Is Cloud-Based WMS an Option for Complex Distribution Centers?

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1 Is Cloud-Based WMS an Option for Complex Distribution Centers? Chuck Fuerst HighJump Software IARW

2 Warehouse Management Systems Manages warehouse inventory, space, equipment, and labor resources to direct the flow of materials and information from receiving and put-away to light assembly, order picking, value-added processing and shipment

3 Warehouse Management At-a-Glance Inbound Internal Processing Outbound Purchases Mfg / Assembly Transfers Outside Processing Pick Pack Inspection Count Assembly Storage Move Replenish Customer Shipments Vendor Returns Transfers Outside Processing

4 Business Pressures Just-in-Time Delivery How can I improve the speed of warehouse operations? How do I integrate operations to reduce order processing time? Inbound Internal Processing Guaranteed Availability How can I improve order promise accuracy? How do I create a global view of inventory? Outbound One Size Fits One How can I manage SKU proliferation? How do I ensure labeling compliance? Lowest Total Cost Where can I reduce inventory while maintaining high fill rates? How do I improve labor efficiency?

5 WMS Benefits Potential Improvements in: Inventory accuracy and turns Space utilization, stock rotation Order, lot and serial number tracking Backorder handling Crossdocking Resource planning and scheduling Labor and equipment productivity Performance measurement Customer service Potential Reductions of: Damage/Shrinkage Lost stock Safety stock Search times and deadheading Paperwork Human error Physical inventory taking Labor, equipment and utility costs Courier/Delivery costs Outside warehousing

6 Warehouse Efficiency Warehouse Efficiency Worker Productivity Automate Warehouse Processes Optimize Task Assignments Reduce Worker Travel Time Resource Utilization Optimize Total Warehouse Space Maximize Use of Equipment Optimally Locate Inventory to Reduce Travel Time Inventory Utilization Reduce Inventory Carrying Costs Streamline Material Flow Reduce Inventory Obsolescence Automate Replenishment

7 Why the Need for an Alternative to Installed Software? Listen In: I m not sure we have the expertise to administer this system Our IT staff have so much on their plates Sometimes we just don t upgrade because of the effort and expense I feel like we re always behind It s a pain and expensive having to keep our hardware current I feel like we need an extra person just to manage hardware vendors, support contracts and insurance what a headache!

8 Does IT Enable Business Agility? IT Investment 23% Application Investment 5% Infrastructure Investment 30% Application Maintenance 42% Infrastructure Maintenance Overwhelming complexity + Brittle infrastructure = < 30% of IT budgets goes to innovation and competitive advantage Operational demands limit business agility

9 On-Going Costs for On-Premise Hardware updates Additional software (back-up, monitoring, VM) Dedicated IT personnel Bandwidth Electric (power, cooling) Space/insurance/security Cost of system outages Software

10 What Does In the Cloud Mean? Your vendor hosts your system for you in a secure data center You access the system through the Internet just like plugging in to an outlet. Use as much power as you need Vendor takes over the burden of system administration

11 Cost Comparison: On-Premise vs. In the Cloud

12 What Is WMS in the Cloud?

13 Common Myths about Cloud Computing Only a small business can gain any cost savings benefit out of using cloud computing Data security issues make cloud applications riskier than in-house applications Critical applications do not belong in the cloud The main reason for companies to move to cloud computing is to save money Cloud applications are less reliable than running systems in-house because you can't fix them in the event of a crash

14 Cloud vs. On-Premise Considerations Economic: Cloud-based deployments are subscription-based, which can minimize upfront capital expenditures for perpetual software licenses and servers Focus on core competencies: Technology infrastructure may be managed more effectively by the engineers who created the technology rather than your own IT organization.

15 Cloud vs. On-Premise Considerations Cost of Upgrades: WMS upgrades are often expensive and complex because of customization done to the WMS. With a cloud-based WMS, the software upgrades and updates are managed as part of the service by the technology provider. This can significantly reduce the cost and complexity of a WMS upgrade.

16 Side-by-Side Comparison Component On premise Cloud Pricing model Perpetual software license Monthly subscription Hardware Customer purchases Included OS licenses Customer purchases Included Software licenses Customer purchases Included Maintenance fees 18-22% of software cost Included IT operations (backups, patches, security, monitoring) Operating costs (electric, space, bandwidth, hardware upgrades) Customer performs Customer purchases Included Included

17 What About Automated Material Handling Equipment Integration? A common objection Ex: conveyor sortation systems, pick-to-light, carousel, automated storage and retrieval systems (ASRS) Integration with cloud WMS is possible with thorough testing

18 Increased Service Levels With Cloud Deployment High availability 100 percent uptime outside of scheduled maintenance Back-up Daily server back-ups Full daily database back-up Disaster Recovery In the event of disaster at primary, secondary datacenter will be brought up within hours The last daily server image can be used to restore

19 Network Connectivity Example Actual cloud WMS customer with: Pick to light Automated cart picking Conveyor sortation SAP interface Mbps IPSEC VPN Tunnel Traffic Profile

20 Cloud Architecture Networks & Security Secure multi-tenancy architecture Secure private network with flexibility to connect via direct connection, VPN, or client VPN Robust security measures including DDOS protection and IDP/IDS Switching & Servers Fully redundant enterprise-class equipment Our Dynamic Allocation v2 Intelligently allocates resources Higher performance than most virtual machines. Dynamic IO (Storage) Intelligent provisioning and migration Three copies of data kept at all times Pay for capacity separately from performance

21 Cloud Security Example Threat Unauthorized physical access to cloudbased computing assets Unauthorized system access Unauthorized access to data Theft of data Virus and malware Hardware failure or disaster Countermeasure Infrastructure access controls Information security controls (e.g. password encryption) Access controls (e.g. authentication, authorization) Identity management Data location management Database access controls Data security software Data reliability processes (e.g. automated backup and replication)

22 Scalability/Elasticity Vertical Add compute requirements as needed Autoscale Dynamic addition of compute requirements Horizontal scaling with load balancing

23 Questions to ask your cloud provider How thorough is the service-level agreements Any SLA worth its weight should specifically address uptime guarantees, as well as incident response times and remedies What levels of RTO and RPO do they offer The lower the RTO and RPO are, the more mission-critical the system is Where will your data reside and what backup and recovery procedures are included Will you have the option to migrate to an on-premise solution (if you desire)

24 Customer Success Full-service cold storage 3PL distribution company that handles 13 million cases (260,000,000 lbs) of perishable food products annually. Problem: Wanted to minimize risk of downtown, reduce on-site IT team Solution: Cloud-based WMS solution Early results: Reduced staff head count by 22%, increased productivity by 40%

25 Business and IT Leaders Say Cloud Enables Agility 80%+ associate business agility with revenue growth, cost reduction, and risk management 63% agree cloud can have a significant impact in making business more agile and responsive Companies with enterprise-wide cloud deployments are 3x more likely to achieve business agility that is much better than competition SOURCE: Global Business Agility Survey, February 2011

26 Analyst Validation of Cloud Model There is a good deal to be said in favor of having your supplier host your solution: It allows experts to maintain and upgrade your system; and from a budgeting perspective, having a simplified SaaS payment plan that includes software, the server infrastructure, and maintenance for both, better aligns the costs with a new WMS to the cost reductions it brings. HighJump demonstrates a strong vision in this space as the overall trend of SaaS solutions starts to gain wider adoption in supply chain applications Steve Banker, ARC Analyst 2010

27 WHAT IS YOUR CLOUD PLAN?

28 For More Information: Speaker: Home Page: IARW

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