iCepts Whitepaper on Return on Investment

JUSTIFYING WMS
A Whitepaper on justifying the cost of a warehouse
management system

HOW TO DEAL WITH THE COST OF A WMS

Installing a warehouse management system (WMS) can radically improve Asko, Inc. A wooden
overall business performance giving you the opportunity to truly take control materials whole distribu-
of inventory, improve efficiency and reduce operational costs. This white- tor installed a their WMS
paper will be your guide on how to justify the purchase and implementation in 2004.
of a WMS based on the return investment (ROI). Most who go through a
ROI analysis are surprised to discover just how quickly a WMS pays for it-
self. Kamila Pichrtová, IT and
Logistics Manager, says,
Introduction– Why do and ROI analysis? "Thanks to Accellos, we
really have a detailed
Many businesses incorrectly assume that a WMS is only affordable to the
huge multi-billion dollar corporations. That cost of implementing and man- overview of the ware-
aging a WMS outweighs both the immediate short term benefits as well as house. We can easily
the long term benefits that could be gained. The impact is different for each trace the flow of goods
and every business and an assessment must be done. Most who go through
an analysis are surprised by the results and how fast a WMS pays for itself. and to respond faster to
the requirements of our
clients."
What needs to be considered?
The impact that a WMS has on a business greatly varies. Each business is
unique in the way that they manage the flow of orders and work throughout
their particular warehouse(s). What is an important issue to one business is a
minor issue to the next.

To stimulate some thoughts about analyzing your businesses ROI let’s ask
ourselves “why WMS”. Here are some numbers commonly known by com-
panies using a WMS today.
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JUSTIFYING WMS

There are four main impact areas to consider when

you are looking to cost justify a WMS.
 Inventory
 Operational costs
 Customer Satisfaction
 Efficiencies

Inventory
A properly implemented WMS can reduce your inventory carrying cost by as
much as 27%. By providing you with a real time look at your inventory the The J. Walter Company Ltd.
(Walter) first opened its
accuracy of the inventory can be improved by 20% or more. Implemented doors as an importer and
correctly a WMS can totally eliminate the need for you to do any physical distributor of industrial
inventories. Cycle counts would become the norm. What would that save utilities in 1952
you in labor and down time?
KEY BENEFITS
Operational Costs Supported 100 per cent order vol-
Lets consider for a minute your warehouse labor costs. Lets say for example ume growth with same number of
you employ 12 people in your warehouse that pick, pack, receive, put-away staff.
ship, check orders, clean up etc. you get the picture. Lets assume for a min- Order turn around speed increased
ute that the average pay for these folks is 28,000 annually with a 35% bur- by 25 per cent.
den. And if they never work overtime which we all now is not a reality the Picking accuracy increased by 25

operational labor cost just for the warehouse annually is $453,600. a 35% per cent.

reduction in operating expenses are typically realized by warehouses using a

WMS. That is $158,760 and we did not even consider the savings on equip-
ment, repairs or clerical staff which can also be significant.
Customer Satisfaction
What does a mistake cost? Statistically, a good data entry person makes 1
error every 300 keystrokes. If you introduce RF technologies (yes, you
really need a WMS to handle the data) the number of errors drop to 1 in 3
million. How many people enter data an check and recheck for errors in
your business today? And still many errors occur. Your customer ends up
"The efficiency and productivity gains we
have realized with Accellos One Warehouse
have been so great that we have been able
to increase warehouse output to 200 orders
per day, filled by 10 warehouse employ-
ees," says Jeannot. "Without the system we
had needed 15 employees just to fill 100
orders per day."
"With this system, we have gained the type

with the wrong items, with missing items or the wrong amounts. It is not of control we could only dream of previ-

uncommon for a warehouse operation to be 94.9% accurate in their ship- ously," says Jeannot. "The supervisor

ments. Experts tell us that an order error that is shipped out costs on average knows exactly what’s happening on every

$200.00 to fix. That means that a warehouse shipping out only 200 orders a floor. It’s like having an extra set of eyes."

week makes 10 errors. And that costs the business $104,000 not to mention
the cost of customer dissatisfaction. A WMS can reduce that number drasti-
cally by lowing the error rate to .1%
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JUSTIFYING WMS

Efficiencies
The growth of the business is vitally important to every business owner,
CEO, president or GM. Getting the most out of your employees, equipment,
vendors, shipping partners and business systems is paramount for the healthy
sustained growth needed to survive in our every changing economic environ-
ment. Becoming efficient in your business practices will add tremendously
to your ability to grow. A WMS system can and will improve the efficiency
The Del-Nat Tire Corpora-
of your operation. It impacts all warehouse functions, clerical activities as it
tion implemented their
pertains to sales orders, purchase orders, invoicing, maintenance on equip-
WMS in the fall of 2002 go-
ment, inventory accuracy, shipping costs and so much more. How fast
ing from a home grown would your revenue grow if you increased your sales orders by 20% without
manual system to a fully increasing your staff or inventory. What increases in cash flow would you
automated warehouse. see if you could invoice faster. What impact would it have on your bottom
line if you could reduce your overhead 5% or your inventory levels just a
KEY BENEFITS
little.
90 % increase in inventory control
35 % increase in order fulfillment
speed What you need to arm yourself with.
Significant productivity gains A warehouse management system cost justification must include both tangi-
Significant increase in locating ble and intangible benefits. You will need to see what the impact is on your
product in the warehouse revenue by comparing the total cost of ownership to the hard saving you
Daily Process now takes the same should realistically expect.
worker 6 hours versus 10 with the
previous paper based system
What are the Tangible Benefits:
 Reduced warehouse labor costs
"Working with Accellos, we  Reduced clerical labor costs
have cut operations down to  Reduced overtime costs
two shifts, says Tosco. "The  Eliminated costs of physical inventories
system has created a great  Lower shipping/freight costs
safety zone for us, too. We  Lower costs to rectify errors
now know that, should we ex-  Reduced equipment costs
perience a spike in demand,
we can bring in an extra shift What are the Intangible Benefits:
to help us service customers.  Fewer shipping errors
This is something we could not  Accurate inventory
have done without the effi-  Faster fulfillment
ciency gains that Accellos  New capabilities/services
helped us realize."  Better control
 Happier customers

The bottom line is this; purchasing and implementing a WMS in your busi-
ness can be a substantial cost. If the return on this investment in your busi-
ness is not something you can measure then perhaps you need to focus on
other things first. But a well implemented WMS can begin to save you
money in many areas of your business immediately.
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JUSTIFYING WMS

What may trigger a warehouse investment?

 Accuracy problems becoming a crisis
 Inventory is out of control
 Space issues is becoming a problem
 A new business opportunity
 New customer requirements
 New systems or expectations are installed
 New management
 Out of control shipping costs and compliance fines

Just to stay competitive is not one normally heard but maybe the biggest rea-
son of all!

Accellos One
Formally Radio Beacon, is a leader in the warehouse management software
Industry. From a simple system called Collect WMS that is designed for a
small business that wants to replace their current paper and manual system
through many warehouse based software products that includes a sophisti-
cated traffic management system to the Accellos one Fulfill WMS that fea-
tures all the functionality needed to run a fast paced high volume operation
Accellos One is the choice of thousands of wholesale distributors and manu-
facturers alike have made to help them become more efficient, productive
and prosperous.

iCepts Technology Group

A Pennsylvania based company, iCepts has been serving the needs of whole-
sale distribution and manufacturing companies for over 30 years. With over
300 satisfied customers, iCepts continues to provide top notch support and
services providing programming services, hardware sales and support, as
well as various business software solutions. As a certified solutions partner
with Accellos One iCepts is uniquely positioned to satisfy the needs of any
company seeking to add WMS to their business.

Our goal with this whitepaper is to give you enough information to take the
next step and allow us to provide you with a warehouse analysis . It could
not be easier to begin your journey; call us at 717-704-1000 or visit our web-
site at www.icepts.com and go to our solutions for warehouse management
and then choose “free ROI analysis and sign up. There is absolutely no obli-
gation.

So, Lets get started, Call Tim Crouser 1-717-704-1000 or visit our website
www.icepts.com
and click on the link for the free no obligation ROI analysis