As supply chains continue to get more automated to streamline inventory, through the use of technology and utilizing best practices in operations, accuracy naturally beings to improve. However, not every warehouse is automated and for various reason, If the physical inventory “on the books” and the physical inventory in a warehouse do not match, the situation is often chaotic. For example, when a picker goes to retrieve a part and it is not there (or not enough is there), a series of manual checks and back tracking must be completed to fix the problem and get the order out the door. The importance of warehouse inventory accuracy cannot be underestimated when you consider that your inventory could be the largest asset to a company. Inaccurate inventory record accuracy results in having wide impact on other system and areas in warehousing including:
- Poor buying practices and excess safety stock associated to buyers lack of confidence in record accuracy.
- Delays in order fulfillment associated to lost or misplaced product.
- Lost sales due to stock outs and over commitments.
- Costs associated to placing and managing back orders.
- Lower labor productivity associated to searching for lost product.
- Potentially higher freight costs resulting from expediting shipments to customers.
These issues could result in excess inventory, which ties up capital and negatively impacts capacity. The results are higher costs, low productivity and bad customer service. The self-checking nature of advanced warehousing technology such as Warehouse Management Systems or WMS, in addition to a good cycle counting program, ensures inventory accuracy of 99+%. This high level of inventory accuracy is the foundation for a majority of the other benefits realized in using a WMS.
Learn more about Benefits of Warehouse Management Systems
Space management is a big deal! Your warehouse (or vault as I like to refer to it) has only so many square feet. You need to utilize the space to its fullest potential. In part 5 of my series of blogs on the 4 simple ways to pay for a warehouse management system I will discuss how a WMS (warehouse management system) can help you use your space and save you money.
A WMS should improve space usage through improved inventory placement and tracking. Because the WMS gives you a full view of your warehouse and where your items are, which ones are moving and which ones aren’t you can manipulate your stock with ease. Putting the fast items in locations that are readily available for picking and replenishment. You will have full visibility of where empty slots or bins are in order to put products away. You can mix pallets and use pallet license plates to identify with one scan what is stored on the pallet in the slot it is assigned to. This can be a big space saving technique. Here are some other areas where savings can be derived
- Eliminate existing overflow space (this is usually a second location used solely to store items that won’t fit in your main location)
- Reduced transport costs with elimination of overflow space
- Avoid or greatly delay new construction of additional space or move to bigger space
When you can use the space you have more efficiently this allows you to reduce the space used for existing inventory. Because a WMS allows you to reduce your on hand inventory levels this saves you money in carrying costs and purchases.
We had one customer put off the need to build on to their distribution center by nearly 4 years. And when they did it was in order to do more fulfillment work which had a very positive impact on their profits. Warehouse space is expensive so use what you have in the best possible way. A WMS will certainly help you do this.
It a Matter of Time
Over the last 5 posts I have reviewed the 4 simple ways a WMS can be paid for. The time for achieving a return on investment (ROI) of an investment in a warehouse management solution should be very short. Many companies find that the system can pay for itself in as little as 6 to nine months. A good average to plan on is 12 to 18 months. Once you have reached the break even point all the found money flows directly to your bottom line and it can be thousands of dollars each month. What could you do to grow your business with an extra 5 or 10 or 20,000 dollars each and every month.
Wouldn’t You Like to Know
As you can see a warehouse management solution reduces labor costs, improves space utilization and reduces inventory cost. The big question to ask yourself is “By how much”. Each business is different, you should investigate how a WMS would fit into you business. We recommend that you work with a company with a great deal of experience in how a WMS works and how a warehouse operations functions. We suggest engaging with a organization that will collect, compile and total all the information and provide you with a sound useful and believable ROI. Once you have done this the decision to purchase and implement a WMS should be very clear.
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This is part 3 of my 5 part series on the four simple ways to pay for a warehouse management system. In the first part I listed the four ways and outlined each one. In part two I covered how better control and accuracy of the inventory can save money and help pay for a WMS. In part three I will discuss what is arguably your most important asset, your employees.
Here are a few points for you to consider; effectively managing labor costs in most businesses is difficult. Labor costs account for a huge portion of your cost of doing business. Arguably your staff in the warehouse can/will make or break your business.
Reducing or reallocating labor is the primary driver for finding the money to pay for a warehouse management solution. A properly implemented WMS like Accellos One Warehouse can reduce your labor needs, help you reallocate staff and or keep you from needing to bring on more staff to meet growing sales or seasonal fluctuations. More people mean more problems most of the time. There is a long list of labor areas that are strongly impacted by the implementation and use of best practices while deploying a WMS.
From the moment product hits your receiving dock until the invoice is sent for the shipped out items people are involved. By using a WMS you increase the efficiency and accuracy of the work they do while eliminating the mistakes they will make. A best of breed WMS should provide useful labor reports that can help you determine who your best people are and who needs help. When the WMS is integrated tightly to your ERP/accounting/business management software you can eliminate the costly clerical work. This allows the people doing this manual data entry to be re-positioned into areas that will help the company make money not just spend it. Another plus here is the accuracy factor a WMS provides. You can also speed up the invoices process which gets you paid in a more timely manner.
Here is an overview of areas of improvement;
- Lines picked per shift are improved
- Fill rates increase
- Inventory accuracy is dramatically improved
- Reduced staff and increased work volume
- Higher pick/pack rates
- Reduced shipping department needs
- Shift elimination and or hour reductions
- Transportation cost are optimized
It is not unusual for a WMS to reduce labor costs by 20 to 30 percent. Lets look at a simple example. If your annual labor cost for a staff of 15 warehouse employees including clerical support is $561,000.00 (18.00 per hour loaded, X 2080 per year, X 15 employees) and you save 20% with the implementation of a WMS you would save $112,000.00. That is huge! Of course every business is different but I have seen this kind of savings by many of our customers. Maybe its time you took a good look at what you could save.
My next post will how cover how a WMS saves money by improving shipping accuracy.
Learn more about iCepts Technology Group and the many ways we work daily to help our customers improve their businesses.
In my last post (which I admit was a while ago) I outlined four simple ways a WMS solution can be paid for. In this post I will discuss the first way, reduced stock.
It may seem obvious that if you reduce your stock levels you would probably save money. But how to do this without causing disruption to fill rates and customer service is a key issue. With real-time and online data collection that a WMS like Accellos One Warehouse provides, inventory accuracy can be drastically improved. This leads to a significant improvement in stock location, quantity and lot/serial number accuracy, as well as reduced “buffer” or “safety stock” levels. If you reduce your inventory value while maintaining adequate stock levels to meet order demand you can save a tremendous amount of money and in addition reduce carrying costs as well.
Lets take a look at a simple example. Let’s say you carry 5,000,000 dollars of inventory. And you find a way to reduce that by 4% to 6% Industry average range when implementing a WMS) you could save $200,00 to $300,000. Carrying cost range from 15% to 25% so if yours is say 20% you will pocket $40,000 to $60,000 dollars. This will go a very long way in helping you invest in a system that will produce for you these kind of results.
In my next post I will discuss how reducing or reallocating labor will help you pay for a WMS solution. stay tuned!!
I am astonished on a weekly basis by the number of businesses I encounter that are still managing their warehouse operation with paper and pencil. In most of these companies I see well thought out processes to handle the many functions and activities in the warehouse. And while these processes do work and the products manage to get out the door, they are holding back the business from making higher profits. Why? Because they are extremely inefficient and inefficiency robs the company of hard earned revenue.
For companies that are in warehousing, distribution or manufacturing it is time to retire the pencil and paper and move into the 21st century. Today, with profit margins being razor thin and customers looking for the very best prices and added services you need to be as efficient and productive as possible. Your warehouse has to be profitable. No longer can you subscribe to the notion that if the products get shipped out then all is well. It is time to automate as many processes as possible.
Its starts with barcoding and with automating the receiving, put-away, replenishment picking and shipping functions by moving to an electronic warehouse management system. WMS solutions are no longer just for the big guns in the 3PL, wholesale distribution or manufacturing business segments. It is time for small and mid sized companies to adopt this technology. Frankly your customers demand it. It is my opinion (backed up by a plethora of industry statistics from the Aberdeen Group, Gartner and Supply Chain Management to name a few) that those that do not step up their game will be left behind. They will wonder where their customers have gone and why they are losing money.
I said earlier it starts with the barcode because the essence of a WMS is tracking very item in the warehouse and every task performed by scanning the barcode that is on nearly every product produced today. And should you actually have products without a barcode you can create one. In your warehouse you add barcodes to every storage location where product could be stored. The combination of scanning the product and the location of that product begins to create an efficiency and accuracy not possible in a paper and pencil, manually operated warehouse.
So take those well thought out processes mentioned earlier that you have been operating with and automate them through the use of a warehouse management system that best fits your companies needs and watch your profits rise. Small percentage gains in efficiency, accuracy and productive will add up to a significant return on investment.
To read more on optimizing ROI in the warehouse click here.
To Read a recent case study on how one company has improved their operation through the use of a WMS solution click here
Not all warehouse management solutions are created equal, the right WMS saves you time and money and ultimately increases your customers’ satisfaction. The key to choosing the right WMS is, will it help in maximizing customer service and satisfaction. A Best in Breed WMS will provide a spike in customer service, leading to greater customer satisfaction and increased profitability. Not having a WMS or one that is not meeting your changing needs means constant struggles to keep a stable customer base.
So, what should a best in breed WMS offer and what should you look for? Here is a list of things to look for.
- Maximum Functionality; will the WMS streamline operations and provide improved productivity Read more
- Ease of Use; if the WMS is easy for the warehouse staff to learn and use they will not look for ways to not use it or find work-arounds.
- Transaction Management; You want the WMS to track everything from the moment product hits your receiving dock until it is shipped out the door. And you want to be able to get easy instant reports on everything that moves and who is moving it in the warehouse.
- Flexibility; a good WMS will be able to grow with you and be able to meet new and changing requirements. Be sure to review what the plan is for future upgrades. Make sure the WMS can interface with today’s well known ERP solutions. One day you may want or need to move to a new ERP and not want start over with your warehouse management system. This is important.
- Useful Reports; data is important. Review the way the WMS provides that data to you. Are their easy to access reports? Does it provide a way to easily create your own ad-hoc reports? Does it have a business intelligence capability?
- ROI; this seems to be a horse that gets ridden too much. But, ROI for a WMS can easily be established and should be investigated and analyzed. Good WMS solutions can provide solid, real results from existing customers. Read more about ROI.
- Proven Track Record; a good WMS provider should be able to provide you with a viable list of references that are in the same or similar industry as you. If possible go for a tour of a business using the WMS and if possible one that in seamlessly integrated to the same ERP solution. Make a list of questions and get answers on the points I have listed.
The right WMS will save you time and money and ultimately increases your customers’ satisfaction and profits. The difference between purchasing the right WMS and the wrong WMS is simply a matter of knowing which questions to ask.
Read more on how a warehouse operates using a best in breed WMS
Implementing a warehouse management system is one of the biggest “bang for your buck” things a warehousing or distribution company can do for the business. Although I only list four in the post there are many other ways a WMS can pay for itself. These four are simple ideas, however many operations choose to continue running their warehouses with pen and paper even though their most successful competitors have made the investment done the work and are now reaping the rewards.
1. REDUCE STOCK. This may seem pretty obvious but many companies carry to much inventory in order to meet customer demand. This is caused by not knowing how much really is in the warehouse or where it is. Nor do they have an accurate idea of how fast they are turning over their products. With real-time data collection inventory accuracy will improve dramatically. This leads to improved item location, quantity etc. etc.
2. REDUCE OR RELOCATE LABOR. Overhead is costly. A WMS will help you see what work is being done, how fast and accurately it is happening and who are your stars. So much more will get done when you throw away the paper and pencil and use real time information to receive put-away replenish pick and ship your products.
3. IMPROVE SHIPPING ACCURACY. It is not uncommon to see a company using paper and pencil technology to have a high error rates on the orders they ship out. Even a company that boats 98% accuracy is paying a lot for that 2% error rate. Not just in the hard dollars it costs to fix the problem but also and potentially more hurtful in customer dissatisfaction. A warehouse management system is design to eliminate costly shipping errors and help you improve customer satisfaction and even obtain new customers..
4. SPACE UTILIZATION. A WMS will allow you to use the warehouse space you have more efficiently by helping you store your product better. Because you can see where all your product is and you can better decide how to use your racks and floor space. Wasted space and empty racks are used properly keeping you from having to add-on which saves thousands of dollars.
The time for achieving a return on investment (ROI) in a warehouse management system should be relatively short. Many companies find that the system can pay for itself in 6 to 9 months however 12 to 18 is a good rule of thumb.
So consider putting done the paper and pencil for a minute and find a company that will work with you to analyze your particular situation and see if it makes sense for your company to consider a warehouse management solution.
Download our complete whitepaper on <a href=”http://www.warehouse-management-systems-us.com/wp-content/uploads/2013/06/4SimpleWaysToPayForWMS-1.pdf” title=”4 Simple ways white paper”>4 Simple Ways to Pay For A Warehouse Management System </a>
Visit our website for more information on WMS solutions http://www.warehouse-management-systems-us.com/
I recently read a discussion board on LinkedIn that asked the question, what is your #1 problem in managing your warehouse? Answers I saw included;
- Aligning staff with work (labor management)
- Irregular inbound shipments & deliveries (receiving)
- Inventory mistakes (inventory management)
- Human errors (picking, put-away replenishment)
- Quality of workforce (employee accountability and productivity)
- Late and incomplete deliveries of products (shipping mistakes)
What I thought was most interesting about all the issues was these are the exact problems that a best in breed warehouse management system is designed to address and eliminate. The creation of a more efficient warehouse operation is the ultimate goal.
I have heard from many operations and warehouse managers that the fear they have is that all the processes that have been created to run their manual, paper driven warehouse will be tossed out when a WMS is introduced. This is not the case nor does a WMS just magically create processes for handling the work done in the warehouse. The goal in buying and implementing a WMS is to take the good processes already in place and make them more efficient, reshape the ones that are not as helpful and drop the ones that are causing profits to leak out of your operation.
If you compare the return that a WMS can give you against the investment you would make in purchasing and implementing a WMS solution you will see why successful, growing distribution companies are investing in this technology.
Read more on how a WMS operates inside a warehouse.
There is a lot of talk and so much written about the many ways a warehouse management system can help a warehouse or distribution center be more efficient. It is also true that a WMS can help a company gain better more accurate control of their inventory. The number of ways a WMS can help a company save money are quite numerous and I have addressed many of them in previous posts. One area that is overlooked quite often when reviewing the cost savings a WMS can provide has to do with the environment. Lets discuss the green savings a WMS will provide.
PAPER & INK
In most cases when a WMS is implemented the amount of paper used by the warehouse is reduced significantly. Think about it there is no longer a need to print;
- PO’s to receive products
- Reports to do cycle counts or physical inventories (really the need for Physical inventory disappears but I digress)
- Pick tickets
- Replenishment or stock move reports
Your particular operation may produce special needs reports as well. By uses the RF handhelds this data is transmitted electronically to and from the WMS and in and out of the ERP solution that the WMS is tied to. Paper use is virtually eliminated. Less paper means more trees are saved from the axe. Your helping to save the environment and oh by the way you are also saving a wad of money.
Then there’s the actual printing aspect. What goes on the paper, ink. Where does most ink come from, that’s right oil. Then you have the power needed to run the printers. This adds up to more savings for the environment and for your bottom line.
Most warehouses or DC’s use a few or many forklifts. Think about all the travelling these things do in a days time. By implementing a WMS you can reduce the travel time of your powered equipment substantially. This saves both the energy usage and cost associated with the use and also reduces the pollutants emitted by these machines. Again both the environment and the business win when these things are reduced.
I have listed a few things in this post where a WMS can help your operation become more environmentally sound. I’m sure with a little more thought many other areas of savings can be revealed. One more that comes to my mind is paper waste removal and how it effects our landfills and the related costs to our environment and the bottom line.
Click here For more information on how a WMS can help a company be more profitable.