January 2011 | Commentary | IT Matters

Top Five Ways Warehouse Management Systems Deliver ROI

Tags: Warehouse Management Systems (WMS)

Rick Register is president and COO, Cambar Solutions.
843-614-8018

As the economy recovers, many companies are considering upgrades to their existing warehouse management systems (WMS) or deciding to invest in a WMS for the first time. All executives making these decisions want to know when they can expect to see a return on investment (ROI) for their technology selection.

Here are five areas where executives can find additional ROI opportunities.

1. Managing inventory. Distributors who lack inventory and warehouse accuracy often carry more safety stock than necessary. Using a WMS allows them to gain inventory and warehouse accuracy so they can reduce safety stock levels. It also provides visibility to real-time inventory, which can potentially eliminate lost product and reduce overstocks.

Warehouses with high levels of inventory accuracy cut costs by not purchasing product until it is needed; earning price breaks by ordering in larger quantities; and consolidating orders to vendors, which limits inbound shipments.

2. Saving space. Using a WMS allows distributors to define storage areas and bin locations in the warehouse. The system then manages product storage using the rules established for the facility. A better organized warehouse yields space savings.

3. Getting the most from labor. A big part of any ROI, labor savings come in numerous forms. Using a WMS can deliver benefits including gaining productivity, reducing and potentially eliminating costly physical inventories, and absorbing business growth and increased volume in the warehouse with existing resources. It also makes training new employees easier.

4. Satisfying customers. Customer satisfaction is often hard to measure, but it is valuable. Having the right product to deliver to customers at the right time and to the right place helps increase sales by reducing short ships, shipping errors, and missed deliveries.

Service-level agreements (SLAs) with customers often have strict guidelines and penalties in place if the distributor fails to satisfy ship completes, on-time delivery, shipping accuracy, labeling, and packaging requirements. A WMS provides the tools to help properly manage SLAs and avoid stiff penalties.

5. Reducing wear and tear. Pallet jacks, forklift trucks, man-up trucks, and other materials handling equipment experience tremendous wear and tear. Using a WMS provides benefits such as:

  • Efficient routing of activity throughout the warehouse.
  • Consolidated activity, such as wave order picking and zero bin cycle counts.
  • Associating equipment to areas of the warehouse and to appropriate work.
  • Managing and enabling pickup and delivery, also known as drop points.
  • Reducing time spent locating product as a result of accurate inventory.

a matter of time

The timing for achieving ROI on a WMS investment should be relatively short. While not the same for every company, some can recognize ROI in just three to six months. For others, the payback will be longer. But in most cases, operations that do not currently have a WMS can likely recognize ROI in 12 to 18 months.