HOW TO DEAL WITH THE COST OF A WMS

A Whitepaper on just i fying the cost of a warehouse

management system

JUSTIFYING WMS

iCepts Whitepaper on Return on Investment

Installing 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 white-

paper 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 it-

self.

Introduction– Why do and ROI analysis?

Many businesses incorrectly assume that a WMS is only affordable to the

huge multi-billion dollar corporations. That cost of implementing and man-

aging a WMS outweighs both the immediate short term benefits as well as

the long term benefits that could be gained. The impact is different for each

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.

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 let’s ask

ourselves “why WMS”. Here are some numbers commonly known by com-

panies using a WMS today.

Asko, Inc. A wooden materials whole distribu-tor installed a their WMS in 2004. Kamila Pichrtová, IT and

Logistics Manager, says,

"Thanks to Accellos, we

really have a detailed

overview of the ware-

house. We can easily

trace the flow of goods

and to respond faster to

the requirements of our

clients."

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JUSTIFYING WMS

There are four main impact areas to consider when

you are looking to cost justify a WMS. Inventory

Operational costs

Customer Satisfaction

Efficiencies

Inventory A 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?

Operational Costs Lets 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 min-

ute that the average pay for these folks is 28,000 annually with a 35% bur-

den. 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 equip-

ment, repairs or clerical staff which can also be significant.

Customer Satisfaction What 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 ship-

ments. 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 drasti-

cally by lowing the error rate to .1%

The J. Walter Company Ltd.

(Walter) first opened its

doors as an importer and

distributor of industrial

utilities in 1952

KEY BENEFITS

Supported 100 per cent order vol-

ume 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 employ-

ees," 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 previ-

ously," says Jeannot. "The supervisor

knows exactly what’s happening on every

floor. It’s like having an extra set of eyes."

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JUSTIFYING WMS

Efficiencies The 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 environ-

ment. Becoming efficient in your business practices will add tremendously

to your ability to grow. A WMS system can and will improve the efficiency

of your operation. It impacts all warehouse functions, clerical activities as it

pertains to sales orders, purchase orders, invoicing, maintenance on equip-

ment, inventory accuracy, shipping costs and so much more. How fast

would your revenue grow if you increased your sales orders by 20% without

increasing your staff or inventory. What increases in cash flow would you

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

little.

What you need to arm yourself with. A warehouse management system cost justification must include both tangi-

ble 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: 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 busi-

ness can be a substantial cost. If the return on this investment in your busi-

ness 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.

The Del-Nat Tire Corpora-

tion implemented their

WMS in the fall of 2002 go-

ing from a home grown

manual system to a fully

automated warehouse.

KEY BENEFITS

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

"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 ex-

perience 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 effi-

ciency gains that Accellos

helped us realize."

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JUSTIFYING WMS

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 rea-

son of all!

Accellos One Formally 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 sophisti-

cated traffic management system to the Accellos one Fulfill WMS that fea-

tures all the functionality needed to run a fast paced high volume operation

Accellos One is the choice of thousands of wholesale distributors and manu-

facturers alike have made to help them become more efficient, productive

and prosperous.

iCepts Technology Group A Pennsylvania based company, iCepts has been serving the needs of whole-

sale 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 web-

site 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 obli-

gation.

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