Accurate control of inventory is essential for great financial results. Do you know how much it could affect your bottom line?
Mismanagement of the logistical processes, both within the business and on customer interactions, is a prevalent source of issues that affect the buyer experience – as well as a potential blind spot for your balance sheet. A Warehouse Management System (WMS) is software built to help you deal with these issues, bringing a digital interface to your operational needs and managing the entire warehouse and logistics process including inventory, picking, shipping and returns among other various tasks. Imagine you are managing a manufacturing company. From the point you order raw materials to the time your finished product leaves the warehouse, a WMS streamlines the floor personnel’s operational processes, accurately reflecting their activities on the shop floor. This provides a clear view of what’s happening with inventory and what should be available at every stage, or in a physical location, as well as generating accurate manufacturing cost information. To understand how a WMS can help your business, we need to dig deeper. When you have great visibility of your inventory, procurement bottlenecks and financial waste become apparent, lead times shorten, WIP (Work in Process) and inventory can be optimized, and work becomes streamlined. A WMS presents an incredible opportunity for a logistics heavy company, either through helping these problems surface, or through enabling a higher degree of flexibility and control for the processes.
Why not having a WMS is a mistake
As a CFO or company owner, you know the company’s finances are heavily influenced by proper inventory allocation. No one holds a huge amount of raw material because they like having cluttered warehouses (or, by that same token, finished products).It is only because it makes financial or operational sense– perhaps you are relying on volume discounts or are restricted by minimum order quantities. Maybe it’s just reliability and availability issues with a supplier, or on the sales side, you can’t predict your orders accurately. Sometimes these questions are harder to evaluate when you have a complex supply chain with hundreds or thousands of raw materials and dozens of suppliers. This becomes even more difficult when you work on a project basis where your inventory situation may require rethinking your raw material needs on a short-term basis or developing a custom planning process that doesn’t rely on a sales forecast. From time to time, operational complexities may suggest that in order to properly deliver on your promises, you require massive raw material stocks because you can’t predict what or how much you will be producing. Maybe it seems like it is impossible to operate at a speed at which your procurement processes respond to your needs. In order to challenge these assumptions, you need high quality data and the right analytical tools to provide supply chain and inventory insights. This means that information must be centralized, fully interconnected and available. A WMS takes care of this and acts as the platform supporting all strategic logistical decisions.
Benefits of a Warehouse Management System
- Reduces opportunity for human error
- Reduces operating expenses
- Reduces shipment fulfillment time
- Increases labor and management efficiency
- Increases customer satisfaction through visibility and service quality
- Optimizes inbound and outbound logistics
- Reduces inventory shrinkage
- Improves order quality and accuracy
- Reduces procurement mistakes
- Serves as a basis for continuous improvement
Are WMS implementations risky?
A WMS can be a game changer for your business, but every change has its risks. The fear of not doing business, or doing it much more slowly, during a WMS change is an obstacle for many companies. However, this downtime can be made up once the system is fully up and running. The sooner you accurately test the system, adapt it to your operations and train your personnel on best practices, the better you will limit downtime during the change and reduce potential execution risks. A key driver for success in a WMS implementation is the establishment of clear goals for what one wants to get out of the system. Every hour spent understanding how key financial and operational drivers map into the software, as well as how to use the software to push them to the limit, will clarify in which features you should invest. A good analysis of your current operations will help predict potential issues and how to solve them prior to any strong financial commitments. When first implementing a WMS, an impact on operations productivity is to be expected. Implementing a new system while allowing the employees to continue doing what they have always done is simply not enough to achieve a successful implementation. A new or even a major upgrade between WMS versions will almost always lead to a learning curve and adjustments to the way people work. To get through the initial drop in productivity with minimal issues, we suggest choosing a low intensity period of the business cycle if possible and designing a training and implementation plan that allows workers to work on the system as soon as possible. More complex processes should be incorporated over time as opposed to a “big bang approach” where everything must work at once. Risk is always expected when implementing a new WMS, but it is manageable with the right processes and experienced implementors. No WMS is perfect – they are general purpose software that require deep industry and company-specific knowledge to successfully adapt – and no WMS installation will go without a hitch. In our process, we help you understand the value drivers for a WMS in your specific case, and help you build a good business case around it. With clear objectives and a clear visualization of how the WMS can help your company become more profitable or operationally capable. Whenever looking at technology investments like modernizing a WMS, it is important to be aware of the alternative. While keeping outdated software driving your operations may seem financially smart in the moment, but it could prove to be a strategic mistake in the long run. As business practices and demands evolve, the system will only become more inefficient, dragging your organization down with extreme upgrade costs and forcing you to adopt complicated solutions like monkey patching.
What to do before implementing a WMS
The next step for your business
At this point, the benefits of a modern WMS should be easy to see. Implementing a warehouse management system is one of the most effective and essential steps in maintaining a competitive advantage and meeting the demands on today’s supply chains. A well-designed and integrated WMS platform is the best way to quickly improve profitability. Whenever you decide to implement a new system, it’s important to take the time to find the perfect WMS platform for your organization, one that can accommodate your business’ unique demands. We work with Odoo’s WMS, which comes integrated with their ERP solution, providing a 360° view of your business. If you’re looking to get started with a WMS but don’t know what to do next, contact our team for a free, non-binding consultation with one of our experts.