Warehouse Management System Solutions(WMS)-Benefit Analysis

Warehouse Solutions - Benefit Analysis

Cost Justifying a Warehouse Management System (WMS)

Executive Summary

The main goal of many companies in today's highly competitive market is to improve customer service. In order to do this, businesses are seriously evaluating their supply chain practices. One obvious means of raising the bar on customer service is to add personnel. The drawback with taking this action is an obvious increase in expenses thus decreasing company profits.

One way to increase customer service levels without adding reoccurring expenses is the implementation of a warehouse management system (WMS). This is not new technology but one that has been around for over 15 years. Over this period, WMS solutions have developed into proven methods for reducing inventory costs while increasing overall efficiencies. Implementing a Warehouse Management System within a company that is already using an ERP system will enable it to provide the best possible service to their client base with a ROI averaging between 12-18 months.

Integrated Data Systems & Services (IDSS) possesses a strong background in delivering distribution and warehousing solutions. RF Navigator is a powerful, intelligent and full-featured WMS solution that we offer to our customers. The system provides a standard for inventory accuracy and visibility through all phases and operations within a facility. RF Navigator is a proven product with an impressive list of references. It has been interfaced with a number of companies including Goodyear Tire & Rubber Co., Honeywell, Lucent, and Siemens.

A Warehouse Management System can improve a warehouse's operations and increase efficiencies without adding employees. A company can obtain many significant benefits by incorporating a WMS into their operations. Some of the advantages are:

Inbound features: cross docking capabilities, customer return functionality
Directed put-away and directed order picking
lot control features
Improve Warehouse space utilization
User defined put-away criteria
Radio Frequency (RF) capability for data capture
Load planning
Predefined replenishment levels
Picking optimization
ABC stratification
Interleaving of work

These benefits mean measurable savings for an organization. The amount of savings depends on several factors including current inventory levels and accuracy, premium shipping costs and employees that are currently needed for receiving, picking, packing, cycle counting and shipping functions. IDSS will provide a quantified cost saving summary after conducting a study and analysis session within the company.

Categories for Potential Cost Savings

The categories presented in this table are based on accepted industry standards and represent areas for high-visibility cost reductions. IDSS will assign dollar values for cost savings to each category after an on-site study of the current warehouse situation.

Tangible Costs
CATEGORY	REASON
Inventory reduction of up to 10% (one-time savings).	Inventory visibility and accuracy.
Reduced inventory carrying costs up to 35% (industry average).	Decreased inventory levels; more efficient space utilization.
Reduced investment based on cost of money @ 8%	Decrease inventory.
Shipping costs	Reduced shipping errors.
Personnel handling paper - potential headcount reduction or redeployment*	WMS eliminates a paper driven system.
Personnel handling order picking - potential headcount reduction or redeployment*	RF based picking productivity increases efficiencies.
Personnel handling shipping paperwork and confirmation - potential headcount reduction or redeployment*	Eliminate preparation work for shipping documents and ship confirmations.
Eliminate physical inventory	Cycle counting replaces physical inventory requirement.
TOTAL SAVINGS from WMS Implementation:	TBD
* Savings in headcount reduction will be based on the average total per person per year.
Total net savings in tangible costs can produce a positive payback within 12-18 months after implementing a Warehouse Management Solution.

Intangible Benefits

In addition to the tangible benefits achieved, there are a number of intangibles difficult to accurately measure, but are still very valuable to an organization that has implemented a Warehouse Management System.

Ability to receive orders and ship same day- Orders received by early-mid afternoon can be shipped before day's end. This brings a level of customer service that can differentiate you from the competition.

Improved customer service levels- By dramatically reducing manual data entry, mistakes are significantly decreased. Inventory accuracy increases. Shipments are timely and accurate and customers are happy. The end result is an establishment of customer loyalty. The cost of acquiring a new customer is five times that of maintaining an existing customer.

Self-managed employees: Because a WMS solution can direct the operations of the user, supervisory intervention is at a minimum. Workers do not need to take the manager away from his/her primary function. The system directs the employee's actions based on the user profile and location within the facility, thereby enabling supervisors to spend more time making higher level decisions.

Redeploy excess resources to other process improvement initiative: WMS allows better facility management. Additional resources are usually not required to support increased business. WMS frees up resources in many cases. These people are available for redeployment to other areas of the business.