Cloud-Based or On-Premises? Choosing a Warehouse Management Software Solution

Cloud-Based vs. On-Premises

Cloud-based computing services are delivered through the Internet and permit potentially unlimited computing power. This means that software can be used at multiple locations, by many users, processing large numbers of transactions simultaneously. The Cloud offers access to software unlimited by the capacity of an on-premises server. The Cloud does not offer specific functionality. That, of course, is provided by the software accessed via the Cloud. Some WMS providers offer a “one size fits all” solution that their customers access via the Internet. Customization is available, but is frequently limited to presentation screens at user sites. Other providers offer custom solutions, accessible only by the particular customer for which the functionality was created. Because the software provider has control of the delivery of the software through the Internet when providing it via the Cloud, it can update and support the software with upgrades automatically available to customers. On-premises systems must be updated remotely and upgrades are installed on the customer’s server. The only real difference is the insignificant step of downloading upgrades, as opposed to accessing the software through the cloud and receiving upgrades on a “real time” basis. Some customers have unreliable Internet service. In such cases, the Cloud may not be a good option.

As a result, when customers talk of the Cloud, they more accurately may mean that they are receiving Software-as-a-Service (SaaS). The Internet and the Cloud are the vehicles by which the computing power is delivered, but the software is delivered as an SaaS product, either as a “one size fits all” product, or a uniquely configured solution accessible only by a particular customer. SaaS may be purchased by customers in a variety of different ways, but typically, the customer pays a monthly or annual fee for a subscription to the software license, support, updates and the supplier’s infrastructure. There may, or may not, be a limit to the number of users or locations allowed to access the software. Typical SaaS applications include CRM and ERP systems, which are examples of software used by employees with a permanent desk location in a company.

Warehouse management software was once thought to be inappropriate for Cloud deployment because the employees using this type of software aren’t typically stationed at a desk. Instead, they move throughout the warehouse to do their jobs. Another challenge was to integrate SaaS WMS solutions with the other complex systems utilized in a sophisticated warehouse. Automated material handling systems eliminate labor, but require highly dependable interface with inventory management systems. If those systems don’t work together perfectly, fulfillment activities are in jeopardy. The very reason a company might invest in a WMS is to increase the predictability and productivity of warehouse operations. To permit these benefits to be put at risk by a clunky interface with a conveyor system should be considered an unacceptable risk.

Recently, these concerns have been overcome and SaaS WMS applications are increasing in popularity. People and equipment (e.g., forklifts, conveyors, etc.) are connected wirelessly with the WMS. The “readout” panels on RF scanners provide clear and simple instructions for warehouse personnel and as tasks are completed successive scans update inventory and fulfillment records in real time. Worker productivity is optimized and individual workers can be evaluated with accurate, objective measurement of their performance. Inventory quantities are always current and inventory requirement forecasting is facilitated by automated, ongoing output from the system.

An approach that has been used successfully to allow the customer to take advantage of a cloud-deployed WMS system while dealing effectively with the complexity of the interconnectivity with other systems and equipment used in the customer’s operations is to divide the software implementation into two separate packages…

First, License.
Second, Implementation and Integration.

Of course, a WMS that functions with wireless connectivity inside a building doesn’t mean that it is deployed using the Cloud. Many companies continue to use on-premises servers to provide the computing power. Indeed, a backup system where on-premises server function is available in the event of loss of Internet service is always recommended. Given this precaution, on-site fulfillment operations can continue regardless of Internet service interruptions. However, more frequently WMS purchasers are moving to Cloud-based WMS implementations to take advantage of the unlimited scalability of computing resources.

Why are you considering a new WMS?

Most businesses are concerned with inventory accuracy, optimal fill rates for orders, excellent customer service information access, lower inventory quantities, smaller space requirements, and reduction of multiple data entry activities. It is sometimes difficult to accurately anticipate the cost savings associated with a new WMS. Certainly, a new WMS is expensive. Frequently, the software license fee alone is a very large capital outlay. This can, of course, be managed somewhat by acquiring your new WMS as SaaS. However, it is wise to anticipate that you will also have some additional infrastructure build out costs which will include some hardware (RF guns, servers, etc.) and networking. We have created a worksheet to help you anticipate all of the areas where savings will be achieved. Comparing those savings over time to the implementation costs will give you an excellent platform upon which to evaluate the wisdom of implementing a new WMS. Most clients see a 100% return on investment within 12 months of implementation.

To further accelerate the return on investment, a Cloud deployment of an SaaS WMS offering ought to be considered. The investment in infrastructure will be reduced (although, as noted above it is critical to have some modest redundancy built into your new system to ensure that operations will continue in the event of an Internet outage).

Typically, the implementation activities with an SaaS WMS are somewhat less intensive. However, no sophisticated WMS, whether purchased through a traditional software license, or deployed via the Cloud, can offer all the features your business will require without significant implementation cost. Your new WMS must be configured to your particular needs, your warehouse must be set up to allow optimal WMS efficiency, and your personnel must be trained.

A misconception some clients labor under is that an SaaS deployment can offer sophisticated functionality while avoiding the set up and training activities. If you’re thinking “plug and play,” you’re being unrealistic. Your warehouse must be mapped in three dimensions, with each X, Y and Z axis identified by location bar codes. Your warehouse equipment (forklifts, pallet jacks, high-reach trucks, etc.) must be configured to the tasks allocated to particular employees – you don’t want a picker going to a location with a pallet jack to pick an item on the highest shelf. Scanning protocols must be established and forward and replenishment locations must be established. A method (or several methods, more realistically) must be established for moving picked items to shipping. Initial inventory counts must be accurate and items must be put into correct locations as the system is initiated. “Eaches” and “Cases” and other units of measurement (UOMs) must be determined and the methodology to move items from one to the other must be established. This is the briefest list of things that must be anticipated and planned prior to the implementation of a new WMS, whether via Cloud deployment or on-premises. It is unwise to attempt to initiate these complex protocols without the guidance – on site – of a sophisticated, experienced WMS provider. Your software supplier, whether via the Cloud and SaaS, or through a traditional license where the software is installed on your server, will guide you through a multitude of critical decisions, offering “best practices” advice at every turn. This will be the difference between struggling to adapt to a new WMS and getting buy-in from all employees and management and launching seamlessly and productively. It is impossible to overstate the importance of finding a software supplier who is willing and able to be in your building during the planning and implementation of your new WMS. Sophisticated planning and implementation is time consuming (for both the software supplier and your employees) but the benefits are absolutely critical and the pitfalls of poor planning and implementation are enormous. Configuration and integration of your new WMS with all of the peripheral software and processes in use in your company must be managed by a knowledgeable software provider with extensive experience in complex integration and configuration.

This is a particularly important consideration for a company considering the purchase of a new WMS which may not have a strong internal IT team. Regardless of whether you choose an SaaS or on-premises deployment, it is critical to be realistic about the enormous challenges associated with the implementation, integration, and configuration necessary to optimize your new WMS. It is a huge mistake to delude yourself into thinking that just because a deployment is done via the Cloud that somehow it reduces the complexity and sophistication of the implementation. It does not and it never will. Indeed, any Cloud-deployed WMS that offers simple, automated implementation is definitionally limited in functionality and cross-platform integration. There is simply no such thing as a complex, seamlessly-integrated, effectively configured, customized implementation of a fully-functional WMS.

That doesn’t mean that cloud-deployed WMS systems aren’t terrific. It just means that you must anticipate a significant amount of effort and expertise being required to make it work optimally in your unique environment.

Except for very large companies with large IT departments, most companies find it preferable to rely upon their WMS provider to conceptualize and architect the WMS solution. This is always done in cooperation with the operations personnel and, to the extent they exist in a company, the IT personnel. Typically, the most effective and smoothest implementations rely upon the coordination of the planning and implementation between the WMS supplier and a single individual in the company acting as the principal point of contact. A complex WMS implementation is a time consuming and complicated process and there will be many people, both at the WMS supplier and at the company, involved in intricate and critical activities. If one person in the company takes the responsibility for managing the activities of company personnel, using a project management tool (we use Pivotal Tracker TM, but there are others available) delay and sequencing challenges can be minimized. Anyone who has gone through a software implementation will attest to the difficulties inherent in this process, but an experienced WMS supplier working with a single point person within the company will make the process simpler, more dependable, and faster. This is the case whether the WMS is deployed on-premises or via the Cloud. If your WMS offers sophisticated functionality, it will require a very high level of expertise, experience, and talent.

Rarely today does a company use a WMS that is limited to that customer, or a single building at a single customer. More often, there are multiple customer sites, as well as integrations with suppliers and customers, all of whom must access and share information generated and / or maintained in the WMS.

Many companies wrestle with the cost of implementing a new WMS. Frequently, the initial cost of a license fee plus the necessary cost of implementation, integration, and configuration is prohibitively expensive, notwithstanding the recognition of cost savings and other benefits that would be realized, if a new WMS were to be installed.

A Cloud-based WMS can help because the cost of the initial Software license is spread out over future SaaS payments. As a WMS software license can range from a low of around $50,000 to practically unlimited maximums depending upon the sophistication of the WMS product being purchased, the future deferral of software license costs can be the difference between being able to implement a new WMS immediately, or in the future. Certainly, the cost of implementation, integration, and configuration cannot be deferred, because those are “hard costs” to the software supplier. A typical implementation of a sophisticated Cloud-based WMS will often cost in excess of $75,000. Depending on your budget, a Cloud-deployed SaaS WMS might be the preferred option if your budget for cash outlay is under $100,000. It must be remembered that there is an enormous number of hours required for a complex, seamless implementation, integration, and configuration of any new WMS product. Even so, the payback for the cost of implementation, integration, and configuration is typically under one year. Thereafter, the continued benefits of a new WMS will be much greater than the monthly SaaS costs. Every WMS purchaser, whether investigating an on-premises or Cloud-based WMS, is well advised to review carefully with the WMS supplier the limitations on number of warehouses, users, interfaces, etc., included in the cost of the License or the monthly SaaS costs. Obviously, the more users, locations, and interfaces with suppliers and customers that are contemplated in a new WMS, the more expensive both the license, or monthly SaaS costs, and the implementation, integration, and configuration will be. However, cost is only one factor. Effectiveness of a new WMS is far more important and a thorough discussion of the limits regarding such connections is of paramount importance so that the customer knows exactly what they will receive and the WMS supplier can professionally anticipate the cost to provide it.

When evaluating various WMS offerings, scalability is of critical importance to any growing company. A Cloud-deployed SaaS WMS will likely offer the most flexible advantages, allowing you to grow without system constraints. While there may be incremental costs associated with expanding the number of locations or users, the inherent flexibility of practically unlimited computer power makes a Cloud-deployed WMS an excellent choice for many companies. A premises-based traditional license typically becomes prohibitively expensive as more locations and users are added. When shopping for a new WMS, you should also consider whether the WMS under consideration is appropriate for your industry. For example, if your business is the distribution of FDA-controlled pharmaceuticals, you will be required to follow strict rules as to security, date, lot control, and certain other documentation obligations. Whatever unique requirements your industry imposes, it is imperative to be certain that the WMS you select will accommodate those requirements. Additionally, it is absolutely necessary to ensure that the WMS supplier has experience with sophisticated and unique implementation, integration, and configuration requirements. Find out what your supplier has done and how they have succeeded in implementations at demanding customer locations.

The bottom line is that the purchase of a new WMS is a complicated and extremely important decision. The choice between a Cloud-deployed system and an on-premises implementation is an important one and should be thoroughly explored. The deferral of the upfront license cost is an important decision, but it must be remembered that the cost of implementation, integration, and configuration cannot be avoided. These are complex and sophisticated activities and will require the assistance of a highly-experienced and sophisticated WMS supplier.

The benefits of a state-of-the-art WMS cannot be overstated. Efficiency, inventory, staff and space reduction, accuracy, predictability, customer satisfaction, information access, and interconnectivity with suppliers and customers is imperative to optimizing growth and profitability in business today. To achieve these critical benefits, you will also need a best-of-breed WMS supplier.

Where do you find one?

You already have.


Take Control.