Forty percent of warehouses don’t currently have a warehouse management system in place—that’s according to IT research firm Gartner (content available to clients).

Don’t be ashamed if you’re one of the people still managing your warehouse with paper and pens—warehouse management systems (WMS) are significant investments, and come with costs that may deter the warehouse managers that still rely on paper-based and manual methods of management. Aside from the system itself, implementation, integration, and training costs can add-up to what might seem like an inordinate amount for the average warehouse manager to be able to justify spending.

But, as the old saying goes—you have to spend money to make money—and it’s likely that the errors in your warehouse that your paper-based methods just aren’t capturing are costing you much more money than you think.

In this article I’ll walk you through five of the reasons that warehouse management system implementation costs are worth the benefits, by highlighting the improvements they can make to separate areas of your business.

1. You’ll see an improvement in order, picking, and shipping accuracy

According to Datalogic, the average cost of warehouse inventory errors to small to medium sized businesses stands at around $195,000 annually. This is without calculating the cost of the loss of customer retention if your customers are left unsatisfied with your customer service.

There are certain warning signs that warehouse managers should be on the lookout for. Consider these metrics within your current order, picking, and shipping processes:

  • Back order rates—a high back order rate means leaving your customers waiting until you can fulfill their order because their item is unavailable
  • Perfect order rates—a low perfect order rate indicates that your products aren’t leaving the warehouse on time, items are being returned, and shipments aren’t arriving on time
  • Rate of return—a high rate of returned items could indicate a variety of reasons why your customers are unsatisfied, ranging from damaged goods to incorrect product delivery
  • Order cycle time—a long order cycle time indicates that time between your customers ordering a product and the time it’s shipped is too long.

How a warehouse management system can help

Order verification Warehouse management systems can calculate the weight of orders, taking into account an item’s individual weight. If the calculated weight is over or under the order, systems then send an alert to users to review the package.
Guided processes Prompts, reminders, and alerts are used to guide warehouse staff through warehouse processes e.g. “stock missing.”
Barcode scanning This technology can be used to track inventory moves such as paperwork, products, and employee actions for increased inventory accuracy.
Pick to voice Pick to voice functionality uses voice recognition to allow staff to communicate with a warehouse management system to confirm their actions and product IDs. The warehouse management system then provides instructions for their next action.

2. Your equipment will last longer

As one of the biggest capital costs in your warehouse, ensuring that your equipment is completely functional for as long as possible is one of the most compelling reasons to justify WMS implementation costs.

If you’re paying through the nose for equipment maintenance, it may be time to consider how a WMS can help reduce your costs and increase the life expectancy of your equipment.

How a warehouse management system can help

Wave management Wave management groups select warehouse activities together in order to reduce the amount of travel for both staff and equipment, which in turn can reduce equipment wear and tear.
Machine idle time The less that equipment is used unnecessarily, the longer the life expectancy of your equipment. WMS can intelligently route warehouse activity, manage drop-points, and reduce time spent locating items.

3. You’ll see a reduction in product damages

Damages cause delays, and delays eat into margins. Product returns cost warehouses in terms of additional storage and processing costs, and damaged goods mean replacing inventory.

A WMS system can prevent the possibility of damages before your products even leave the warehouse. Start by asking yourself the following questions:

  • How often are products damaged en route to their destination?
  • How often do customers return products due to damage or poor quality?
  • At which specific touch points are your products becoming damaged?

How a warehouse management system can help

Quality control Quality control functions can reduce the amount of damage to products by assigning priority parameters to high-value orders.
Put-away processes WMS systems can assign locations and the best put-away routes for the process, which reduces the amount of travel time for products, thus reducing opportunity for damage.

4. You’ll see a reduction in shipping costs and improvements in on-time shipping

The cost to warehouses of late shipments stands at around $720,000 per year. Late shipments can be linked to issues in the supply-chain, so maintaining visibility into your warehouse processes is crucial—surveyed warehouse managers reported on-time shipments rose to 92.10% after the installation of a WMS.

How a warehouse management system can help

Visibility into the supply-chain Real-time dashboards provide insight and analytics into issues in the supply-chain that are preventing on-time shipments.
Product tracking WMS systems can provide alternate product packing suggestions in order to reduce shipping costs.

5. Your supply will meet the demand

Knowing your peak demand seasons are key to having a warehouse that runs like clockwork. If you know when to expect a rise in demand, but your ability to supply is limited, this could be linked to data gaps between one area of the warehouse and another, poor analysis of historical data, or poor warehouse layout.

How a warehouse management system can help

Guided processes A WMS system can help train staff during periods of higher demand/seasonality through guided actions.
Slotting optimization WMS systems can aid in slotting optimization—namely the organization of products in the warehouse in accordance with picking purposes—by assessing business needs during high seasonality and product trends.
Real-time visibility WMS modules can help forecast future inventory and stock levels and shipping dates.

WMS implementation costs are worth the benefits they deliver—so what next?

Take a look at our catalog of warehouse management software, where you can refine what kind of system you’re searching for by features, pricing models, organization type, and size of company.