04 Sep What is a Warehouse Optimization System?

What it is, which questions it answers, and where it stops

To run your warehouse you use a WMS, or the WM module of your ERP. These systems support the people on the floor: order pickers, forklift drivers and staff at packing stations. But planners, team leaders and logistics engineers work in them just as much every day, while the system offers little for their decisions. How many people are needed, how work should be spread across the day, which docks are assigned to which trips, or which pick locations items get: they have to figure that out themselves, usually in Excel.

Yet these are all significant decisions with a major impact on the warehouse. A Warehouse Optimization System (WOS) supports exactly those decisions, using mathematical optimization based on data already held in WMS and ERP.

APS systems already sit on top of ERP for production planning, route planning systems on top of TMS, and inventory management systems on top of the purchasing module of ERP. WOS is the counterpart for the warehouse.

That separation is no accident. ERP, WMS and TMS are standard packages. Their strength is that they work at hundreds of companies, which calls for functionality generic enough to fit everywhere. Optimization is precisely the opposite. A slotting model for an e-commerce fulfilment centre with tens of thousands of small items bears no resemblance to one for a cold store with pallet flows: different layout, different constraints, different cost trade-offs. The optimization model therefore has to be tailored to the specific situation. That is hard to capture in a generic standard module.

Slotting and planning

A WOS comes into its own in two areas in the warehouse.

Slotting determines the layout of the warehouse: which zone and which location type an item gets, how much stock should sit at the pick position, and what the replenishment thresholds are. Not a one-off reshuffle, but continuous optimization that moves with assortment and demand.

Planning translates the expected workload into the required deployment of people and resources: daily staffing needs, the distribution of work across the day, or the assignment of inbound and outbound trips to docks.

Equally important is what does not fall under it. WOS does not take over the execution of the warehouse process. WMS remains responsible for releasing orders, directing staff and recording stock movements. WOS also goes beyond business intelligence. BI tools give users insight, after which they still have to decide what should happen. WOS gives concrete recommendations.

Implementation without migration

WOS is not a transaction system. It pulls data from WMS, TMS and ERP, evaluates different options and delivers concrete recommendations. Planners and logistics engineers can review these and then enter them into the WMS.

Because it runs alongside the existing transaction systems, the nature of the implementation changes. No migration, no conversion, no weekend with the operation shut down. The data you need is already there. You connect an export, design the optimization model, run the calculation and compare the outcome with what happens today. A completely different order of lead time and risk than replacing a WMS.

When can a WOS help?

A WOS can add value when:

• Parameters in your WMS have not been touched since go-live.
• Decisions about layout and planning are mainly made in Excel.
• Warehouse performance stays at the same level year after year, while you suspect it could be better.

ERP and WMS are good systems, planners and logistics engineers know their trade, and the data is available. What is missing is the tooling to make those three work together.

Metrica is a Warehouse Optimization System with modules for slotting and planning. It runs alongside existing systems.

About the author
Jeroen van den Berg is the author of Highly Competitive Warehouse Management and holds a PhD in warehouse algorithms from the University of Twente. He has been advising companies on warehouse optimization and WMS since 1997, running his own consultancy since 2001. He develops Metrica, a Warehouse Optimization System.