At first, it may not make sense: how could not replacing your warehouse management system cost your business money? After all, a warehouse management system (WMS) replacement project brings costs around licensing, services and, in some cases, hardware and additional staffing.
But you must look beyond those upfront costs to get to the heart of the matter. It’s critical to account for the revenue your business never sees or gives away because it doesn’t have the right WMS. Warehousing software that is functionally rich and also supports your organization’s continuous innovation and improvement is critical to the company’s overarching success. It’s also possible that maintaining your existing solution is more expensive over the long-term than a new system would be.
You need specific examples of how postponing a WMS project is hurting your business, so let’s jump into five ways delaying a project hurts your bottom line.
1.Failure to meet customer expectations.
Consumers today have almost limitless options. That’s great for the end user but creates numerous new hurdles for retailers, wholesalers and manufacturers. Shipping windows are tighter than ever before because customers want their products as quickly as possible. Prices must be extremely competitive or the shopper/vendor will simply find another place to spend their money. They also expect free, painless returns and some prefer to pick up orders at retail stores.
Your WMS must facilitate the processes that make it possible to meet those standards. For example, dynamic waves or waveless processing has become popular because it constantly pushes orders to the floor instead of grouping them into pre-planned waves. More advanced systems will continuously reprioritize orders based on cutoff times, inventory levels, carrier availability and other factors. Not only does this help ensure a positive customer experience, but it also improves labor efficiency because there is a steady flow of work.
As noted earlier, there are plenty of places for prospective customers to purchase a product, and if they are not satisfied with their experience, they are unlikely to return in the future. You may never earn that person’s business in the first place if it cannot be delivered as soon as they want it.
2.Missed sales opportunities.
A well-known big-box retailer approaches your company because it wants to carry your product on its website. But there’s one condition: you must fulfill and ship the order while following their unique requirements. It’s an intriguing opportunity, with real money on the line, but do you have the solutions necessary to take on this commitment?
Can your WMS adapt your business processes to meet the needs of your new customer? Every day that you can’t ship on behalf of a customer, you’re losing potential sales – that’s your cost of opportunity. That one contract with a big-box retailer, especially if it grows into a more lucrative relationship over time, could make up for the cost of a new WMS project all by itself.
Similarly, if your systems cannot handle both pallet-based store replenishment shipments and eCommerce orders through your own website, it hurts the bottom line. This is why it’s so critical to calculate ROI when figuring out if it’s time to invest in a new WMS.
3.Long, painful waits for system modifications.
Just about anyone who has spent their career in supply chain has a horror story about sky-high services bills and/or long waits in the WMS vendor’s queue. The two often go hand-in-hand: when a company needs to change a process within the WMS, it often has to get in line behind dozens of other clients with similar requests; when it’s executed, it’s typically quite expensive. You may need to make this change to support a new partnership or fast-growing sales channel. So every day you wait for that process to be reconfigured, you’re losing money.
A steep bill and a long wait – there must be a better way, you think…and there is! Certain WMS providers have developed a system with built-in adaptability tools so your IT team can adjust workflows. Not only are the configurations much cheaper, but they also happen much faster. When a promising new opportunity arises, you know you have the technology to figure out how to make it work.
4.Upgrades are dangerous and expensive.
Much like an antique, an aging or shoddily developed WMS can become increasingly fragile over time. With many solutions, modifications are completed via custom source code that can make it unstable. Upgrades can become risky – or in some cases, not possible – because all of that custom code must be re-implemented. And if you decide to move forward with an upgrade, you know it will come with a hefty price tag.
So you’re left trying to succeed in a highly competitive environment with an inferior WMS that was never intended to manage the complexity of modern supply chains. Once again, this will directly impact your revenue. You miss out on the enhancements that come with major upgrades and do not achieve the corresponding efficiencies. When there is an issue, support may not be able to help because the software has reached the “end of life” stage.
A modern system will come with the features you need to optimize your operations, meet the challenges of the day and stay ahead of competitors. And with certain warehouse management systems, all configurations roll forward with upgrades. Suddenly, you’re not avoiding an upgrade but eagerly awaiting the vendor’s next big release.
5.Retail and vendor compliance chargebacks.
As customer requirements have increased and more sales channels emerge, there are far more retail compliance standards than ever before. Those standards may be as simple as sending acknowledgement of an EDI purchase order. It could be more sophisticated, like specific advance ship notice (ASN) labels or packaging and packing slips that make an order look like it came from a retailer when a wholesaler or manufacturer actually drop shipped it. Retailers must implement these standards to streamline their supply chains so they can meet tight delivery windows and maintain shrinking profit margins.
Failure to satisfy these compliance standards leads to chargebacks that pull money directly out of your pocket. This could add up to tens of thousands of dollars every year – and it’s avoidable. The WMS can also provide specific instruction during the receiving process for orders that come from certain retailers to speed up fulfillment and confirm all requirements are met. A best-of-breed WMS can also create an internal scorecard that tracks compliance performance. If that scorecard shows a clear source of issues, an adaptable WMS will allow you to alter workflows to correct the problem.
And remember that the cost of compliance issues does not end with those chargebacks. Amazon, Walmart, Target and other massive retailers have plenty of options when looking for suppliers, and they will take their business elsewhere if they have a bad experience with a certain vendor. So you’re missing out on future earnings, as well.
Just one of the issues listed above could justify the price of a new WMS, and it’s possible more than one of them rings true for your business. Supply chain execution technology is a significant investment, but it is one that drives big returns. Don’t wait until your business is leaking way too much money to open up the search for a WMS – act now.