Warehouse and Inventory Management for Reduced Costs and Increased Efficiency
What is warehousing?
Warehousing—the storage, control, and processing of materials to, from, and within a business—doesn’t seem complex on the surface. In its simplest form, some item is delivered to a location, unpacked, received, taken to a location for storage, and put away for a later date. Later, the item is picked up, put into a container, wrapped, labeled, and placed onto another truck to be shipped to a new location. What could be easier?
What is the difference between warehouse management (WMS) and inventory management systems?
The surface simplicity of warehousing might be the reason why so many warehouse and inventory management systems exist in the marketplace—over 280 at our last count. Some of the solutions marketed as warehouse management systems only handle one or two areas of warehousing, such as inventory or order management, or material handling.
But as the number of items, shipping and receiving locations, vendors, suppliers, SKUs, people, equipment, devices, and other supply chain components multiply, many inventory management systems cannot scale to address the high volume of transaction data such complexity demands. Not to mention the wealth of business processes that a well-executed warehouse management system (WMS) can automate, manage, and optimize.
The Benefits of WMS Implementation
The benefits of introducing a supply chain IT execution system to your business include:
- Increased inventory accuracy: On average, inventory accuracy increases by 20% in warehouses that implement a WMS solution.
- Reduced inventory costs: The cost of carrying inventory is usually about 27% less in an automated WMS environment.
- Reduced labor costs: The average supply chain warehouse using an automated WMS can reduce labor costs by 20-30% over a paper-based system.
- Reduced forklift travel time: System-directed picking and put-away can reduce the time forklifts travel through your facility by as much as 50%.
- Reduced operating expenses: You can expect to receive as much as a 35% reduction in your operating expenses by moving to a WMS.
What Tangible Cost Reductions Can I Expect from a WMS Implementation?
| Cost Category | WMS BENEFIT |
|---|---|
| Inventory reduction of up to 10% (one-time savings) | Inventory visibility and accuracy |
| Reduced inventory carrying costs up to 35% (industry average) | Lower inventory levels Higher space utilization |
| Reduced investment based on cost of money @ 8% | Reduced inventory |
| Premium shipping costs | Reduced shipping errors |
| Personnel handling paper – potential headcount reduction or resource redeployment* | WMS automates the management of order and priorities, eliminating paper |
| Personnel handling order picking – potential headcount reduction or resource redeployment* | RF-based picking productivity increases efficiencies |
| Personnel handling shipping paperwork and confirmation – potential headcount reduction or resource redeployment* | Eliminate preparation work for shipping documents and ERP ship confirmations |
| Eliminate physical inventory | Cycle counting will replace physical inventory requirement |
* Savings in headcount reduction will be based on the average loaded cost per person per year.
Real WMS Return on Investment (ROI)
While every company’s results are different, your total net savings in tangible costs can range from $500,000 to well over $1M in the first year of your WMS implementation. The result usually translates into a complete payback for the WMS within that time.