WMS ROI: Is a New WMS Worth the Investment?
When deciding to implement a new warehouse management system (WMS), there will come a point where the ROI of the new solution is questioned. While there are many systems on the market, WMS solutions are a significant expense.
The right one can save you thousands per month in other expenses.
Many companies view a WMS as a cost. However, it should be viewed as an investment—an investment that:
- Protects your inventory
- Manages labor costs, and
- Streamlines warehouse operations
WMS Costs to Evaluate
Tangible Costs
Tangible costs are straightforward and can be easily measured. Tangible costs refer to any costs for physical goods or things you can see, feel, or touch. Nearly anything that can be viewed on a report or that generates data is a tangible cost. Here are some of the main tangible costs impacted by a WMS.
Labor
Labor costs are the costs for your employees and how many man-hours will go into the system. However, most WMS don’t monitor people. But the time your packers and pickers spend preparing and sending out orders is another major cost to measure. A good WMS software monitors both people and inventory.
Inventory
How much inventory you have on hand and need to keep track of is another tangible cost. WMS costs can be greater if your total number of SKUs tracked is high and no other rules apply to minimize your stock.
Productivity
Measure current operational costs and then compare them to what they would be after implementing a WMS. This helps give an estimate of how much time and money a WMS can save you by helping you optimize your operations, increase productivity, and shorten tasks.
Existing Technology
Look at your existing technology stack. Is your company using any other logistics software or warehouse management software? What about ERPs?
You need to make sure that the WMS you choose will be able to integrate with your existing solutions. If not, you may need to consider investing in additional software so everything can communicate with each other, which adds to the cost of implementation.
Equipment and Automation
Will you need additional Material Handling Equipment (MHE), like conveyor belts, light picking systems, or robotics? To stay competitive and realize even greater savings in the long run, you may want to consider investing in additional MHE tools that help your team work more quickly.
Intangible Costs
Unlike tangible costs, intangible costs are a bit more difficult to measure. That’s because intangible costs aren’t necessarily tied to a piece of equipment or software. They are important costs to keep in mind for any WMS implementations though. Here are the main intangible costs to consider.
Support Requirements
Once your new WMS is implemented, are there ongoing support requirements? Is it a cloud-based solution or something that needs to be physically installed on other company devices? Is the system easy to learn, or will it require training and ongoing customer support? These are all important questions to have ready when evaluating a new WMS.
Employee Satisfaction
A major intangible cost that should be strongly considered is how will the new WMS impact employee satisfaction. Businesses should avoid software that makes workers’ jobs harder or causes daily frustration. Adding additional friction to your warehouse operations causes inefficiencies, increases turnover, and lowers morale.
WMS ROI Analysis
With a better understanding of the costs associated with implementing a new WMS, you can begin to work on an ROI analysis to help sell the system internally. The best WMS providers show a return in about a year or less because a WMS eventually saves a company much more money than it costs.
Here’s how you can begin your WMS ROI analysis to see if the system in question is right for you.
Step 1: Evaluate Current Operations
Do a detailed analysis of your existing operations. If you don’t have the expertise to do this internally, it can be beneficial to work with a consultant or ask the vendors you are exploring to help guide you.
Specifically, you want to find bottlenecks in your warehouse operations. You should also track how inventory moves through the warehouse to discover the most optimal paths. Document what happens at each stage of your fulfillment process and see what areas need the most attention or improvement.
While it may be tempting, do not rush through this first step. Plan to spend quite a bit of time here so you can be as thorough as possible.
Step 2: Needs Assessment
After finding out the strengths and weaknesses of your current warehouse operations, you can determine which needs are most important. Not all WMS solutions are the same. You’ll want to find one that can help you improve the areas you need help with while not creating any additional burdens. At the same time, you should prioritize looking for a system that can scale with your company as it grows.
Determine what technological requirements are needed to support a new WMS. Will it work with your existing systems, or will additional upgrades need to be made?
Even though “warehouse” is in the name, a WMS touches many other areas of your business. Each department involved should make a wishlist of the features they would like to see in the new WMS. You may not be able to get all of them, but it will be a helpful exercise that can improve the adoption rate of the new software internally.
Step 3: Crunch the Numbers
Review the tangible and intangible costs of implementing a new WMS. There are many ROI calculators online from various vendors. However, they all use a slightly different method to determine the WMS breakeven points. It is best to work with each vendor individually on the ROI of their system.
To make sure you are comparing apples to apples, ask the vendors if you can see the calculations they are using to determine if there are any key differences in how the ROI is calculated.
Is a WMS Worth the Investment?
To determine if a WMS is worth the investment, it needs to show a positive return. If the monthly costs for the WMS bring enough savings, then yes, it is worth the investment.
Still, this will not always be the case. Not every WMS will be suitable for every business. Finding and partnering with a trustworthy WMS provider that has a proven track record of success is a great way to ensure you get the results you need.
Logistics Vision Suite (LVS) WMS
Regardless of where you are in your search for a new WMS, check out our Logistics Vision Suite. It is used by more than 700 companies across the globe because it is advanced, adapts to your needs, integrates well with existing technologies, and delivers results. Contact our team today to learn more about what LVS can do for you.
