COST JUSTIFYING A WAREHOUSE MANAGEMENT SYSTEM

In today’s competitive marketplace, the primary focus of many organizations is on improving customer service. To accomplish this, companies are embarking on a wide range of process-improvement initiatives. In many cases, increasing customer service levels involves adding personnel and increasing overall expenditures. Unfortunately, these additional expenses can erode profitability.

One proven method for increasing customer service without incurring additional long-term expenses is the implementation of a Warehouse Management System (WMS). The WMS concept and technology are not new. These systems have matured into time tested methods for reducing inventory costs while increasing overall efficiencies. Implementing WMS technology within an organization already using an ERP system allows that company to achieve a higher return on their software dollars and provide the best possible service to their customers.

Global Concepts' warehouse management system, Logistics Engine,  is the perfect choice to handle the logistics functions for the most complex distribution centers or manufacturing locations. Advanced algorithms in conjunction with radio frequency and other leading edge technologies gives the modern logistics manager the real-time control necessary to be competitive in today’s global economy. Designed with input from some of the top logistics experts in the country, Logistics Engine is much more than a typical warehouse management system. It is a decision support system with real-time inventory visibility that enables the logistics professional to expertly manage the movement and storage of all materials within a facility. Using real time material tracking (coupled with priority based Radio Frequency (RF) employee tasking) it can take advantage of all available space and resources. Utilizing a highly configurable front-end, Logistics Engine™ readily adapts to most DC environments. Although its functionality is founded in simple pull concepts, probably the most important aspect of Logistics Engine™ is its ability to be phased into an operation – No Flash Cuts. You can begin with paper picking while putting all inventories under the control of Logistics Engine™. As the environment stabilizes, you can gradually move to system directed (RF) picking activities. Other functions such as put-away from receiving and replenishment of forward or prime picking locations may begin as dedicated functions and gradually migrate to system directed activities. For those companies that do not have good historical, demand, and volumetric data, Logistics Engine™ can begin with simple default algorithms. As it builds its own data over time, the more complex features of the software can be turned on. Logistics Engine™ grows with you as you move at your own pace, one step at a time, toward a world class operation. Purchasing a warehouse management system is a sizeable investment, not only the initial cost but also the commitment to the business processes it will help define and enforce.

A WMS can provide an organization with tangible benefits quickly, improving warehouse operations and increasing efficiencies without adding headcount. By implementing a WMS, a company achieves a number of dramatic benefits. They include:

• Directed put-away and directed order picking

• Warehouse capacity management

• Radio Frequency (RF) capability for data capture

• Load planning

• Cross docking

• Picking optimization

• ABC stratification

• Interleaving of work

These benefits translate into direct cost savings. The extent of these savings depends on a number of factors including existing inventory levels and accuracy, premium shipping costs and personnel currently required for picking, packing and shipping.

The categories presented in this table are based on accepted industry standards and represent areas for high-visibility cost reductions.

In addition to the tangible costs and associated savings, there are a number of intangibles difficult to accurately quantify, but are nonetheless valuable to any organization as the result of implementing a WMS.

Ability to receive orders and ship same day without expediting. Consider the value of receiving orders as late as 3:00 PM and shipping the same day. This brings a higher level of service that helps differentiate you from your competitors.

Improved customer service levels. A WMS enhances the overall warehouse operation. Data accuracy and inventory accuracy both improve. Mistakes are pushed to an absolute minimum. Deliveries are timely, shipments are accurate and customers stay happy. This results in avoiding the very costly problem of losing existing customers to the competition. The cost of acquiring a new customer is up to five times greater than maintaining existing an existing customer.

Self-managed employees. With system-directed operations available to the users, supervisory intervention is held to a minimum. Much of the decision making required in a typical warehouse is handled by the WMS. Workers do not need to take the manager away from his/her primary job. Rather, the WMS directs the employee's actions based on the user profile and location within the facility. Managers have more time to make higher level decisions.

Redeploy excess resources to other process improvement initiatives. Rather than take on additional personnel to increase sales volume and revenue, 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.