One reason why IT projects are delayed or even fail is the incorrect or complete lack of risk management. This is particularly true for the implementation of warehouse management systems (WMS), which are characterized by a large number of divergent project participants and a highly complex process and IT landscape. Against this backdrop, prismat GmbH, a long-standing expert in the implementation of SAP solutions in logistics, and the warehouse logistics team at the Fraunhofer Institute for Material Flow and Logistics IML have examined the topic of risk management in WMS implementation projects.

The challenge in risk management lies in the complete identification and awareness of all risks. For this reason, relevant risks in WMS projects were identified in expert interviews, weighted according to their hazard potential and categorized according to process. The hazard potential of a risk describes the impact associated with the occurrence of the risk (low, medium, high, very high). With the help of the expertise of Fraunhofer IML and prismat GmbH, it was possible to identify requirements and risks that can become stumbling blocks in WMS projects if risk management is inadequate.

Complex or close to the standard?
Not every WMS project has the same potential for risks. Depending on the complexity and proximity to the standard of the project requirements, specific risks must be taken into consideration. The requirements placed on WMS projects can be divided into four categories: The functional requirements, the non-functional requirements, the connection of third-party systems and the integration of technology. This classification and the top 5 potential risks per category are shown in Figure 1. It is clear that far-reaching functional requirements in the area of package optimization and hazardous materials in particular can become a challenge in WMS projects. It is also important to choose the time of the go-live sensibly and to involve operational employees at an early stage in order to achieve a high level of system acceptance. According to the experts, the integration of third-party systems only poses a medium risk potential for the successful introduction of a WMS, but should not be ignored in WMS implementation projects. No increased risk potential for a WMS project is seen in the area of technology integration either. However, the gradations within the evaluation of the individual technologies illustrate that there are standard approaches and less frequently used technologies such as RFID and pick-by-light and pick-by-voice.

Regardless of the complexity of the requirements for a WMS project, typical, recurring risks in WMS projects could be identified and weighted. These include the aspects shown in Figure 2. In order to fully record and address these in every WMS project, checklists can be used as a catalog for risk identification. In addition, each project should be considered in terms of individual risks and requirements. Methods such as brainstorming can be used for this project-specific identification of unknown risks.

Biggest potential risk: poor training
The top 3 weighted risks show that the involvement of the customer and their employees at all levels is a decisive success factor for a WMS implementation. In addition to inadequate user training and insufficient test motivation, insufficient process knowledge on the part of the customer also repeatedly leads to obstacles in WMS projects. These stumbling blocks can be successfully counteracted with a structured as-is process analysis involving the operational employees and a target process design in the concept phase. The classic project management risks of "unrealistic time and budget planning" are also among the most frequently occurring aspects that jeopardize the project objective and should therefore be specifically considered at the start of the project. Another risk that is often underestimated in WMS projects is the lack of clarity regarding functional and non-functional requirements. This can be remedied by a detailed specification sheet that describes "what" the WMS must do - without necessarily telling the provider "how" the implementation is to be carried out. The specifications should be formulated as generally as possible and as restrictively as necessary. For WMS projects, it is advisable to base the structure on the VDI guideline 3601 "Warehouse Management Systems".

Unrecognized risks often become reality later on
A lack of risk management in the early project phases leads to increased costs later on in the project. For example, few risks occur at the start of the project in the deployment analysis. As the project progresses, the number of risks increases. Inadequate handling of risks is particularly noticeable in the implementation and testing phases. In terms of risk management, this means that measures must be taken before the project starts in order to reduce risks as the project progresses . The study on risk management also raised the question of which party (customer or WMS provider) is responsible for controlling a risk. The vast majority of risks must be handled in coordinated cooperation. This means that responsibilities must be clearly assigned and communicated. Cooperation between the project parties is therefore a key success factor in WMS projects.

Integrating risk management into processes
For a successful risk management system, it is also essential to plan and anchor the methods and tools of risk management directly into existing processes. For WMS projects, this means embedding the risk management process in the usually well-established project methodology of the WMS implementation. The milestone concept provides an orientation framework for sequential procedures. In principle, the risk management process should be carried out each time a milestone is reached, i.e. at the end of a phase. Furthermore, the previous phase is analyzed at these points in order to gain insights for subsequent phases. Risk control, i.e. tracking the status of the risks identified in the project, should be carried out at short-cycle intervals. This can take place within project reviews, for example.

Define internal and external risk communication
In addition to integrating the risk management process into the project methodology, the aspect of risk communication is an important pillar. In order for this to be carried out in a target-oriented manner, all project participants must have a pronounced risk awareness. This includes gaining a basic knowledge of the risk management process, methods and typical risks in WMS projects. Only with this foundation can employees assess the consequences of their actions. This risk awareness can be communicated in advance through training or in project-specific meetings. Within risk communication, clear rules for internal and external communication must be defined depending on the risk status. This includes, for example, defining times at which higher-level bodies such as the steering committee are informed about risks. Risk communication also includes ensuring that project staff adhere to their responsibilities in risk monitoring and the implementation of measures and that status changes are reported directly to a project manager. The collaboration between prismat GmbH and Fraunhofer IML has identified typical risks in WMS projects and assessed their potential dangers. It also highlighted what needs to be considered for the successful implementation of risk management in WMS projects. It became clear that comprehensive risk awareness, early risk identification and defined risk communication are of crucial importance for a successful WMS project.

About the authors:
Kira Schmeltzpfenning is an employee of the Fraunhofer Institute for Material Flow and Logistics IML in Dortmund and, as the technical head of the "Warehouse Logistics Team", is responsible for long-term studies as well as process and strategy consulting in the WMS market.

M.Sc. Christoph Hagedorn works as an SAP EWM Consultant at prismat GmbH and took a closer look at the topic of risk management in WMS projects as part of his Master's thesis.