Which Warehouse Solution is Right for Me?

Inventory management, picking, barcoding, and counting … all of these are important aspects of warehouse activity, and if you have pain in one of these areas, it tends to affect your entire company and its customers. But what is the best way to solve this kind of problem?

Warehouse Video Final-1

As with most of these questions, the short answer is that “it depends.” While there are many aspects to effective warehousing and inventory management, several fundamental questions appear consistently:

  • Does your company have the right products in stock?
  • Do you have appropriate inventory levels to ensure acceptable service levels and not tie up too much cash?
  • Can your team reliably and cost-effectively receive, pick, and ship the right products to your customers?

Sounds simple enough, right? But many times, and for many reasons, it isn’t. Whether you inherited your current situation or saw it develop over years, the question that must be answered first is, “What is the expected return on the investment you make in warehouse automation?”

What's the (Potential) Return on Investment (ROI)?

As a first step and an important discipline, let’s look at the areas that tend to drive the largest and most quantifiable ROI opportunities.

  • Mispicks/mis-shipments. This is one of the largest and most customer-facing pains for most businesses. When we pick and ship the wrong product, we make several errors:
    • First, we depleted the wrong product, which our system still shows as on hand.
    • Second, we still have the product that was supposedly shipped in stock.
    • Third, we frustrated a customer because they did not receive what they ordered.
    • Fourth, we have additional expenses--some tangible, some less so.
      • We need to pick the appropriate product and ship it to the customer, thus doubling (at least) our material handling cost.
      • We need to either pay for the customer to return the wrong product or simply allow them to keep it, which also diminishes or eliminates our margin on that product.
      • We have the relationship cost of frustrating a customer, who may choose to purchase from a competitor next time.
    • Inaccurate Inventory. Sounds simple; count more accurately, right? If it was only that easy. There are several possible causes and impacts to our business from inaccurate inventory.
      • Causes
        • Improperly received purchase orders
        • Improper picking
        • Improper or no cycle counts
      • Impacts
        • Lack of faith in the system, which results in:
          • Manual verification for purchasing teams trying to replenish our stock.
          • Manual verification by customer service trying to take orders on which stock levels are low.
          • Warehouse pickers having to roam about due to the product not being in the expected location.
          • Extra inventory is carried on hand, thus tying up cash, to ensure we have what we expect our customers to order.

OK, so if you have read this far, it is a pretty safe bet you recognize some of these issues. Now, what should you do about them? Warehouse solutions come in a variety of levels of complexity and price points. Which one makes the best business sense for your operation? In my experience, this can be a simple math equation.

Reread the impact of the problems listed above. Take your time. Truly determine the cost of each of these events. Then look at the financial impact on your company if most of them (maybe all) were resolved. Now you have a sense of what you might be prepared to invest in a solution.

What Options Do I Have for Warehouse Solutions?

From this point, I will assume you run at least an ERP system, but more specifically, I will relate options that exist for users of Microsoft Dynamics.

The first option is to utilize the built-in functionality for warehouse management. All the basics are included in Microsoft Dynamics 365 Business Central. Innovia has many customers that use this functionality very effectively. Your investment in this functionality can range from $10,000-$25,000 (depending on the number of users). Its specific features include

  • Full physical inventory
  • Cycle counts
  • Warehouse bin management
  • Receiving
  • Picking
  • Shipping

The second option is leveraging an ISV (Independent Software Vendor) solution. There are many that either build and/or supplement the existing Business Central functionality. The advantage of this level of warehouse automation is that the investment is reasonable and the additional functionality tends to benefit day-to-day users. The user interface is more friendly, making for quicker adoption. Some of the solutions that fit in this category are listed below with links to learn more about them. Expect to invest somewhere in the range of $15,000-$100,000 (depending on the number of users).

Your third option is to purchase a Tier One style WMS system. As the name suggests, these solutions bring much more robust functionality, but they also require a more significant investment. Depending on your ROI math and desired functionality, these solutions may be a great option. Investment range: $200,000-1,000,000+

The Bottom Line...

I hope this exploration of the different types of warehouse solutions has brought you some clarity on what path might work best for your business (or at least given you somewhere to start). It all comes down to choosing the level of investment that matches the business problem you are trying to overcome. If you can do that, you’ll be in great shape.

As always, feel free to reach out to Innovia if you have additional questions about this or any other topic.