Avectous > Private: News/Blog > Technology > Why a Warehouse Management System (WMS)?

Why a Warehouse Management System (WMS)?

4 years ago
Rita K

Properly implemented and integrated, your new WMS will launch your warehouse and fulfillment operations to a new and vastly improved level and contribute enormously to your profitability. You will lower costs, optimize use of existing space, minimize training time for new employees, increase accuracy, and help you make better business decisions.

It will help you ensure accurate transfer of information between operating departments, such as accounting, purchasing, sales, and customer service.

You’ll reduce time between order receipt and shipment to your customers, which will speed up billing and collections. You’ll increase inventory turns, lower labor and inventory carrying costs and help you assess the productivity of warehouse personnel. Assessment of the productivity of warehouse personnel is something that ought to be of great concern. Typically, labor in the warehouse accounts for over two-thirds of total warehouse expense. Do you know which employees are picking fastest and most accurately? Do you have warehouse staff that are performing at sub-optimal levels? A good WMS will tell you hourly who is working fastest and who is making the most mistakes. Additionally, a good WMS will allow you to train new warehouse employees in a matter of hours, rather than days, or weeks. Modern WMS systems operate using Radio Frequency (RF) devices with digital readouts that instruct employees where to go, what equipment to take to accomplish picking tasks, and automatically control accuracy by preventing picking errors. In some situations, improvement in accuracy can account for a 10-15% improvement in the bottom line. Errors that are not caught before shipment require return shipping cost and re-shipping costs, as well as additional receiving, putaway, picking, accounting and customer service activities. A good, well-implemented WMS will pay for itself in a remarkably short period of time. Fewer errors and faster shipping time will improve customer satisfaction and help your company to increase sales.

RF devices do lots of other things, too. They direct the pickers on the most efficient path through the warehouse. They automatically validate that the correct items have been picked. They correlate the picking to the orders in the system, ensuring that items haven’t been overlooked, so shipments can be sent out complete. If there are lot or serial number management issues, the RF devices will ensure that the correct item has been picked, not simply a similar item with a different serial, or lot, number.

In addition to labor cost reductions achieved with the implementation of a good WMS, most companies also find they accomplish improved inventory control, in respect of both inventory accuracy (knowing what you have in real time) and inventory availability (having inventory ready to ship immediately upon receipt). These benefits really help companies to improve inventory turns, because there is no need for “safety stock” to hedge your bets against uncertainty of inventory availability. Some companies find that eliminating the need for “safety stock” can improve inventory turns resulting in the amount of cash invested in inventory by double-digit amounts.

Additionally, when year-end inventory analysis is performed, it is a pleasant surprise to have fewer (if any) inventory adjustments. Personnel responsible for warehouse operations can achieve huge gains in the personal and professional respect from senior management when inventory numbers are “bang on” at every closing period. Frequently, because of the perceived reliability of RF technology, outside CPAs are required to less on-premises oversight of inventory counts, dramatically reducing the cost of, and speeding up, year-end processes. Indeed, after establishing credibility as a result of several periodic and accurate inventory closings, cycle count requirements and the comprehensiveness of year-end inventory audit processes are reduced, or eliminated. When looking at the cost / benefit of a new WMS most companies don’t take these savings into account, but they are real and achievable with the implementation of a modern, RF-enabled WMS.

Obviously, another benefit is that the space you used to dedicate to “safety stock” is now available for other inventory. This effectively increases your warehouse space—not only without additional capital investment, but with an actual decrease in inventory investment! Companies that need additional space at peak times during the year may find that optimized utilization of current warehouse facilities obviates the need for renting off-site space to manage these high-volume periods. When considering a new WMS it would be wise to consider the costs inherent in managing peak periods. If you could eliminate a significant portion of the expense and chaos associated with your “crazy” periods, what would that be worth to your company?

Knowing your inventory with accuracy and confidence does lots of other things, as well. For example, what are your levels of obsolete inventory? If you only had as much inventory as you needed, would that logically allow you to avoid the buildup of obsolete inventory? Similarly, if you had very accurate inventory records, would that enable you to offer discounts and closeouts to liquidate otherwise obsolete inventory? If you could convey inventory imbalances to the sales and marketing departments early and often, isn’t it likely that they could must the resources necessary to sell that inventory while it was still of highest value, rather than delaying the sales effort until next season when the inventory has suffered further value decline?

We’re all human. When we see things, we are motivated to act. A new WMS will help you lay out your inventory in an organized, observable manner. You will have both information and visual observation, leading to a new, highly efficient utilization of inventory and space.

An interesting corollary to that point is that you can sometimes disorganize your inventory storage to significant benefit. Because the RF equipment will direct pickers to the inventory to be picked, similar inventory doesn’t necessarily have to be stored in the same location. How much time and effort have you expended moving inventory around your warehouse because you ran out of room for the green widgets on the shelves on aisle 3? With a modern RF-enabled WMS, you can put the inventory where you have room for it and the RF equipment will ensure that the pickers don’t have to search for it—they will be directed automatically.

This benefit will be magnified manifold if you have multiple warehouses, or drop-ship partners. By building business rules into your WMS, the system will direct from which facility a particular shipment ought to be sent. The system will aggregate products in accordance with those business rules to ensure complete orders are shipped at the lowest possible cost, consistent with optimizing customer satisfaction by ensuring prompt shipment.

What else can a good WMS do for your company? How standardized are your warehouse processes? With an RF-enabled WMS, standardization becomes easy, resulting in predictable costs and increasing confidence throughout your enterprise, because everybody knows the warehouse is taking care of business. New warehouse personnel are trained quickly and efficiently and errors are eliminated, leading to increased customer service, fewer customer service calls, repeat business from satisfied customers and higher profits. When calls do come in to customer service, the availability—in real time—of all information relating to a customer’s order is critical to salvaging the customer relationship. Customers don’t expect perfection. Customers expect prompt and satisfactory resolution of their problems. That dress your customer ordered for her daughter’s wedding? When will it ship and when will it arrive? A good WMS, well integrated with your order and sales management system, will ensure that your customer service personnel are armed with all the necessary information to resolve concerns and create customer loyalty.

A good WMS will allow you to make better business decisions. Quality processes will be better managed. You will have the right inventory, in the right quantities, processed by the right employees. Customer satisfaction will be improved. Generally, life will be better.


Take Control.