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.
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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!!
This New Jersey based stocking distributor selected warehousing technology to streamline operations which resulted in
- A near doubling of outbound shipments
- A reduction in labor expenses
- The elimination of paper documentation,
- Plus an increase in both improvements to order accuracy and customer service.
By choosing a scalable and flexible real-time warehouse management system, Accellos One WMS accomplished this through the use of an automated, paper-free process and radio frequency (RF) communications. With these robust technologies, WMS accurately tracks stock into, out of, and within warehouses-streamlining and verifying processes with each movement.
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