Warehouses and distribution centers are dynamic environments where many different challenges arise. Sometimes those challenges go beyond the normal issues to become overwhelming, and start to seriously impact the performance of the business. A Warehouse Management System (WMS) can help a business with many of these challenges, yet many smaller and medium-sized businesses hesitate to move from a manual paper-based approach to even a rudimentary WMS, based on fears about cost and disruption. Ten Signs You Might Need a WMS for Your Warehouse
At the same time, Amazon (and other competitors) are seriously raising the bar on rapid, error-free fulfillment at extremely low cost per unit. Consumers have come to expect that orders will consistently ship the same day, without mistakes or any wrong items. Top retailers are also very demanding, with serious deductions and chargebacks for mistakes. Any business, including a small business, that is slow or sloppy in their warehouse and fulfillment operations, risks losing customers to those that can execute well. So how does a business know when it’s time to take the plunge to implement WMS? Here are ten signs that it is time to seriously consider making the move to a WMS for your warehouse or DC:
Figure 1 – Ten Signs You Need a WMS
- Error rates climbing or unacceptable—Too many errors such as wrong items or quantity shipped, incorrectly packed, damaged goods, incorrect paperwork, and other customer claims. Human beings make mistakes. The more complex, chaotic, fast paced, and unguided the environment and tasks become, the more mistakes they will make, resulting in more returns and chargebacks. If you need someone to double-check the contents of every box being shipped, that can be a sign that too many errors are being made in picking and packing. A good WMS system tames the complexity by providing simple, unambiguous step-by-step guidance for tasks in a complex environment, while verifying correct execution at each step (e.g. via barcode scanning).
- Missed deadlines/high expediting costs—Too many late or expedited shipments, and/or inability to keep up with each day’s orders. Your workers may be walking much further than needed to fill each order. They may be handling items, cases, and pallets more times than necessary. Different items for an outbound shipment may arrive at the shipping area at vastly different times, clogging up and slowing down shipping operations. Causes include suboptimal layout, poor slotting decisions, suboptimal picking sequences and paths, and extra time spent looking for items. A warehouse and WMS that have been configured for optimized slotting1increase the pace of picking and ensure that cycle counts are done efficiently (resulting in higher inventory accuracy). The WMS can also ensure that invoices are issued in a timely manner once items are shipped.
- Low fill rates/low perfect order rates—Orders are not being filled completely, or with damaged or incorrect items, or incorrectly invoiced. A portion of low fill rate problems may be caused by inaccurate forecasts or late deliveries from the supplier, but low fill rates can also be due to inaccurate inventory records, poor visibility into stock on hand, and picking issues, all of which can be fixed by a WMS.
- Fulfillment costs rising or too high—Many companies don’t really know what it costs them to fulfill orders. The total cost includes labor, facilities, inventory carrying costs, the cost of systems, equipment, shipping, chargebacks, and returns. As your business grows, the fulfillment cost per unit should go down, not up. However, the battle for ever-faster fulfillment and shipping, combined with inefficient utilization of warehouse labor and space, can turn a growing profitable business into a loss-making one.
- Running out of room—If your warehouse or DC is perpetually overflowing, with hardly room to maneuver, the immediate reaction may be “we need a bigger space.” However, a properly implemented WMS, combined with optimizing the site’s layout and processes, can generate higher throughputs from the same space, postponing the move to a bigger space even as your business grows.
- Chaotic environment/flying blind—If you are always in firefighting mode and the DC feels more like a war zone than a well-oiled machine, it is probably time to look to a WMS to bring things under control. Likewise, if the warehouse is a black hole with no visibility and nobody trusts the information coming out of it, or you have trouble meeting traceability requirements (your own, your customers’, or regulators’), or you struggle to generate and send timely ASNs,2 a WMS system provides the disciplines and data collection, creating the needed visibility, traceability, and automatic document generation.
- High turnover/uneven workloads—A chaotic environment, too much manual administrative work (like manual data entry), and uneven workloads (some workers running as fast as they can, while others are idle) can lead to worker frustration, low job satisfaction, and high staff turnover. If you find you’re spending an inordinate amount of time hiring, training, and micro-managing staff about what to do and where things are, it may be time to switch to a WMS system.
- Jammed up receiving dock—If your receiving area is an obstacle course, with incoming shipments sitting for hours before they are received into the system and longer to be put away, with trucks backed up in your yard waiting to unload, and items often missing or misplaced during receiving, it is a good sign that you could use a WMS. A jammed receiving dock slows overall throughput, increases lost and damaged items, and creates safety hazards for workers.
- Products handled too many times—Every extra touch or move adds labor, time, risk of damage, and errors. Without a WMS, you likely don’t even know how many times a product is touched from the time it comes into your receiving dock until it is loaded at your shipping dock. The process of implementing a WMS provides the opportunity to reassess all your processes, to see if there’s a better way to do things, including improving the layout and flow of your warehouse.
- Unable to keep up with growth and demand peaks—As an overarching symptom of all of the above, your DC may be the bottleneck constraining the growth of your company and/or your ability to reach your maximum revenue potential during peak seasons. In this case, a WMS can be an enabler for the growth and profitability of your firm. se the pace of picking and ensure that cycle counts are done efficiently (resulting in higher inventory accuracy). The WMS can also ensure that invoices are issued in a timely manner once items are shipped. space, can turn a growing profitable business into a loss-making one. things, including improving the layout and flow of your warehouse.
If you are experiencing even one of these symptoms intensely or several of them moderately, then it is time to take a serious look at implementing a WMS. Postponing implementation of a warehouse management system may be costing your business in many ways, including higher labor costs, chargebacks, expedited shipping, excess returns, unhappy customers, and ultimately slowing the growth of your business.
Many business owners are naturally wary of making the initial leap from a manual approach to a WMS, fearing the potential prospects of disruption, capital expenses, and new complexities (such as retraining their workforce). In Part Two of this series, we will discuss how risk can be addressed via an incremental approach to implementation while properly addressing change management issues.
1 Slotting optimization can be done manually via a spreadsheet, or using a standalone slotting module, or with WMS-integrated slotting capabilities. Optimal slotting is often based on velocity (number of picks), order patterns, ergonomics, and other considerations. It is good to have an experienced warehouse expert help with slotting optimization. A good article on slotting can be found here. —
2 ASN = advance ship notice.