Anyone who has had a home built from the ground up, or who has done extensive remodeling, knows how difficult it can be to decide between keeping costs down by going with the basic offerings or adding to the looks or performance of certain items by upgrading them.
Take the appliances for example. A new home may come with a basic oven, dishwasher and refrigerator, all of which will be perfectly fine. But with a little extra investment you can get a double oven, a quieter dishwasher and a fridge with water and ice in the door. And for a larger investment you can get appliances with so many amazing features they practically do all the work for you.
In the end, it all comes down to what your needs are and how you plan to use them. After all, if you don’t plan to cook much there’s no sense in investing in the high-end oven (unless you’re trying to impress your in-laws).
Organizations with a heavy supply chain component face a similar dilemma. Often they have to choose between using the warehouse management system (WMS) module that is included with their enterprise resource planning (ERP) software or purchasing a more robust, best-of-breed WMS solution.
Here, too, there is no one right answer. It all depends on how your business operates, what your future goals are, and of course what your financial situation is. Less obvious (but often as important) are factors such as the cost of workarounds if your WMS lacks the functionality you need, how easily it integrates into your other systems, whether it will grow and adapt with you as your business changes and the potential impact on customer satisfaction if you make the wrong choice.
Following are eight questions that will walk you through some of the key considerations in order to come to the decision that best fits your organization.
Which company strategy does the WMS need to support? The first step is defining the operational demands and goals the solution must meet. It has to have the ability to influence your key performance indicators (KPIs) in a positive way, improving your business results and driving a higher ROI. Strategic questions to ask include: What are our customers expecting of us? What does the competitive landscape look like, and how will we differentiate ourselves from the competition? How experienced are we in supply chain execution and warehouse & fulfillment activities? How dynamic is our operation? How deep is our technical expertise?
What does our overall cost look like? The key here is to compare the advantages to be gained by putting in the ERP or WMS solution with the costs required for generating those benefits. For example, the WMS functionality in an ERP solution may not have an initial cost, but if it won’t yield any concrete operational improvements you haven’t gained anything. And the costs and risks for implementation, such as integrating it with your other software, not to mention the time management involved, may end up making it more costly to implement that solution than to do nothing. On the other hand, a best-of-breed WMS with a high initial cost that yields significant operational improvements may pay for itself very quickly, and yield better long-term results both operationally and financially. Factors to consider when determining the true cost of a WMS solution, either as part of an ERP system or stand-alone best-of-breed, include:
- Functional fit with the organization
- Operational effectiveness, i.e. how well it does what it’s supposed to do?
- Costs for order fulfillment
- Its effect on customer satisfaction
- Ability (as well as cost and time involved) to integrate with existing applications and modules
- Training fees and learning curve users can expect
Does the solution have sufficient functionality to meet our strategic goals? This is a very important point. No matter whether it’s free or costs very little, if the solution can’t meet the requirements defined in your business strategy—or better yet, exceed them—it won’t be worth the time and effort to implement. Moreover, it is essential that the solution have the ability to adapt quickly and profitably to your needs as they change.