Identifying and understanding the key drivers behind the ROI for a WMS can help you ensure you have the necessary information to ensure you can cost justify your decision, the payback period and the benefit
Recognising the need for a WMS is a straightforward exercise for many warehouse managers. Inaccurate inventories, customer service issues and pressures to continually reduce costs make the investment decision almost intuitive
Investments are rarely made based on intuition, so the benefits of a WMS can, fortunately, be identified and quantified to provide an accurate basis for justification.
For example, you may find the following problems in each of the above areas:
We recommend that the advice of an experienced facilitator be leveraged to assist in clearly defining, measuring and creating a baseline issues list.
The warehouse manager will be best suited to present the baseline list of challenges. However, to ensure that all problems have been identified, other stakeholders in the warehousing process should be asked for their input.
Once warehousing problems have been documented and benchmarked, the next step is to estimate the costs associated with each. This step is critical to understanding the severity of any problems
A variety of equations and industry standards can be used to quickly estimate the costs with examples of typical costs being listed in simple ROI table.
The desire to improve inventory accuracy is another prime reason to invest in a WMS.
Inventory reduction and increased customer service expectations have forced manufacturers, wholesalers, and retailers to re-think traditional inventory management philosophies.
Best-in-class service levels must be achieved within a competitive cost and service structure.
The savings associated with the reduction of inventory levels may themselves justify investment in a WMS. Many companies have reported reducing inventory levels by as much as 30%.
This level of reduction greatly affects carrying costs, which typically equate to 25% to 35% of the cost of inventory.
What savings should be expected by implementing a WMS?
At this point in the process, it will be reasonably clear how much money and time the right WMS will be able to save. The next step is to determine how much will have to be spent to successfully implement the WMS.
In addition to the total cost of implementation, there are other important criteria that should be considered when selecting a vendor including track record, size, investment into R&D, financial stability, and the level of trust and confidence between vendor and customer.