Does a WMS = ROI?
Recently in a meeting with a company contemplating replacing their old, home-grown WMS with a shiny new one from one of the premier WMS vendors, I asked a simple but potentially controversial question: Why are we doing this? Seeing the vendor’s jaw drop at this question and lots of side discussions quickly ensue, I clarified my question. If we are going to spend many hundreds of thousands of dollars and add the short-term risk involved with doing one of these implementations, I surmised, I think we better have some pretty clear objectives. Whenever anyone does one of these systems, there is always lots of talk about ROI and improvements, etc. The problem is that these things are not automatic. Having architected my share of this type of software, I am a huge proponent of them, but in my mind, it is incorrect to make the jump from getting a WMS to automatically getting improvements, let alone ROI.
Instead, you should think of a WMS as a platform for continuous improvement. Ultimately, that is where the ROI will come from. Sure, if you are putting in a WMS where a paper system had previously been, there is the immediate potential for improvement. However, in our current environment, it is more likely that customers are looking at their second generation of WMS. So, in these cases, the ROI equation can be much more subtle. Generally, the arguments for such a move revolve around issues of maintainability or the risk inherent in keeping old software around. I tend not to buy into these notions and find that they are more typically devices used by vendors to attempt to derive some ROI in these situations. It is not only misleading, in my opinion, but unnecessary in many cases.
Why? Let’s go back to my assertion that a WMS is a platform for delivering continuous improvement. So, it’s all about improvement and the ROI derived from these improvements. Take stock of your current system based on the idea that it will either help or hinder your ability to improve, adapt, and change with market forces. There are costs associated with the time and effort it takes to do such things (both from an IT perspective and operations perspective). Many of the new WMS packages out there make it extremely easy to make modifications that used to take a lot of time and add a lot of risk. They also tend to be good at adapting to new operational requirements like flow or Value-Add changes. Additionally, there are opportunity costs associated with not being able to do certain things (certain accounts might even pull their business if you cannot deliver product exactly the way they want it). Just as an inability to ship, the potential of this sort of failure should be considered as a breakdown in the platform.