic Level 3
operations, while a smaller number of specialists will be best-suited to the more
demanding end of this strata.

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Level 4: Intelligent
At Level 4, emphasis shifts from simply automating and enhancing basic physical work
processes to focusing on improving or optimizing processes by including value-added
decision support capabilities (for example, task, labor and yard management, and
slotting) and managerial support (for example, work planning, business intelligence,
visibility and event management). At this level, operations are typically more complex and
sophisticated, with higher volumes of work, more items and more-complicated processes,
such as light assembly or kitting (see "Understand the 10 Dimensions of Warehouse
Complexity Before Evaluating WMS Solutions"). The goals driving new system
evaluations are often to improve performance and throughput, while adding more
decision support capabilities that can improve efficiency and productivity.

Although logistics service providers, notably third-party logistics (3PL) providers, can have
facilities at all strata, their larger multiclient operations will typically be at Level 4 or
higher. They have unique additional needs in areas such as 3PL billing that require
specialized solutions that are currently the primary domain of ISV WMS. A small number
of leading ISV WMS solutions remain the primary solutions at this level, and those
vendors are the leaders in developing and enhancing extended WMS capabilities. Some
ERP vendors are just getting to low Level 4 support as they add extended WMS
capabilities, but they continue to trail ISV WMS leaders.

Level 5: Automated
The previous levels focus primarily on people-driven processes, while the emphasis at
Level 5 shifts to warehouse automation. Although Level 3 and Level 4 operations can
often have limited automation (for example, pick-to-light, or carousel storage and
retrieval), Level 5 operations are the most automated and, in extreme cases, entire
facilities are engineered to support highly automated operations (for example, extensive
use of conveyors, automated storage retrieval and robotics). Often, the design of these
types of operations is driven by engineering or materials-handling firms that have their
own WMS or partner with specific ISV vendors.

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Companies considering Level 5 should first make the engineering/materials-handling
company decision, and then determine the best approach to the WMS business
application. Furthermore, with highly automated facilities, addressing WMS application
needs is often easier because there is less WMS task and decision control, due to the
automation layer taking control of decisions and work steps. This means that, in certain
cases, a less-sophisticated WMS that wouldn't be a good fit for a Level 4 warehouse may
perform satisfactorily in a Level 5 facility. For example, take a company extensively using
automated storage and retrieval systems (ASRS). Without the automation, the company
would likely benefit from advanced task interleaving logic that would automatically
prioritize, sequence and assign work to human workers. For example: User X, your next
task in the queue is put pallet 123 away in slot A21, and then while there, go to slot A28
and pick up pallet 456 and take it to forward picking slot FP07. This logic can get very
sophisticated and absolutely differentiates certain WMS providers. Now in the highly
automated ASRS facility task interleaving is often performed inside the ASRS controller
and the WMS is limited to just telling the ASRS what it needs (e.g., I need pallet 456 to
take to FP07) and the ASRS does the work management. Consequently, in some cases, a
less robust WMS might be adequate.

As automation grows in Level 5 facilities, the software emphasis begins to shift from
WMSs to warehouse control systems (WCSs). WCSs can be viewed as middleware that
sits between the WMS business application and the materials-handling equipment. A WCS
translates business-oriented instructions into forms that are meaningful to materials-
handling automation, communicating directly with the automated equipment to execute
the instructions. The WCS coordinates materials-handling subsystems, such as conveyor
belts, carousels, scales and sorters. At each decision point, the WCS determines the most
efficient product flow and transmits directives to the equipment controllers to achieve the
desired result.

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WCSs are undergoing an evolution — from their initial focus purely on communicating
with materials-handling equipment to, in some solutions today, creeping more into the
business applications domain historically controlled by WMS. These new solutions, called
warehouse execution systems (WES), combine capabilities from both WCS and WMS that
enhance the operations of the warehouse by including analytics, visibility, and other
monitoring and oversight (transform automated warehouses with warehouse execution
systems to master high-velocity order fulfillment). WES builds on WCS's near-real-time
insight into what's happening in the automated warehouse, but adds business process
logic to this layer. These systems are adding capabilities to meet the demand for a more
agile response, blurring the lines of distinction. The natural question is if a company is
considering a WES, does it even need a WMS. For now the answer is yes it needs both,
although some functions will migrate to the WES (notably, picking) but other functions
will remain in the WMS (such as receiving, put-away).

Emerging Hybrid Deployment Models

Many organizations have a mixed warehousing environment, with some complex and
sophisticated warehouse environments and a larger number of satellite facilities with less
demanding requirements. Gartner finds these organizations are willing to consider a
hybrid WMS deployment strategy in which they consider different WMS solutions for the
various warehouse environments. Often, the sophisticated facilities will be Level 4 or Level
5, while the satellite facilities will be Level 1 or Level 2. In this situation, a reasonable and
likely alternative for these organizations is to consider ISV WMS applications for their
most-sophisticated operations, and to consider alternative solutions for the satellite
facilities.

One option is to select an ISV WMS primarily to support the needs of the organizations'
complex facilities, and use it to run the satellite facilities remotely. The second option is to
consider their ERP vendors' WMS offerings, which will often work fine for the satellite
facilities, but will fall short for the most-complex environments. A third option, and one
that is growing in popularity, is to select an ISV solution for the complex facilities and to
use the ERP offering for the satellite facilities. The main driver for the latter is that the
satellite facilities are already extensively using ERP capabilities and only need modest
WMS capabilities. However, many factors can influence the decision regarding which
approach is best-suited to a specific company, including operating environment,
application environment, user profiles, and current use of the ERP in satellite facilities,
integration and total cost of ownership.

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Action Items
Companies must realistically align their needs across warehouses to ensure that they
address their essential functional needs without buying too much. Companies should:

■ Define their high-level objectives for a new system, being cognizant of how these
objectives will manifest by strata of warehouse.

■ Use the stratification model provided in this research to map the people, process and
technology needs by individual warehouse.

■ Use Gartner's "Understand the 10 Dimensions of Warehouse Complexity before

Evaluating WMS Solutions" to rate the complexity of each individual warehouse to
understand the needs at each strata.

■ Determine the functional imperatives that must be supported in the new system.

■ Document critical capabilities and use them to develop detailed business scenarios
to use when evaluating the fit of various solutions.

■ Document and model flows for the specific elements of work that must be supported
by the new system.

■ Develop a realistic business case for a new WMS and map it to the source of value,
and the features and functions that deliver that value.

The obvious essential characteristics will be key functionality, but other equally important
characteristics that should be considered include:

■ Adaptability

■ Technical architecture

■ Scalability

■ Usability

■ End-user support, availability and quality

■ Productivity- and throughput-enhancing capabilities (for example, work and labor

management, analytics and dock scheduling)

■ Product evolution and vendor viability

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■ Integration and support for warehouse automation

■ Total cost of ownership

Document Revision History

Apply an Architectural Framework to Stratifying Warehouse Management Systems - 7
May 2021

Apply an Architectural Framework to Stratifying Warehouse Management Systems - 18

March 2013

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Table 1: The Five Levels of WMS

Level 2
Level 3 Advanced
Rudimentary
WMS Impact Level 1 Storeroom Systems Directed Level 4 Intelligent Level 5 Automated
System Directed
Work
Wok

People Inventory management Limited WMS user Increased WMS user Advanced WMS user Emphasis shifts from
and control are knowledge and skills still knowledge and skills, knowledge and skills managing people-driven
secondary processes for focus on day-to-day but still primarily with operators, support processes to designing
users in storeroom-type execution of receiving focused on process personnel and the warehouse around
environments, which is and put-away. execution; increased warehouse materials-handling
typical of this level. demand and use of RF management; focus automation.
for operators. moves more to
warehouse
productivity/efficiency/t
hroughput,
resource/asset
utilization and
optimizing warehouse
activities. More demand
and need for decision
support and extended
WMS capabilities.

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 Level 2
Level 3 Advanced
Rudimentary
WMS Impact Level 1 Storeroom Systems Directed Level 4 Intelligent Level 5 Automated
System Directed
Work
Wok

Process Primarily manual Minimal complexity; Increasing warehouse Tend to be larger At this level, warehouse
processes, with minimal typically have complexity, with more physical facilities, have and automation design
use of technology (ERP); rudimentary needs for receiving/put-away, more employees in are often done in
very low complexity. product locating for put- pick/pack/ship and operations and back concert, with the
Typically, inventory is away and picking, and inventory management office, more products building designed to
stored in single location pallet storage with options and and transactions, and support the needed
in support of some other minimal split-pallet requirements; focus on more-complex warehouse automation
function, such as sales picking; focus on simple improving warehouse processes, such as light processes and
or customer service and storage and retrieval. task execution assembly or complex capabilities. While
support. performance. picking, or kitting limited automation can
operations. High-level be used in previous
complexity, labor and levels, these types of
transaction volume facilities are highly
require more robust automated, and the
decision support to automation is
optimize operations. intrinsically woven into
the warehouse
processes.

Technology Use whatever Need a real WMS with Need for richer locator Need for strong core Highly automated
capabilities provided by basic product-locating capabilities, greater WMS capabilities facilities are often
ERP, or perform capabilities, but feature depth across remains, but emphasis designed and built by
manually. minimally use core WMS core WMS capabilities, shifts to extended WMS engineering or materials-

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 capabilities. Even with and need more feature handling companies
Level 2
the reduced cost for RF, Level 3 Advanced
options and that specialize in
Rudimentary
WMS Impact Level 1 Storeroom activities are often configuration,
Systems Directed Level 4 Intelligent automated warehouses.
Level 5 Automated
System Directed
paper-based. Most particularly in The emphasis in WMSs
Work
Wok
ERPs offer acceptable pick/pack/ship. More is less on the core WMS
Level 2 WMS functionally deep core capabilities that aid in features and more on
capabilities. WMS supported by operating complex integration with
some, but not all, ERP warehouses more automation. Highly
WMS and all ISV WMS. effectively. Capabilities automated facilities
such as task often require less robust
interleaving, labor WMS applications,
management, dock because task and
scheduling and yard decision control is taken
management are often over by materials
required. Increasingly, handling automation.
having an adaptable
application architecture
is more important at this
level to enable the WMS
to adapt to process
changes during and
after implementation.
Some, but not all, ERP
approaches this level
and offers some
extended capabilities,
but it remains primarily
the domain of ISV WMS.

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 Level 2
Level 3 Advanced
Rudimentary
WMS Impact Level 1 Storeroom Systems Directed Level 4 Intelligent Level 5 Automated
System Directed
Work
Wok

RF = radio frequency

Source: Gartner (January 2017)

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