What is a WMS
First let’s start with a definition of WMS. WMS stands for Warehouse Management System. Sounds simple right? It is a system that helps me manage my warehouse. I’ve got it. Well not so fast. WMS’s can come in many flavors and levels of complexity. At a low end systems can keep track of what goes in and out of a warehouse. At the high end the system can tell you exactly what location within the warehouse, within a zone, and within the racking the product is sitting. You can do everything on paper and then key it into the system or you can have portable computers (handheld, vehicle mounted, or voice activated hardware) which interact in real-time with the system. A WMS can run conveyor systems, do directed picking with lighting, require barcode and RFID scanning, track lot and serial numbers, and track the productivity of the warehouse staff.
Now before you go running off and saying “I want it all!” consider the following statement: the goal of a WMS is to provide discipline and accountability to the warehouse and its processes. In simple terms this means that the more features you add to the WMS the more controlling it becomes. While this can sound really good it can also slow down your daily processes. If you decide you want to always know where all the inventory is down to the bin location then your staff will be required to record a transaction every time they touch the inventory: every pick, every put-away, every movement. Recording all that information, even with scanning technology, can be time consuming and will require a change in process.
Where to begin
Start by defining what problem(s) you are trying to solve. Are you missing shipments because you can’t find inventory? Are you losing inventory only to find it after you have purchased or produced replacements? Does it take too long to pick product for orders? Do you have large inventory write-offs because of inaccuracies in inventory? Do you have too many shipping errors?
Next consider how much discipline you need in your process and how much you are willing to pay for it in terms of additional processes and equipment. How detailed do you want to be able to see inventory: warehouse, warehouse and zone, warehouse and zone and bin? Does your product currently have barcodes for scanning? If product does not currently have barcodes, how difficult will it be to add barcodes? Are you wanting to track incoming materials as well as inventory and outgoing inventory? How much automation do you want in terms of data collection: paper entry or scanning? What type of material handling equipment do you have? Does the equipment need scanning devices or can you work with handhelds?
Finally, begin to calculate the savings in time and money a WMS can provide. While in the beginning the picking, put-away, and movement processes may take more time. Once workers are familiar with the system it will improve. Some areas where you should see savings:
• Reduction in lost inventory and inventory write-offs
• Improvement in data errors: quantity entry, lot and serial numbers
• Reduction in shipping errors
• Labor savings during picking due to knowing exactly where inventory is located
• Cycle counting and physical inventory improvements
• Inventory level reduction and inventory turns increase
• Improved inventory transaction reporting
When calculating your savings be conservative but realistic. If you wrote off $100,000 in inventory last year assume your first year savings will be $50,000 but don’t forget that the savings is annual. That means you are saving $50,000 EVERY YEAR. If you feel you can process 20% more orders due to the efficiency gained from accurate inventory location records, calculate 10%. Remember when calculating labor savings the goal is to “do more with the same or less”. If you don’t have to hire the additional picker that is another annual savings. It doesn’t take long to find an ROI when you have annual recurring savings.
In the next blog we will discuss selecting the software options and what to do about labeling the warehouse.
