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Long Term Warehouse Management System (WMS) ROI

4 years ago
Rita K

The gift that keeps on giving, long term ROI from your WMS

The implementation of a top notch Warehouse Management System (WMS) will have immediate benefits, which include:

  • Faster picking
  • More accurate order fulfillment
  • Better inventory visibility and control
  • Better integration with shipping processes
  • Reduction of shipping costs
  • Better personnel control due to increased information on employee performance
  • Improved equipment utilization, especially forklift equipment
  • Faster putaway, resulting in immediate inventory availability
  • More logical warehouse layout, reducing picking travel distance and time
  • There are many other significant and immediately achievable benefits, as well.

The significance of these benefits will continue and even improve. However, perhaps even more importantly, there are longer term benefits to be achieved, once the WMS has been in place for some time and data is collected and evaluated.

There is a process called Warehouse Profiling, which really drills down into warehouse operations and enables a WMS user to achieve significant benefit over many years.

Warehouse Profiling integrates the data produced by the WMS with the human resources in your operation. Data analysis and human process evaluation combine to offer enormous advantages. Some of the areas that can be addressed (in no particular order) include:

  • Organizing batch and wave order picking strategies
  • Receiving process improvement, including automated QC segregation
  • Storage mode optimization, establishing dynamic reserve levels for seasonal merchandise
  • Most efficient item location decisions
  • Reduction of facility requirements through more frequent inventory turns
  • Reduction of employees due to dramatically improved picking productivity
  • Building and racking design improvements, especially when combined with automation
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Examining these areas of potential improvement separately, the advantage of the long-term accumulation of data combined with the development of human insight as the data is interwoven with on-the-floor experience becomes extremely apparent.

Please remember that this list of long-term improvement benefits is simply a sampling of the many places you will find opportunities to reduce cost and increase profit after you implement a world-class WMS. This list is offered only to provide examples from some of our customers that illustrate a handful of the benefits they have achieved, often in unlooked-for areas, in the years following their WMS implementations.

Opportunity for improvement: Organizing batch and wave order picking strategies

Strategy: Analyze order mix and lines per order distribution. By collecting data on how your customers order, warehouse layout and picking order can be designed for optimal efficiency. In the case of multiple warehouses, items ordered together will always be available from the same location. A single picker can pick multiple identical items to be associated at the shipping department with specific orders.

Opportunity for improvement: Receiving process improvement, including automated QC segregation.

Strategy: As with organizing batch and wave order picking strategies (above) the data related to customer order history allows expedited receiving and quality control processes. Products that are received in high-volume categories from trusted suppliers may need only statistically relevant quality control inspections (e.g., 2% of each incoming shipment) which can expedite the received inventory to picking locations, to fulfill orders immediately. The backlog in receiving and quality control can often contribute to unnecessary inventory levels. A thorough understanding of your order history and the quality and rejection history associated with particular suppliers can enable just-in-time ordering with consequent reduction in inventory investment.

Opportunity for improvement: Storage mode optimization, establishing dynamic reserve levels for seasonal merchandise.

Strategy: Correlating demand with seasonal inventory availability enables you to reduce inventory levels as seasons dictate. A sophisticated WMS allows the inventory location to be dynamic (moved from time to time) because the inventory location instructions given to pickers is provided via radio frequency hand held bar scanning guns. This means that your pickers don’t have to memorize inventory locations. Instead their RF equipment guides them to the correct location and audits the accuracy of picking tasks. Therefore, as seasonal demands dictate increased inventory of particular merchandise, it can be stored in multiple locations, without fear that it will be lost or overlooked by pickers. Since the inventory locations are simply data points to the WMS, the pickers will be automatically directed to the correct inventory locations, in accordance with any plan that is established (e.g., perishable inventory can be picked according to expiration dates). Because this is a dynamic process, there is no need to move existing inventory to make room for new inventory, freeing up labor and optimizing space utilization. Many companies spend significant amounts of time moving inventory items to make space so that newly arriving inventory can be warehoused in the same location as previously in-stock inventory. It is not necessary to move 20 pallets of blue cups because you have 20 new pallets of red cups arriving at the warehouse. The new pallets will be stored according to the inventory plan (e.g., 15 pallets in the reserve inventory location and 4 pallets to the forward closed box inventory location and one pallet to the open box ready-to-picks inventory location. None of these need to be adjacent to the other, or located in the same area as any previously existing stock of that same inventory item, because the computer knows what inventory is in stock where it is, and the order in which it should be picked, or moved.

Opportunity for improvement: Most efficient item location decisions.

Strategy: Again, through knowledge gained by accumulating and analyzing data, it can become clear where inventory ought to be stored. As an example, it might seem intuitive that all large items that require movement by forklift should be located in a similar area. However, if certain of those items are shipped on less-than-truckload carriers, while other items are shipped via UPS, it might make more sense to locate them dependent upon the method of shipment, rather than the picking equipment required. Damage to items resulting from long forklift travel might outweigh the advantage of having items that require particular lifting equipment in similar areas. Only a sophisticated WMS that is linked to financial software, order history, customer service records, etc., allow you to analyze all of this data collectively, which often highlights unanticipated areas for cost reduction and operational improvement. Most companies are shocked at the expense associated with problems such as damage to inventory, moving inventory to incorrect shipping locations, etc. Damage to inventory is just one example of a variety of realizations that can arise from a thorough analysis of data from multiple sources.

Opportunity for improvement: Reduction of facility requirements through more frequent inventory turns.

Strategy: By implementing an excellent WMS, you will become acutely aware of the levels of inventory on hand and on order and how that relates to seasonal demand. Because the need for safety stock is dramatically reduced, total dollars invested in inventory can be reduced significantly. After a couple of inventory cycles (e.g., working through one, or two, seasonal peaks) optimal inventory levels can be safely determined and invariably reduced. Once that knowledge is trustworthy and consistent, facility planning can anticipate square foot requirements allowing the company to reduce space, or increase inventory diversity in existing facilities. Decisions about facilities are huge and cannot be unmade. Once you’ve got the building, you’re stuck with it. Deep and dependable data is essential to making those decisions correctly the first time.

Opportunity for improvement: Reduction of employees due to dramatically improved picking productivity.

Strategy: As with facilities planning, warehouse staff can be reduced dramatically with improved processes and accurate information. One customer reduced warehouse employees from 110 to 41 while simultaneously accelerating the time from order receipt to shipment from 8 hours to under one hour. Not only was labor cost dramatically reduced, but not insignificantly, order cancellations went down enormously. When customers received an email notifying them that your order has been shipped,” the number of cancelled orders dropped precipitously. Our customers have often found large benefits in the most unexpected places.

Opportunity for improvement: Building and racking design improvements, especially when combined with automation.

Strategy: Analysis of warehouse operations has allowed our customers to make surprising and greatly beneficial decisions about building design and racking. Integration with automation technology, such as conveyors, auto bagging and automatic box assembly has allowed our customers to store inventory items in unpackaged configurations, saving space and increasing picking efficiency. Automated packaging and safe conveyor transfer allowed for tremendous reduction of warehouse space and racking requirements. Comprehensive data on damage and packaging cost ensures that decisions are made intelligently and with the greatest cost benefit. The message is that the accumulation of complex data, cross-related with data from other processes (e.g., financial accounting, customer service, etc.) has allowed our customers to change operational procedures, which has resulted in changing facility requirements and the ability to avoid costly investment in new racking as well as facilitating well-informed decisions about automation equipment.

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Only some of the long-term benefit from a first-class WMS is realized immediately. Much of the benefit comes over time after data has been accumulated and analyzed. Having a WMS partner with sophisticated experience in integrating that data with data from other processes and systems really opens the door to startling realizations about hidden costs and opportunities for profit enhancement.

How do you find a WMS partner with the experience, knowledge and creativity to help you realize all the benefits that can be realized from the implementation of a world-class WMS?