Warehouse Management Systems (WMS) and Return on Investment

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Justifying a Warehouse Management Systems (WMS) by iCepts Technology Group, Inc.


iCepts Whitepaper on Return on InvestmentJUSTIFYING WMSA Whitepaper on justifying the cost of a warehouse management system

HOW TO DEAL WITH THE COST OF A WMSInstalling a warehouse management system (WMS) can radically improve overall business performance giving you the opportunity to truly take control of inventory, improve efficiency and reduce operational costs. This whitepaper will be your guide on how to justify the purchase and implementation of a WMS based on the return investment (ROI). Most who go through a ROI analysis are surprised to discover just how quickly a WMS pays for itself.

Asko, Inc. A wooden materials whole distributor installed a their WMS in 2004.

Kamila Pichrtov, IT and Logistics Manager, says, Introduction Why do and ROI analysis? "Thanks to Accellos, we really have a detailed Many businesses incorrectly assume that a WMS is only affordable to the huge multi-billion dollar corporations. That cost of implementing and man- overview of the wareaging a WMS outweighs both the immediate short term benefits as well as house. We can easily the long term benefits that could be gained. The impact is different for each trace the flow of goods and every business and an assessment must be done. Most who go through an analysis are surprised by the results and how fast a WMS pays for itself. and to respond faster to the requirements of our clients." What needs to be considered?The impact that a WMS has on a business greatly varies. Each business is unique in the way that they manage the flow of orders and work throughout their particular warehouse(s). What is an important issue to one business is a minor issue to the next. To stimulate some thoughts about analyzing your businesses ROI lets ask ourselves why WMS. Here are some numbers commonly known by companies using a WMS today.

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There are four main impact areas to consider when you are looking to cost justify a WMS.

Inventory Operational costs Customer Satisfaction Efficiencies

InventoryA properly implemented WMS can reduce your inventory carrying cost by as much as 27%. By providing you with a real time look at your inventory the accuracy of the inventory can be improved by 20% or more. Implemented correctly a WMS can totally eliminate the need for you to do any physical inventories. Cycle counts would become the norm. What would that save you in labor and down time?The J. Walter Company Ltd. (Walter) first opened its doors as an importer and distributor of industrial utilities in 1952KEY BENEFITSSupported 100 per cent order volume growth with same number of staff. Order turn around speed increased by 25 per cent. Picking accuracy increased by 25 per cent."The efficiency and productivity gains we have realized with Accellos One Warehouse have been so great that we have been able to increase warehouse output to 200 orders per day, filled by 10 warehouse employees," says Jeannot. "Without the system we had needed 15 employees just to fill 100 orders per day." "With this system, we have gained the type of control we could only dream of previously," says Jeannot. "The supervisor knows exactly whats happening on every floor. Its like having an extra set of eyes."

Operational CostsLets consider for a minute your warehouse labor costs. Lets say for example you employ 12 people in your warehouse that pick, pack, receive, put-away ship, check orders, clean up etc. you get the picture. Lets assume for a minute that the average pay for these folks is 28,000 annually with a 35% burden. And if they never work overtime which we all now is not a reality the operational labor cost just for the warehouse annually is $453,600. a 35% reduction in operating expenses are typically realized by warehouses using a WMS. That is $158,760 and we did not even consider the savings on equipment, repairs or clerical staff which can also be significant.

Customer SatisfactionWhat does a mistake cost? Statistically, a good data entry person makes 1 error every 300 keystrokes. If you introduce RF technologies (yes, you really need a WMS to handle the data) the number of errors drop to 1 in 3 million. How many people enter data an check and recheck for errors in your business today? And still many errors occur. Your customer ends up with the wrong items, with missing items or the wrong amounts. It is not uncommon for a warehouse operation to be 94.9% accurate in their shipments. Experts tell us that an order error that is shipped out costs on average $200.00 to fix. That means that a warehouse shipping out only 200 orders a week makes 10 errors. And that costs the business $104,000 not to mention the cost of customer dissatisfaction. A WMS can reduce that number drastically by lowing the error rate to .1%

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EfficienciesThe growth of the business is vitally important to every business owner, CEO, president or GM. Getting the most out of your employees, equipment, vendors, shipping partners and business systems is paramount for the healthy sustained growth needed to survive in our every changing economic environment. Becoming efficient in your business practices will add tremendously to your ability to grow. A WMS system can and will improve the efficiency The Del-Nat Tire Corporaof your operation. It impacts all warehouse functions, clerical activities as it tion implemented their pertains to sales orders, purchase orders, invoicing, maintenance on equipWMS in the fall of 2002 goment, inventory accuracy, shipping costs and so much more. How fast ing from a home grown would your revenue grow if you increased your sales orders by 20% without manual system to a fully increasing your staff or inventory. What increases in cash flow would you automated warehouse. see if you could invoice faster. What impact would it have on your bottom line if you could reduce your overhead 5% or your inventory levels just a KEY BENEFITS little.90 % increase in inventory control 35 % increase in order fulfillment speed Significant productivity gains Significant increase in locating product in the warehouse Daily Process now takes the same worker 6 hours versus 10 with the previous paper based system

What you need to arm yourself with.A warehouse management system cost justification must include both tangible and intangible benefits. You will need to see what the impact is on your revenue by comparing the total cost of ownership to the hard saving you should realistically expect.

What are the Tangible Benefits:

"Working with Accellos, we have cut operations down to two shifts, says Tosco. "The system has created a great safety zone for us, too. We now know that, should we experience a spike in demand, we can bring in an extra shift to help us service customers. This is something we could not have done without the efficiency gains that Accellos helped us realize."

Reduced warehouse labor costs Reduced clerical labor costs Reduced overtime costs Eliminated costs of physical inventories Lower shipping/freight costs Lower costs to rectify errors Reduced equipment costs

What are the Intangible Benefits:

Fewer shipping errors Accurate inventory Faster fulfillment New capabilities/services Better control Happier customers

The bottom line is this; purchasing and implementing a WMS in your business can be a substantial cost. If the return on this investment in your business is not something you can measure then perhaps you need to focus on other things first. But a well implemented WMS can begin to save you money in many areas of your business immediately.

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What may trigger a warehouse investment?

Accuracy problems becoming a crisis Inventory is out of control Space issues is becoming a problem A new business opportunity New customer requirements New systems or expectations are installed New management Out of control shipping costs and compliance fines

Just to stay competitive is not one normally heard but maybe the biggest reason of all!

Accellos OneFormally Radio Beacon, is a leader in the warehouse management software Industry. From a simple system called Collect WMS that is designed for a small business that wants to replace their current paper and manual system through many warehouse based software products that includes a sophisticated traffic management system to the Accellos one Fulfill WMS that features all the functionality needed to run a fast paced high volume operation Accellos One is the choice of thousands of wholesale distributors and manufacturers alike have made to help them become more efficient, productive and prosperous.

iCepts Technology GroupA Pennsylvania based company, iCepts has been serving the needs of wholesale distribution and manufacturing companies for over 30 years. With over 300 satisfied customers, iCepts continues to provide top notch support and services providing programming services, hardware sales and support, as well as various business software solutions. As a certified solutions partner with Accellos One iCepts is uniquely positioned to satisfy the needs of any company seeking to add WMS to their business. Our goal with this whitepaper is to give you enough information to take the next step and allow us to provide you with a warehouse analysis . It could not be easier to begin your journey; call us at 717-704-1000 or visit our website at www.icepts.com and go to our solutions for warehouse management and then choose free ROI analysis and sign up. There is absolutely no obligation. So, Lets get started, Call Tim Crouser 1-717-704-1000 or visit our website www.icepts.com and click on the link for the free no obligation ROI analysis


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