Warehouses are built around numbers — from the facility's square footage, to how many rows of racking it takes to stock the number of stock-keeping units (SKUs), all the way to the amount of orders processed through a facility in a day. This article is designed to take the numbers associated with warehouse management systems you don't see in the marketing brochures or advertisements of WMS vendors and get you thinking before you purchase and begin to implement a warehouse management system (WMS).
If you watch television, you may be familiar with the CBS show "NUMB3RS." Rob Morrow stars as an FBI detective aided by his mathematician brother in solving bank robberies and homicides. The show depicts how the confluences of FBI work and mathematics provide unexpected revelations and answers to the most perplexing criminal questions. Let's take a look at those number junctions in your distribution center.
Less than 30 percent of warehouses are efficient, according to "Benchmarking Warehouse Performance," a study by Georgia Institute of Technology, Atlanta. That probably speaks directly to why you're reading this article. You may have been wondering if a WMS system could make your warehouse more efficient.
Interestingly, about 30 percent of the 600,000 warehouses in the United States have a WMS system installed. As the guy on the television show says, "Hmm…" What are the numbers telling us? Only 30 percent of warehouses are efficient, and 30 percent of warehouses have a WMS system installed. Do you see a correlation?
Those numbers are telling me we can solve "crimes" taking place in 70 percent of warehouses. Although these crimes aren't bank robberies or homicides, they do involve money lost and people getting hurt.
My point is this: There's a lot of information out there on how to make your warehouse more efficient, but what you need to realize is, "It's not what you know that counts, it's what you do with what you know." Many of you already know your warehouse is inefficient, and you're not doing anything about it.
Assuming you are part of the 70 percent that processes orders through an inefficient warehouse, and you are also part of the 70 percent that has not installed a WMS system, let's look at possible reasons you've given for not implementing a WMS.
- Your warehouse is not big enough.
- You don't have enough people or orders to justify such a large investment.
- Your IT staff isn't large enough.
- You are currently searching for a system. (Perhaps you've been researching WMS systems for years when attending trade shows, by reading industry articles and talking with vendors, but you still haven't made a decision and purchased one.)
The reasons are endless, but your real reason is very likely because of the next two numbers.
$100,000 to $500,000
A company will typically invest between $100,000 and $500,000 for software alone, but that software investment represents only a fraction of the overall costs. By the time hardware, training, implementation, revamping the warehouse and consultants fees are added, that number can reach more than $1 million faster than you can say multiplication. Those intangibles will usually reach one to three times the cost of the software. About 60 percent of the overall cost will be tied up trying to integrate the WMS system to the existing enterprise resource planning (ERP) system.
The main reason only 30 percent of all warehouses have a WMS is because only 30 percent have been willing to bite the bullet and make the investment. There are other contributing factors, though.
More than 220 WMS vendors exist. How can anyone make an informed decision and select the correct business partner with so many options? Most companies don't even try; they enlist consultants with an expertise in warehouse management systems to help them make that decision. The ones that don't employ a consultant usually make their decisions based on cost, and then bring in a consultant to help dig them out.