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The Warehouse Execution System: A New Competitive Imperative

By December 12, 2023Uncategorized

In today’s fast-paced, hyper-competitive, omni-channel world, warehouses play a critical role in maximizing service and fulfilling the ambitious customer promises that are required today. Warehouses also represent an enormous cost center. Companies annually spend about $325 billion on warehousing — and 85% of that cost goes to operating expenses that include labor, space and equipment.

Optimizing warehouse operations for both service and profitability has never been more important, or more challenging. The rise of e-commerce has led to higher volumes of smaller orders that need to be fulfilled and shipped individually. Volatile demand means warehouses need to pivot quickly when order volumes change. But, at the same time, labor shortages represent a crushing obstacle to getting daily work done. Less than a third of companies believe they can manage their warehouse workloads with their current staff.

In response, most companies are investing in warehouse automation and robotics. In fact, over 4 million robots will be installed in US warehouses by 2025. However, the average company struggles to integrate robots from multiple vendors with their existing systems and processes, as well as divide and orchestrate work across humans and machines. Businesses would like to make the most of their investments in warehouse automation, but they’re not sure how to do that.

While just about every distribution center is guided by a warehouse management system (WMS), these solutions aren’t designed to orchestrate work across humans and machines, unlocking opportunities for greater speed, accuracy and profitability across the warehouse. To truly capitalize on automation and robotics, companies need a solution that matches all resources to volatile demand, strategically balances tasks across labor and robots, and replans work in real time as conditions change.

Enter the Warehouse Execution System

Fortunately, this purpose-built solution already exists, and it’s called a warehouse execution system (WES). A WES autonomously gathers real-time signals from across the warehouse, then applies artificial intelligence (AI), machine learning (ML), and data science to create plans and solve problems.

It matches labor, equipment, and other resources accurately with order volumes, in real time. It ensures that tasks are accomplished quickly, correctly and efficiently — and that high-priority tasks are always completed first. By tracking and managing picking, packing, and shipping processes minute-by-minute, a WES dramatically increases accuracy and efficiency, enabling companies to support much higher order volumes with the same resources.

While a WES is a relatively new concept for some organizations, leading companies are already embracing it — and with good reason. The typical benefits of a WES include an 80% reduction in administrative costs, a 12% increase in units-per-hour, and a 15% improvement in throughput. Driven by these benefits, the global market for warehouse execution systems is expected to grow from $1.22 billion in 2022 to $3.12 billion in 2029, reflecting an average annual growth rate of 14.3%.

What Exactly Does a WES Do?

Today’s warehouse environment is too complex and fast-moving to manage effectively via human cognition, as well as manual planning and analysis. A WES applies advanced AI and ML to gather data, identify exceptions, define resolutions and enact them, autonomously, in mere seconds. It positions the warehouse to sense and react in real time to changes in order volumes, task priorities, and resource availability. Daily task chains are planned and replanned on a continuous basis to ensure all resources — whether human or machine — are always focused strategically on the most important job.

A WES capitalizes on huge volumes of data from across the facility to consider factors like resource location, product location, and travel distances and times. It intelligently and profitably delivers the right task to the right resource at the right time. The result? Decreased steps, faster task completion, capacity smoothing, lower operational costs, and customer service gains.

Let’s look at the example of an order that needs to go out by 5:00 pm, when FedEx or UPS is making a pickup. The WES works backward and ensures that picking starts at a certain time, based on a deep understanding of the warehouse layout, the associated task chain and realistic task completion times. This might sound simple, but remember that the WES is performing these calculations across hundreds or thousands of orders, and weighing complex trade-offs. It’s also reprioritizing automatically as disruptions occur — for example, when an employee leaves early, a robot malfunctions, or a rush order comes in from a top-tier customer.

The Increasing Importance of Decision Automation

There’s a lot of buzz around warehouse automation, in which machines are used to accomplish physical tasks. A warehouse execution system adds a crucial layer of decision automation, which is becoming absolutely essential in today’s volatile and disrupted business environment.

With so many variables, so many datapoints, and so many minute-by-minute changes in the warehouse environment, companies need a smart, autonomous solution that can make the right decision, reliably, with no human intervention. More than ever, organizations need to pivot immediately and profitably as conditions change, without stopping to perform manual analysis — and without making intuitive guesses that turn out to be wrong. A WES provides a flawless decision capability, as well as the ability to start executing the right corrective action in seconds, to keep the warehouse on track without interruption. Thanks to machine learning, the WES gets smarter and better at resolving disruptions all the time.

But a warehouse execution system also helps companies take a longer-term, strategic view. Enabled by AI, it understands the complexities of the end-to-end fulfillment workflow, as well as the relationships between different processes and different assets. That means the WES can help identify and achieve meaningful performance improvements. If the warehouse has an average output of 100 cases per hour, but needs to increase that by 20%, the WES can help figure out a practical solution. It can test various strategies such as adding new hires, onboarding a new robot, or changing the distribution center layout.

Five “Must Haves” Capabilities for a WES

Given today’s challenging business landscape, more companies are exploring warehouse execution systems. But what should they be looking for? There are five key capabilities that allow these solutions to deliver operational excellence, higher service levels and cost improvements:

Autonomous resource orchestration. To maximize service and profitability amid constant disruptions, the WES needs to automatically, fluidly assign tasks to robots or humans based on their individual skills and availability — then interleave these tasks based on proximity, priority and permissions. As conditions change, the WES must intelligently and immediately re-assign tasks, pulling in additional resources as needed. A best-in-class WES will also support predictive task assignment, in which it looks ahead toward future activity and considers the best available resource for a given time frame.
Priority and proximity awareness. The WES should be capable of considering and navigating a highly specific warehouse environment characterized by thousands of SKUs, hundreds of labor and robotics assets, and complex floorplans. It should balance customer priorities and cost constraints with the realities of the physical space. It should exploit proximity efficiencies and logically group tasks based on geographic location, customer priority, travel distances, task completion times, and other decision factors.
Streamlined automation onboarding and daily management. Given the huge investments represented by warehouse automation and robotics, the WES needs to support fast, easy onboarding of new tools, as well as their integration with other systems in the supply chain. An advanced WES will be cloud-based; supported by standardized and public application programing interfaces (APIs); and vendor-agnostic — so that multiple robotic vendors can play a part in warehouse excellence.
Agile task assignments and flexible allocation. The only real certainty in today’s warehouse is uncertainty. Employees will call in sick, rush orders will come in, and inbound deliveries will be missed. The WES must be dynamic in nature, always tracking warehouse activities and agilely re-allocating work. It should continuously create efficient travel plans that include multiple picks to maximize efficiency, accuracy, and job satisfaction. A WES is not adding maximum value unless it’s built for the volatile, ever-changing nature of the modern fulfillment process.
Accurate resource forecasting. Crushing labor shortages make it essential to schedule resources accurately in advance to optimize costs, service, asset utilization, and employee satisfaction and retention. A top-tier WES will leverage advanced AI and ML to predict and accommodate future order volumes, resource availability, throughput targets, and constraints. Given today’s volatile landscape, it must be forward-looking, instead of relying on historical order volumes.

More Predictable Results, Even in an Unpredictable Environment

It’s clear that companies are embracing the promise of warehouse execution systems, which enable them to achieve more consistent results, even when faced with constant disruption. By applying AI, ML and data science, a WES can maximize customer service and profitability, while reducing resource demands via intelligent orchestration.

Leading organizations are leveraging WES solutions to maximize the utilization and financial return of all their investments, whether labor or robots. In an industry that is rapidly adopting automation and robotics, a WES is the logical and systematic way to ensure that these advanced capabilities are contributing, along with humans, at the highest possible level.

Terence Leung is Global Senior Director of Solutions Marketing for Supply Chain Management at Blue Yonder. With a keen interest in digitalization and the benefits it generates, Terence is passionate about the real-world value delivered by Blue Yonder’s solutions. He works closely with Blue Yonder customers to understand their challenges and requirements, and to help them adopt best practices in their digital journeys.

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