Warehouse Management Systems (WMS) and Return on Investment
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Transcript of Warehouse Management Systems (WMS) and Return on Investment
HOW TO DEAL WITH THE COST OF A WMS
A Whitepaper on just i fying the cost of a warehouse
management system
JUSTIFYING WMS
iCepts Whitepaper on Return on Investment
Installing a warehouse management system (WMS) can radically improve
overall business performance giving you the opportunity to truly take control
of inventory, improve efficiency and reduce operational costs. This white-
paper will be your guide on how to justify the purchase and implementation
of a WMS based on the return investment (ROI). Most who go through a
ROI analysis are surprised to discover just how quickly a WMS pays for it-
self.
Introduction– Why do and ROI analysis?
Many businesses incorrectly assume that a WMS is only affordable to the
huge multi-billion dollar corporations. That cost of implementing and man-
aging a WMS outweighs both the immediate short term benefits as well as
the long term benefits that could be gained. The impact is different for each
and every business and an assessment must be done. Most who go through
an analysis are surprised by the results and how fast a WMS pays for itself.
What needs to be considered?
The impact that a WMS has on a business greatly varies. Each business is
unique in the way that they manage the flow of orders and work throughout
their particular warehouse(s). What is an important issue to one business is a
minor issue to the next.
To stimulate some thoughts about analyzing your businesses ROI let’s ask
ourselves “why WMS”. Here are some numbers commonly known by com-
panies using a WMS today.
Asko, Inc. A wooden materials whole distribu-tor installed a their WMS in 2004. Kamila Pichrtová, IT and
Logistics Manager, says,
"Thanks to Accellos, we
really have a detailed
overview of the ware-
house. We can easily
trace the flow of goods
and to respond faster to
the requirements of our
clients."
Page 2
JUSTIFYING WMS
There are four main impact areas to consider when
you are looking to cost justify a WMS. Inventory
Operational costs
Customer Satisfaction
Efficiencies
Inventory A properly implemented WMS can reduce your inventory carrying cost by as
much as 27%. By providing you with a real time look at your inventory the
accuracy of the inventory can be improved by 20% or more. Implemented
correctly a WMS can totally eliminate the need for you to do any physical
inventories. Cycle counts would become the norm. What would that save
you in labor and down time?
Operational Costs Lets consider for a minute your warehouse labor costs. Lets say for example
you employ 12 people in your warehouse that pick, pack, receive, put-away
ship, check orders, clean up etc. you get the picture. Lets assume for a min-
ute that the average pay for these folks is 28,000 annually with a 35% bur-
den. And if they never work overtime which we all now is not a reality the
operational labor cost just for the warehouse annually is $453,600. a 35%
reduction in operating expenses are typically realized by warehouses using a
WMS. That is $158,760 and we did not even consider the savings on equip-
ment, repairs or clerical staff which can also be significant.
Customer Satisfaction What does a mistake cost? Statistically, a good data entry person makes 1
error every 300 keystrokes. If you introduce RF technologies (yes, you
really need a WMS to handle the data) the number of errors drop to 1 in 3
million. How many people enter data an check and recheck for errors in
your business today? And still many errors occur. Your customer ends up
with the wrong items, with missing items or the wrong amounts. It is not
uncommon for a warehouse operation to be 94.9% accurate in their ship-
ments. Experts tell us that an order error that is shipped out costs on average
$200.00 to fix. That means that a warehouse shipping out only 200 orders a
week makes 10 errors. And that costs the business $104,000 not to mention
the cost of customer dissatisfaction. A WMS can reduce that number drasti-
cally by lowing the error rate to .1%
The J. Walter Company Ltd.
(Walter) first opened its
doors as an importer and
distributor of industrial
utilities in 1952
KEY BENEFITS
Supported 100 per cent order vol-
ume growth with same number of
staff.
Order turn around speed increased
by 25 per cent.
Picking accuracy increased by 25
per cent.
"The efficiency and productivity gains we
have realized with Accellos One Warehouse
have been so great that we have been able
to increase warehouse output to 200 orders
per day, filled by 10 warehouse employ-
ees," says Jeannot. "Without the system we
had needed 15 employees just to fill 100
orders per day."
"With this system, we have gained the type
of control we could only dream of previ-
ously," says Jeannot. "The supervisor
knows exactly what’s happening on every
floor. It’s like having an extra set of eyes."
Page 3
JUSTIFYING WMS
Efficiencies The growth of the business is vitally important to every business owner,
CEO, president or GM. Getting the most out of your employees, equipment,
vendors, shipping partners and business systems is paramount for the healthy
sustained growth needed to survive in our every changing economic environ-
ment. Becoming efficient in your business practices will add tremendously
to your ability to grow. A WMS system can and will improve the efficiency
of your operation. It impacts all warehouse functions, clerical activities as it
pertains to sales orders, purchase orders, invoicing, maintenance on equip-
ment, inventory accuracy, shipping costs and so much more. How fast
would your revenue grow if you increased your sales orders by 20% without
increasing your staff or inventory. What increases in cash flow would you
see if you could invoice faster. What impact would it have on your bottom
line if you could reduce your overhead 5% or your inventory levels just a
little.
What you need to arm yourself with. A warehouse management system cost justification must include both tangi-
ble and intangible benefits. You will need to see what the impact is on your
revenue by comparing the total cost of ownership to the hard saving you
should realistically expect.
What are the Tangible Benefits: Reduced warehouse labor costs
Reduced clerical labor costs
Reduced overtime costs
Eliminated costs of physical inventories
Lower shipping/freight costs
Lower costs to rectify errors
Reduced equipment costs
What are the Intangible Benefits: Fewer shipping errors
Accurate inventory
Faster fulfillment
New capabilities/services
Better control
Happier customers
The bottom line is this; purchasing and implementing a WMS in your busi-
ness can be a substantial cost. If the return on this investment in your busi-
ness is not something you can measure then perhaps you need to focus on
other things first. But a well implemented WMS can begin to save you
money in many areas of your business immediately.
The Del-Nat Tire Corpora-
tion implemented their
WMS in the fall of 2002 go-
ing from a home grown
manual system to a fully
automated warehouse.
KEY BENEFITS
90 % increase in inventory control
35 % increase in order fulfillment
speed
Significant productivity gains
Significant increase in locating
product in the warehouse
Daily Process now takes the same
worker 6 hours versus 10 with the
previous paper based system
"Working with Accellos, we
have cut operations down to
two shifts, says Tosco. "The
system has created a great
safety zone for us, too. We
now know that, should we ex-
perience a spike in demand,
we can bring in an extra shift
to help us service customers.
This is something we could not
have done without the effi-
ciency gains that Accellos
helped us realize."
Page 4
JUSTIFYING WMS
What may trigger a warehouse investment? Accuracy problems becoming a crisis
Inventory is out of control
Space issues is becoming a problem
A new business opportunity
New customer requirements
New systems or expectations are installed
New management
Out of control shipping costs and compliance fines
Just to stay competitive is not one normally heard but maybe the biggest rea-
son of all!
Accellos One Formally Radio Beacon, is a leader in the warehouse management software
Industry. From a simple system called Collect WMS that is designed for a
small business that wants to replace their current paper and manual system
through many warehouse based software products that includes a sophisti-
cated traffic management system to the Accellos one Fulfill WMS that fea-
tures all the functionality needed to run a fast paced high volume operation
Accellos One is the choice of thousands of wholesale distributors and manu-
facturers alike have made to help them become more efficient, productive
and prosperous.
iCepts Technology Group A Pennsylvania based company, iCepts has been serving the needs of whole-
sale distribution and manufacturing companies for over 30 years. With over
300 satisfied customers, iCepts continues to provide top notch support and
services providing programming services, hardware sales and support, as
well as various business software solutions. As a certified solutions partner
with Accellos One iCepts is uniquely positioned to satisfy the needs of any
company seeking to add WMS to their business.
Our goal with this whitepaper is to give you enough information to take the
next step and allow us to provide you with a warehouse analysis . It could
not be easier to begin your journey; call us at 717-704-1000 or visit our web-
site at www.icepts.com and go to our solutions for warehouse management
and then choose “free ROI analysis and sign up. There is absolutely no obli-
gation.
So, Lets get started, Call Tim Crouser 1-717-704-1000 or visit our website
www.icepts.com
and click on the link for the free no obligation ROI analysis