Where Is the ROI in a WMS Implementation?
Assessing the return on investment (ROI) of a warehouse management system (WMS) implementation is an essential step in building the business case for investment. According to Chris Barnes, solution consultant for the Accellos platform, Warehouse Managers face many challenges in understanding the ROI in a WMS implementation. Calculating the ROI of a WMS implementation requires an understanding of its tangible and intangible benefits, as well as knowing whether to use each benefit as a critical focus in the business case. Let’s take a closer look at where Warehouse Managers may find the highest ROI in a WMS implementation.
Warehouse Managers and Supply Chain Executives Often View WMS Implementation as a Cost of Doing Business
Part of the problem and challenge in understanding the ROI in a WMS implementation is simple. Warehouse Managers and supply chain Executives often view an investment in a WMS as a typical cost of doing business or perhaps a capital expenditure, but that was not always the case. When WMS technology first emerged in the mid-1990s, managers and executives saw a WMS as a way to gain a competitive advantage. As true as it was in the 1990s for today’s complex supply chain, utilizing a WMS is nearly a no-brainer to those operating with 5000 or more stock keeping units (SKUs) to remain competitive.
Furthermore, utilizing a WMS may mean staying in business as the Amazon Effect is putting considerable pressure on companies to implement an omnichannel supply chain strategy. Without a modern WMS, Warehouse Managers and supply chain executives will find themselves unable to keep up, reduce costs, and gain the efficiency necessary to keep and retain customers. Without a modern, enterprise-capable WMS, businesses with a complex supply chain and goals of going omnichannel may not stay in business much longer. It is clear; a WMS is not merely a capital expenditure, but nearly a requirement. As a result, implementing a new WMS in today’s world opens the door to a host of tangible and intangible benefits.
ROI in a WMS Implementation Occurs Thanks to These Tangible and Intangible Benefits
The ROI in a WMS implementation offers tangible benefits for the company. Companies using a WMS improve inventory accuracy more than 99.99 percent which has a resounding effect of improvements in customer service levels, reducing labor costs, and more. Picking makes up approximately 50 percent of company labor costs, and the use of a WMS can lower labor costs between 20 and 30 percent. Labor costs are not exclusive to pickers. Improvements in administrative expenses, like the reduced need to manually manage paperwork and upgrade systems, also impacts labor savings.
Predominant, intangible benefits are more difficult to quantify. These include:
- Fewer errors.
- Improved customer service levels.
- Real-time visibility into business analytics.
- Better allocation processes.
- Refinement of procurement strategies.
- Access to new freight shipping strategies, like cross-docking.
- Improved employee satisfaction.
Why Focusing on Tangible Benefits Is Key to Success
Intangible benefits are built on “what-if” scenarios. Depending on your organization, placing a value on intangible benefits, like employee satisfaction is difficult at best. Furthermore, the long-term value of intangible benefits represents an even more significant challenge. Warehouse Managers may be unable to place a value on these areas. As a result, building a business case through analysis of the return on investment relies heavily on the tangible benefits, says Michael Badwi of SC Junction, and in fact, the tangible benefits can be used to increase productivity, free capital, increase sales, lower freight spend, and move the company into the digital age.
Know the ROI for Your Unique Facility Now
Warehouse Managers must understand the ROI in a WMS implementation. Failure to recognize the potential cost savings will result in the continued use of inefficient processes and higher costs for an organization. Essentially, shareholders may refuse to support a new WMS implementation, so the burden of doing more with less in the business that becomes even tighter. Warehouse Managers that do understand the ROI of a WMS can position their organizations to continue competition with Amazon, Target, Walmart, and other major retailers.
Veridian, a Manhattan Associates, HighJump, and JDA warehouse management system implementation company, can help you realize your supply chain success. Fill out the contact information below in order to schedule a consultation call with one of our supply chain professionals.