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Tech Talk: Warehouse Management System Aids Hardware Firm
By Elizabeth Wasserman
A chain of hardware stores in Washington state improved inventory accuracy and reduced "out of stocks" at stores after deploying radio frequency barcode reading equipment as part of a new warehouse management system (WMS).
McLendon Hardware, based in Renton, Wash., started in 1926 and has now grown to six stores throughout the Seattle-Tacoma region and a 90,000 square foot warehouse. When the warehouse became overcrowded and inefficient, Vice President Mike McLendon tells IncTechnology.com that tracking goods in a warehouse management system (WMS) with radio frequency (RF) barcode reading equipment produced dramatic results.
Elizabeth Wasserman: Why did you decide to deploy a warehouse management system?
Mike McLendon: We were using a general enterprise resource planning (ERP) system for all other functions in our stores -- point of sale, accounting, accounts payable, etc. But we only had limited computer functionality in our warehouse. It was very manual driven. We worked from a big list. We would go pick the items we needed to send to our different stores and manually check them off the list. We couldn't track inventory accurately using this system. It really drove us to look for something different.
Wasserman: What type of business benefits were you looking for?
McLendon: We've been in business 82 years and had a warehouse for a long time. In the past, we didn't care about having an accurate inventory of our stock on hand. We ordered a lot of stuff and made sure we had enough when customers asked for it. These days, however, we compete against Home Depot and Lowe's. The reason customers come to us is because we have larger quantities on hand and more types of different products than Home Depot. We've always strived to provide the best service and broadest selection of products available. But as we've grown, so has the number of products we sell. To manage that number of products it became so difficult that we realized we had to manage our inventory better. Near the end of 2005, we decided we had to do something, so we started not stocking as many things in the warehouse. Some goods we would have shipped directly to the store, so we wouldn't have to manage so much stock. By 2006, however, we realized that we still didn't have as much information as we could get from using computers. That's when we decided to look for a warehouse management piece of software. We decided on PathGuide Technologies' Latitude WMS, which we integrated with our ERP system. It went live in January 2008.
Wasserman: There's been a move among businesses recently to move toward lean inventory. Were you impacted by that at all?
McLendon: That was one of our earliest phases. We decided to see if we could manage better by being leaner in terms of the amount of inventory we had on hand at one time. Do we really need to stock all this stuff in the warehouse? Or should we ship it to the store and let them stock it? We did that with some of our products. That relieved some of the pressures on the warehouse as far as being overcrowded. But it was not the only thing we needed to drive efficiencies. We didn't have a means to automate our ordering. Every time we'd place an order, we'd have to go out and count how many we had and write that order up and fax it to the factory. A very slow and tedious process. To increase turns and lower stocking levels we wanted to be able to place orders on a more frequent basis. We have the ability within our Eagle ERP system, by Activant, to create orders automatically. But to use the automated ordering function requires that you have precise on hand quantities. By adding a warehouse management system one of the things we have now is an accurate inventory in our stores and warehouse which provided us the ability to automate our orders.
Wasserman: How does your new system work?
McLendon: It's extremely easy to use. That's one of the reasons we chose it. The nice thing about a warehouse management system is it only does one task. The system itself has three parts. It has a database that holds all the data. It has a gateway server that handles communications between the database and the radio frequency equipment. And the third part is radio frequency equipment. Most products come pre-labeled with barcodes. We have handheld RF guns that read the tags when we check in inventory and when we pick goods to ship to our stores. We have access points around the warehouse that allow the RF guns to talk to the database.
The telling point for me after it was installed was that my Dad, who is 78 years old, could use it. He has his own RF gun and works with the receiving crew to scan the stock in. Once you scan the goods into the system, the computer knows where the stock is. It makes it much easier to pick products to ship to our stores. When you go over and take four of these products, you scan that information in and it registers in the warehouse management system. It makes it all function paperlessly. In the old way, we would take a piece of paper and a shopping cart down the aisles of the warehouse and throw the goods in the basket. We never had to check off anything or worry that we were taking more than we should. The downside was that we never knew how much we had or where it was located. Back then we used what we called “tribal knowledge” to locate items. Longtime specialized employees who were the only ones who knew where everything was.
Wasserman: What have the results been?
McLendon: We are very satisfied with results we have gotten by combining the functionalities of the warehouse management system with those of the ERP system. Our picking rates have increased by 50 percent within the warehouse. No more tribal knowledge. We can train anyone to pick in one day. And our inventory accuracy has increased from 65 percent to more than 90 percent. At the same time, we've reduced our inventory level by about 10 percent. In terms of what our customers see, our out-of-stock situation in our stores has been much better. We have actually decreased out of stocks by 10 percent at the store level. Our goal is to have better than 99 percent in stock. Now, we're at around 95 or 94 percent -- in some stores it's a little better and in others it's a little worse. We want it to creep up so that we don't lose the sale because we don't have an item in stock.