Warehouse Management Systems Direct Labor Savings

Warehouse Management Systems are designed to execute the proper and efficiency flow of inventory along with warehouse procedures to reach a streamlined supply chain.   A large component improvement with this technology is gains in cost as it relates to labor. Labor productivity improvements can range from 20-30%. Labor is generally classified in three areas

  1. Direct,
  2. Indirect and
  3. Administrative.

This article focuses on direct labor savings achieved through Warehouse Management Systems or WMS

It is reasonable to expect up to a 20% improvement in direct labor productivity. Direct labor is better utilized due primarily to a WMS’s ability to provide specific task assignments based from a concise picture of inventory availability, inventory positions, and the overall movement activities to be accomplished. System directed activities minimize operators time spent identifying what actions need to be accomplished and planning the activities once they have been identified. The below key areas of warehouse activity focus on savings reached through WMS software functionality.  The sum total has the potential for dramatic labor cost savings.

Receiving: Generally, labor requirements in receiving stay the same for direct material handling but are eliminated for clerical activities. Efficiency in down-stream warehouse activities depend on the receiving process to capture and record accurate data. At startup, efforts should be made to ensure data integrity.

Once a system has been in use for 6 – 12 months, potential improvements in receiving labor productivity should be reviewed. As an example, you could use a wave receiving process to receive multiple purchase orders simultaneously and see improvement in both receiving labor productivity and dock utilization.

Put-a-way: Activities can be combined with the receiving process to minimize material hand-offs and staging or put-away can be performed as a separate activity to expedite the turn-around of trailers and improve dock utilization. In either case the WMS’s ability to identify appropriate put-a-way locations and direct the operator to the location will minimize an operator’s time spent searching for available storage locations.

Replenishment: In a forward pick/reserve storage environment, wait time for replenishment can be eliminated if replenishment activities can be managed by the WMS. In a system directed environment, forward pick locations are triggered to automatically generate replenishment commands based on inventory threshold levels. Replenishment activities are then performed in advance of pick operators being dispatched. This offers a significant savings potential if the amount of time pick operators spend waiting for material to be replenished can be quantified. Additionally, delays in the order picking process potentially lengthen the overall order delivery cycle time.

Picking: A majority of the labor savings is typically found in order picking which accounts for at least 50% of the labor costs. In general you should be able to practically eliminate time spent searching for lost inventory and improve pick labor productivity.

Picking improvements can be accomplished in several ways: Orders can be grouped to allow picking of multiple orders on one pass through the warehouse. The type of pick process you use is driven by cost, handling characteristics, and order profile.

Being able to match the right pick process to the order profile will result in improvements.  To understand your order profiles , consider analyzing 6 to 12 months’ worth of order history and develop a table or order distribution graph similar to this chart for your operations. Then begin to think about how you can manage to each order type.

Learn more WMS Cost Saving by Downloading the Business Case for Warehouse Management Systems:

Get an Estimate on Warehouse Management Systems


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