| Tangible benefits of Warehouse Management Systems |
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New value-based, integrated WMS platforms bring tangible business value to mid-size organizations
GEORGE THIOPOULOS Ph.D.
An outline of potential benefits for ROI decisions
about WMS in mid market business
HOW TO JUSTIFY WMS TO YOUR CFO
With the economy being as tough as it is and with budgets being squeezed, WMS remains one of the best places to spend IT money because of its many measurable, and clearly tangible ROI elements. The timeframe for payback we've found is typically 12 to 18 months, but savings can be achieved in as little as six months or as much as 2.5 years depending on how much money and effort is invested. Payback timeframe varies broadly because no two companies have the same starting point from what they're doing from a system, process or business organization perspective.
So if we want to describe the benefits associated with the use of QGUAR we can say that we expect to obtain a third of savings from labor, another third from freeing up excess inventory and the last but not least from other factors including improved customer satisfaction, taking better advantage of sales in your marketplace etc. as we will see below:
More specifically you can expect:
- Boosting service, being more accurate and shipping on-time improves the competitive advantage.
- QGUAR can be used to consolidate several warehouses into one DOMAIN for unified and better use of storage space and reduced safety stock, thereby reducing warehouse cost.
- Food related LSP’s and producers are using QGUAR to prevent the wrong product being added to production runs, reducing scrap and recalls.
- Integrating AS/RS and warehouse software eliminates the typical delays caused by workers and paperwork. Add that up over the course of a day, a week and a year, and the productivity savings are clear.
- QGUAR allows the benchmarking of warehouse performance across multiple warehouses.
- The cost of investment is lessened by implementing internal best practices by comparing all your warehouses’ productivity in specific areas.
- If a worker leaves a workstation, QGUAR can reroute tasks intelligently to distribute the workload over remaining workstations rather than let work pile up at an empty station.
- Manpower is automatically reduced when inventory levels are decreased and time is taken out of searching for product. By eliminating dual-entry of data, labor is further decreased.
- Most workers in a warehouse spend 30 percent of their time looking for things that QGUAR can put at their fingertips.
- In addition, credits and returns drop precipitously when error rates improve.
- QGUAR shows customers that you have validation throughout your processes. That means that a lot of claims that are just bogus go away since customers know you have the transaction data for tracking orders all the way back — maybe half of the claims will disappear.
- WMS can be justified by improving equipment utilization, including carousels, pick-to-light and RF-controlled carts. Rather than cutting manpower, we see better ROI through improved equipment utilization.
- Some people put labor productivity at the top of the list, but the big benefits (hard cash that is) come from having happy customers and reduced inventory. You have to consider return on asset increase from WMS, which means reducing the cost of funds tied up in excess inventory.
- Calculating the cost per error is important for ROI. Error rates will decrease substantially, based on past installations.
- We see from 10 percent to 30 percent increase in labor productivity because of reduced deadheading. If you’re depending on lift trucks to move your material, WMS can increase the life of trucks by 25 percent due to less deadheading.
- The ability to interleave work queues alone can increase productivity by 30 percent to 40 percent. A lot of companies stating they have 98 percent picking accuracy in fact employ many workers checking the orders. Manual double-checking isn’t necessary with the proper WMS, leading to savings.
- More recently ROI calculations are driven by transportation savings enabled by WMS. QGUAR can provide wave planning and order fulfillment process tightly coupled with Transportation Management System to allow for zone skipping and more effective use of transportation carriers.
- QGUAR allows the 3PL to be more efficient with activity billing. This is another module that lets 3PLs do a more accurate job of accounting for what they've done for each customer. The modules detail exactly how long products have been stored in the warehouse and what the charge for that is.
- QGUAR provides visibility of Advanced Shipping Notices to drive receiving operations. QGUAR allows workload planning and scheduling so the right number of workers are assigned, permits priority order handling and improved inventory allocation which mean reduced purchases, better hub transfers and increased inventory turns.
- After installation of QGUAR (when compared to paper/pencil process) we can expect 20 percent reduction in split-case picking errors. Receiving time reduction by 20 percent. Expect 15 percent improvement in efficiency for the warehouse scheduler/dispatcher. We can add 60 percent cut in paper costs when used with radio frequency data communication network.
- Using QGUAR and considering the increased warehouse flexibility and productivity, we can expect improvements to the statistics for space utilization and warehouse throughput and stock rotation.
IN SUMMARY
• Tangible benefits: reduced backorders and safety stock, reduced freight costs and missed schedules, the elimination of information errors and reduced information lead time, real-time information and increased data accuracy.
• Strategic benefits: Improved customer service and better total quality, reduced lost sales and the ability to deliver orders Just-In-Time and to perform automatic customer replenishment.
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Articol disponibil in limbile: RO, EN
Data adaugarii: 5 Oct 2009
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