4 Reasons Why Switching to an Automated Warehouse Management System Can Become an Epic Failure - Modern Distribution Management

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4 Reasons Why Switching to an Automated Warehouse Management System Can Become an Epic Failure

Companies often overlook the need for data accuracy, leadership investment, subject-matter expertise and extensive training requirements.

“You can pay me now or pay me later” is a quote from an early 1970s TV commercial wherein an auto mechanic is recommending investing in a Fram oil filter to avoid spending more later after the owner experiences severe mechanical failure.

That concept expressed in the Fram commercial came to mind when I spent a few days helping a colleague stabilize his distribution operation after moving from a manual paper-pick environment to an automated warehouse management system (WMS) model.  

He led the company’s distribution team as the business grew — in less than a decade — from about $40 million in annual revenue to a projected $140 million this year. No question, the investment in a WMS system, building expansion, carton and pallet flow racking and pick modules was needed to support the company’s rapid growth and address the resulting strained labor resources. 

However, the execution of the transformation reminded me of similar projects I’ve walked into where frustration bubbled up as the team struggled with this huge change.

The project was a major investment for this family business. The infrastructure changes, adding conveyors, racking, print and apply technology, new software, new hardware, new material handling equipment, fees for design, implementation and consultants were all expenses that this company was not used to experiencing.

And how was the investment paying off for them? Daily shipping revenue running at 50% of the manual model and 30% of the required run rate to meet demand. At last count, they were 15 days behind plus the needed daily volume. Temporary labor costs were spiraling upward, more consultants were called in, more material handling equipment was onsite, the WMS implementation team was driving up their billable hours, overtime was out of control and leadership was exhausted. 

Career-threatening stuff.

This was textbook failure of implementation. The company’s lack of a concrete plan to recover clearly points to gaps in implementation planning and execution. To avoid this fate, my history with these transformational activities points at four legs of a stool that need to be equal to hold the weight of the operation:

  1. Master data accuracy
  2. Find the right leadership
  3. Create subject-matter experts
  4. Train, train and train again

1. Master Data Accuracy

Golf coach Hank Haney wrote a controversial book about his time with Tiger Woods called “The Big Miss.” The big miss in distributors’ transformations into automated WMS-controlled warehousing environments it is in not getting the master data correct. 

The legacy manual environment drove all picks at an ‘each level’ and had a significant over pack operation. Before the cut over, the team did a physical inventory and at the ‘each level’ they had a high degree of accuracy. The new distribution model drove picking at a level of least effort. Orders would be filled at the pallet level, the case level, the inner pack level, or the each level. To achieve this the new model required accurate dimensional data and velocity data to properly slot the new case flow rack and pick modules as well as make sure the customer who ordered a case of 12 received a case of 12 and not two or 24 or even 48.

When the team flipped the switch, the replenishment teams flooded the pick module with inventory that often did not fit its destination. The WMS did what it was expected to do, but with the poor data, the operation crawled. The harder the team pushed, the worse the issue became. As shipping stalled, receiving backed up and service further diminished. New items were captured and loaded correctly but the system treated carryover SKUs as being correct, so the data issues perpetuated. 

All the preparation to slot the new picking areas and experience the benefit of the investment was done with bad data and will need to be completely reworked. A huge task alone, but even more daunting while trying to catch up on a staggering backlog.

Getting the data corrected was critical. While the inventory accuracy is important, the data integrity will bite you again and again if it is not correct. Organizations need to allow for the time and the resources to make sure the data is correct at each level of selling unit — and that includes the case dimensions. Not factoring in the time to get this baseline right is planning to fail.

2. Find the Right Leadership

Underinvestment in leadership quality and quantity will build failure into your project. The skills needed in a legacy manual distribution model are not the same as the required skills in an automated world. Leaders need to take an honest look at the floor supervision and frontline managers and make the difficult calls to create the go-forward team. 

In this example, no one except the VP of distribution had ever operated in an automated environment. No one in the organization shared his vision or experience and therefore couldn’t share it with their floor associates as issues arose. 

Senior leadership needs to make honest evaluations and make sure the floor level leaders are capable of managing through the transition.

The quantity of leadership also needs to be increased. This is a time of great change. Even if the training of the operators was robust, the number of questions, on the spot retraining, floor level decisions and ad hoc projects will greatly increase the time demands on supervision. Without increased supervisory depth to address the anticipated demands from the floor, senior leaders drop down a level and cannot make the time to step back, evaluate the operation and make course corrections to workflow or staffing to drive optimization of the new investment. 

As the process matures, the level of supervision will be rightsized to the new operating model and much of the knowledge work shifted to “leads” taking the operating cost down a notch. At the onset, however, an investment in a deep supervisory team will accelerate transformation, limit diminished customer experience, and in the end, lower the total cost to this transformation project.

3. Create Subject-Matter Experts 

Super users on the floor are critical to ramp up the learning and execution on the floor. Certainly, as the operation matures, unofficial leaders will develop. That is just the normal course of things. The better practice is to identify these high potentials as the project launches. The number of these teammates the operation needs is dependent on the complexity and size of the operation. At a minimum, I’d require one in inventory/receiving, one in the pick module, and one in shipping, per shift. 

These operators need to be comfortable with systems and they need to be comfortable training and answering questions (often the same question over and over) and also being able to articulate to leadership real challenges that may be in the system configuration that can be augmented.

Without the super-user team in place, the knowledge transfer from the WMS provider and/or integrator does not properly take place. My observation is that this gap creates dependence on the expensive outside resources that it is difficult to wean the team from. Additionally, the lack of a go-to team for answers and instruction forces the associates to find a leader (in the case in question mainly the director) to answer their questions. The result: Loss of production while the operators find help, loss of the leader’s time answering questions that could be handled a level or two lower, and general frustration.

The implementation team ends up resolving issues on a case-by-case level. It is difficult to watch these expensive resources that should either have moved on long ago or be fine-tuning the new operation in the shipping lane who are instead trying to figure out how to ship a case or need to be engaged to do simple tasks like setting up a location for case picking. No one would consider that a good allocation of resources.

These super users will need to be pulled off the floor during the integration process — anther investment. They are often some of the higher producers and their roles may need to be backfilled. If they are in work sessions with the systems integration team, management cannot pull them out for the current crisis. 

Depending on your WMS partner, they may not have a formal process for sharing this knowledge and developing this talent. This needs to be vetted and an expectation set that part of the integration process is the creation of internal subject-matter experts and super users from the associated group. I would also suggest that this team be rewarded for the additional responsibility they are taking on. All of this can be viewed as an additional expense, and it is. But without it the transformation will fail, service with decline and costs will increase at a steep angle.

4. Train, Train and Train Again

The final piece of the puzzle is — and this is likely intuitive — the training of the associates can’t be curtailed. This needs to include standard operating procedure (SOP) documentation. The creation, evaluation and approval of SOPs are vital in this change management process. 

The ‘shadowing’ model to train employees on the new system only assures that the new employee learns all the bad habits of the associate they shadow. The SOP needs to be documented and the training modules need to mirror that SOP. 

The associates and the trainers need to feel empowered to challenge the SOP if there is a better way to complete the task in a different manner. However, that change must be recorded in the SOP and the alteration made under the formal change management procedures. This is can be a daunting task but can’t be ignored. 

In my recent short assignment, the inability to review a documented process for compliance and for gaps hindered any improvement efforts. The associates did their jobs the best that they could, based on the word of mouth and peer coaching they received. Without documentation and a change management process, training became a game of telephone with the message getting diluted as the communication flowed out.

Moving from a manual ERP managed process to a paperless environment to an integrated ERP/WMS environment with automation is a huge process and cultural shift. Often the front-end, actions that will deliver the value are underestimated or deemed to be unnecessary. “We can fix that later.” “We do on-the-job training here.” “Our inventory is stable.” These often-repeated statements communicate a lack of understanding of the complexity of this transformation and will cripple the implementation, drive gaps in service, and drive costs well in excess of the funding that would be needed to provide the best opportunity for success.

Postmortems are easy. Pointing out what others did wrong without the ownership of getting it right and without the pressure of a leadership team driving to see benefits is not really complicated. I’d opt for the concept of a “premortem” before requesting funding: Pulling your operational leadership team together along with your WMS and integration partners and working through a worst-case scenario where the project fails. 

Imagine if the team had asked themselves ahead of time: What happens if the data is bad? What is the impact if we do not have the right leaders? What if our leaders don’t have the vision to share with the organization? What is the impact if employees aren’t comfortable with the technology? If we don’t create subject-matter experts and super users among the team, what happens to the workflow? How long do we pay the WMS provider for knowledge that should have been transferred on to the team? What is the impact on the process of not investing training of the associates and documenting the process so questions and adjustments can be addressed promptly and institutionalized?

If the team conducted this doomsday review and relayed the impact of not investing in these actions and built those costs into the ROI and project plan, the foundation for a successful operational implementation would have been established. 

Dave Haley began his career working for tailored clothing manufacture Hart Schaffner and Marx in multiple roles, completing his 16-year career as plant manager. His next roles were at Compaq and subsequently Hewlett Packard where he assumed responsibility for East Coast business-to-business distribution. Haley has successfully led a diverse set of distribution models across several industries including imaging equipment, parts and supplies, basic apparel, and security products, and industrial distribution. Reach him at haleydave91@gmail.com.


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