Infosys-Oracle Blog : TEAR Factors to Gauge ROI of Big Ticket Engagements

Big ticket investments by organizations are in vogue. We are talking of huge investments when organizations embark on such journeys. As discussed earlier, these investments make economic sense only when the ROI crosses the hurdle rate. Let us refresh our memories by recapitulating that it is important to understand the initiative's probability of success to achieve the ROI that is greater than the Hurdle Rate. Hence ROI as a number in isolation has not got a meaning unless it is associated with the chances of it being achieved. These kinds of analyses can help better understand the risk-reward trade-off of potential investment.

Keeping, Enhancing or Replacing a WMS/WCS is also one such big ticket engagements. Organizations need a WMS or a WCS when they can justify the ROI such as manpower savings, space, utilization, product turns and customer sales based on the TEAR factors. Well what are these TEAR factors? Before we get into understanding these factors, let us quickly get to know the basics of WCS. I am sure we all are well versed with the WMS but to some of us WCS may be an unknown territory.

A WMS focuses on inventory from the time it arrives at the receiving dock to the time it leaves from the shipping dock. This means that a WMS tracks the inventory movement within the four walls of the warehouse. A WCS schedules, monitors and directs movement of inventory and tends to include some kind of automated equipment control. By definition WCS is an execution system that orchestrates the activity flow within a warehouses. The WCS coordinates material handling sub-systems such as conveyor belts, carousels, and sorters. At each decision point, the WCS determine the most efficient product flow and transmit directives to the equipment controllers to achieve the desired result. Warehouses with automated material-handling hardware often have a warehouse control system (WCS) that integrates with a warehouse management system (WMS) to provide management with a comprehensive view of the warehouse. The WMS is well integrated with the ERP system to ensure that there is seamless information interchanged between the two systems.

Let us now get back to understanding the TEAR factors to just the ROI in such big ticket engagements.

Training: The WMS/WCS should be configured and designed in such a way that it crosses the demographic boundary. The screens should be easy to navigate and use and only relevant information is displayed for each user based on his role. It is important to understand that a warehouse comprises operators of all age groups, therefore it important to have systems that are user friendly. They should be appealing and not appalling.
Efficiency: The WMS/WCS should be configured and designed in such a way that it enhances the efficiency of operations. This translates to increased pick rates (picks per hour) and fewer user touches per picks. WMS/WCS often replace the batch pick methods with dynamic picking opportunities. This not only enhances the efficiency but also increases the reporting accuracy to the ERP under consideration.
Accuracy: This is vital in terms of fulfilling customer orders. Customers have unique remaining shelf life requirements that WMS/WCS can help achieve. WMS/WCS ensure that FIFO oldest components and oldest lots are picked before newer ones to insure product shelf life and eliminate fragmentation.
Responsiveness: WMS/WCS reduce the amount of manual effort involved in the warehouse. This in turn in turn implies shorted delays. Since the work orders are assigned automatically the instant that they arrive from the ERP, they are picked within minutes instead of longer durations.

Deploying expensive WMS/WCS are strategic decisions for organization and analysis the TEAR factors will help gauge the ROI better.