WMS ROI - Points to Ponder
Understanding what ROI a WMS can provide before deciding to get one implemented in the warehouse is the foremost exercise that needs to be carried out. You need to look at your current efficiency levels are and set expectations once a WMS is put in place.
Some question that are worth considering:
- Is your stock traceability accurate?
- Are there frequent miss-picks?
- Do you have excess manpower that is not utilized efficiently?
- Is the warehouse space efficiently utilized?
- Is the right Material Handling Equipment(MHE)selected to picking?
- Do you have a well defined inbound and outbound operational rules being followed?
If your answers to these questions are not overwhelming, well then you need to look at how a WMS would bring about increased level of performance in your warehouse.
The first aspect that is most important for a WMS implementation is to have proper discipline followed on each warehousing operation being carried out. This discipline needs to be chalked out based on what your WMS system is capable to offer. You need to set your processes in place to have the WMS provide the desired results, for example, if you carry out random putaway for all items irrespective of the item's characteristics, a WMS would expect you to have putaway rules to be in place first so that you set it up in your WMS to have the items in the right place and achieve maximum utilization of space.
Analyzing the details of each operation that would lead to cost savings would help you in understand on how soon you can achieve your ROI. For example, if currently 1000 pallets are picked in a day and it takes 6000 mins to do so, it means that you are putting in 6 mins to pick per pallet. Such data needs to be collected and analyzed with the new pick rate after the WMS has been implemented. Say, after 6 months, you find that picking rate is now 1000 pallets in 4000 mins, which means that there is now a saving of 2000 mins, which translates to 4 mins per pallet, leading to a 33% saving in time. Since there is a considerable saving in time, your warehouse now has the capacity to service new customers.
In the same way it’s important to look at various operations that take place in the warehouse that have a direct or indirect impact on time and cost and then analyze them to arrive at the overall cost savings.
Once implemented, a WMS would generally achieve its ROI in a year's time, however, it could be much longer if you have complex integration requirements like integration to conveyor systems, pick to light or voice pick systems, sorters, carousels and other host systems like ERP, OMS, TMS etc. ROI depends on how soon your system starts optimizing the warehousing processes, which translates to increased accuracy in inbound and outbound process, maximum productivity and efficiency, leading to increased levels of customer satisfaction. The more customers are pleased with your service, the more continued business you will have with them. This would also mean that you have raised the bar for service levels and are ready to take on new customers as well.