WMS Economics
By Brian Lee, Director of Advanced Technology
Best-of-Breed Warehouse Management Software has come a long way since the early nineties and the Exacta Synchronize WMS Suite is at the head of the pack. It offers state-of-the-art features like event management alerts and business analytics; it can operate on a wide variety of platforms and communicate in real-time or near real-time with almost any Enterprise Resource Panning (ERP) System; it can allow your folks to make use of the latest scanning and interface technologies. You can drive out costs by making warehouse and distribution processes more efficient and increase revenues by making them more effective. Finally, you can take advantage of technologies that allow your work force to execute faster and more accurately.
How many benefits can you identify? Can you quantify some or all of them? What costs will be associated with the implementation of new software? Which will be one-time costs and which will be recurring? Will the benefits not only outweigh the costs, but outweigh them enough to make the forecasted return on your company’s investment in warehouse management software more attractive than the figures of merit associated with other projects vying for capital dollars?
Welcome to the wonderful world of WMS Economics! This is a big subject, so I decided to break it up and discuss it over the course of a series of articles that will be published in the ASAP Newsletter. If you miss an issue of the newsletter, don’t worry. Back issues will be available at the new and improved ASAP Automation website!
Potential Returns - Can You Give Me a “Ball-Park” Estimate?
Yes. According to Marc Wulfraat, a partner at KOM International, the successful installation and use of today’s Warehouse Management Software can reduce warehouse (or DC) operating expenses by 10-35%. Warehouse (or DC) operating expenses (as a percent of sales) vary from industry to industry. According to Herb Davis (Council of Logistics Management), they hover around 2-3%. If you combine these two numbers, you’ll see that the typical firm enjoys a 0.2% to 1% increase in profits before taxes (as a percent of sales). This, by the way, DOES NOT include potential “top line” (i.e. revenue) benefits. Depending on your situation, these benefits could double or triple the increase in profits before tax. Interested?
The Sources of “Top Line” and “Bottom Line” Improvements
I thought it best to close by providing you with a general overview of the benefit categories (in red) we’ll discuss in detail in future issues of the ASAP Newsletter. Benefit categories are certainly not limited to the set included here:
