How do you perform a successful WMS cost-benefit analysis?

WMS stands for warehouse management system; a software platform that helps you effectively and safely manage your warehouse operations. WMS solutions have a broad price range, depending on scope, vendor, functions, and several other factors. This article will take a closer look at how to conduct a successful WMS cost-benefit analysis.

Why implement a new WMS?

Many businesses implement a new WMS system to gain access to greater functionality, and support growth. A fitting system will modernize your warehouse, making it more efficient, accurate, and safe. It is an investment with long-term ROI in mind, and you have a lot to gain by thinking ahead. The many available options on the market make it even more important to perform a solid cost-benefit analysis before choosing a system.

The WMS cost-benefit analysis

A cost-benefit analysis is crucial to any business project, as it outlines the budget, decision-making, timeline, risk management, and much more. It is a fundamental step that we highly recommend to all businesses looking to invest in a new WMS.

What functions will the new system provide, compared to your current setup? When can you expect it to deliver value, and when will the investment break even? Increased complexity and functionality could mean a more expensive system, but it might also increase your profits more than a basic option. Having a realistic, actionable cost-benefit analysis in place will make the WMS transition much smoother.

Identify and involve key WMS stakeholders

For starters, you need to identify the key stakeholders across the business. Including diverse stakeholders helps you get a comprehensive understanding of the costs and benefits associated with the WMS implementation. Some examples of relevant stakeholders are:

Leaders and management
Warehouse management
Finance
IT
Operations and logistics
HR
Procurement
Other end users

It is also a good time to assign stakeholder roles and dependencies in the WMS implementation, keeping them informed and involved throughout the process. Make sure to gather input during the implementation, so the system provides as much value as possible across your business. The input may prove useful, and having stakeholders sign off during the process can increase engagement.

Compile tangible and intangible costs

Many types of expenditures are associated with a WMS implementation, and it is a good idea to divide them into tangible and intangible costs. Tangible costs are easily quantifiable, as you can usually track them through invoices, receipts, and accounting records. Intangible costs are harder to quantify, but they are still a significant part of the cost analysis. Accurately listing and categorizing the costs will provide you with a good starting point.

Examples of tangible costs:

WMS licensing and subscription fees
Running costs (support, salaries, training)
Hardware (servers, workstations, mobile devices)
Supplies

Examples of intangible costs:

Implementation time (downtime, change management)
Opportunity costs (diverted resources and potential delays in other projects)
Employee transition costs (training, temporarily lowered performance during the transition period)

Having an extensive analysis of tangible and intangible costs in place gives you the best possible background to plan and execute a successful WMS implementation.

Cost drivers in WMS implementation

Let’s have a closer look at some of the most common cost drivers in the WMS implementation process, and what you can do to mitigate them:

SaaS software licensing fees: SaaS (Software as a Service) can help organizations reduce or eliminate the need for on-premise IT infrastructure and other resources, e.g. servers
Hardware: when it comes to hardware, you truly get what you pay for. Invest in good devices from the start, e.g. high-quality handheld hardware
Implementation costs: analyze the complexity of the warehouse operations. If you run a multi-site operation, maybe a common core across sites can be implemented to mitigate costs
Support: training internal staff to handle a majority of support independently will decrease the WMS costs
Logistics processes: is it better to adapt the WMS to your existing processes, or should the warehouse flows follow the WMS standard instead? Making the right decision regarding this will decrease the customization costs
Labor costs: elaborate staff training and change management will go a long way in achieving a successful implementation

Projected benefits and ROI

Now that you know more about the costs, it is time to explore the benefits. A WMS implementation usually improves inventory management, labor management, and order accuracy, among other things. It is also good to keep in mind that scalability might lessen future costs in the event of business expansion or sudden growth.

Another part of the financial projection is calculating the break-even point; when has the system benefited the business to the point where the initial investment is repaid? It is a good milestone to include, marking a deeper-level understanding of the associated costs and benefits of the WMS.

Conclusion

Warehouse and logistics technology has entered a whole new era, and businesses have a great opportunity to turn their WMS setup into a competitive advantage. It is high time to embrace cutting-edge technology, but to do so, you need solid research and background. When you have the WMS cost-benefit analysis and implementation plan in place, you’re good to go!

Introducing nyce.logic WMS

Many companies have chosen the nyce.logic WMS from Extenda Retail, a market-leading WMS for businesses in any industry. It transforms warehouses of all sizes, solving complex assignments with customized flows without costly development. It doesn't matter if you're in 3PL, e-commerce, retail, wholesale, or another industry - we have the solution for your warehouse!