Where to start? That is a question I have heard many times from company executives preparing to modernize their operations by implementing a warehouse management system (WMS). Making the decision to improve productivity, cut costs and increase throughput is the easy part. But selecting the right WMS system can be confusing if you are not prepared and truly understand how your operation best fits with the many different tiers and functions available within WMS systems. Before you understand the WMS that provides the best fit, first you must know thyself.
Below are the 5 key analyses I encourage executive teams to walk through to prepare for a WMS selection process. These will help you learn more about your current operations, avoid pitfalls and provide a WMS vendor a clearer picture of your operation so they can supply you with a competitive quote and you can hold them to your high expectations.
- Map all current operational processes – Especially for operations moving from very low technology environments, tribal knowledge helps the individual not the tribe. Completing an enterprise-wide audit of ALL your functions and documenting the base processes being followed will be an eye-opening experience. You will likely find several mid-level processes that are being performed by the wrong role or should not be performed at all. Rationalizing your operations must be done BEFORE you bring in a new system, or you’ll run the risk of recreating old goat paths in the new system, leading to costly enhancements that do not bring value to the operation. Also, document all the technology currently used to perform tasks, such as scanners, picking carts and any printing or labeling machines, so you can best leverage existing investments.
- Create a list of pain points – Let’s be honest, most of your workers will be more than happy to make a long, detailed list of what they feel is wrong with day-to-day operations. While this may seem like griping, it is also the source of the best gold nuggets of process improvement and key leverage points for new technology. If you have a dedicated team member who understand the need for change, they will also appear at this time as they bring their ideas forward. These people will be your agents of change in the warehouse.
- Facility KPI – The only reason to implement a new WMS is to improve the bottom line. Whether that is reducing labor costs, improving inventory turns, or leveraging new technology, you must have solid data on your current KPIs so you can measure the improvement once the new system is fully implemented. This will be critical in calculating your ROI for your executive team or board of directors. Some of the KPIs my clients have tracked include:
- Processing costs per unit by area (Receiving/Picking/Packing/Shipping)
- Inventory accuracy
- Inventory carrying costs
- Inventory shrinkage
- Inventory turn
- Dead inventory
- Maximum processing capacity
- Throughput – You will also need to measure how long operational processes take from initiation to completion. This is useful as it will show you where you can improve productivity, as well as labor and resource allocation.
- Choke points – what stops or slows work and hampers the ability to process more products?
- Total time to process (pick) an average order
- Number of touches to process an average order
- Average number of orders per day/hour
- Inventory accuracy – How many times a day do you need to back order a product?
- Is overtime normal? How many hours per week?
- Information the WMS provider will need – Any WMS provider will need a download of general and specific data. Having this information at the beginning, before they request it will speed up the process and will lead to more informed discussions.
- Warehouse map – A warehouse map should include the current layout, highlighting any safety or process issues and if the layout can or cannot be altered.
- Rack labeling – Create a visual representation of the picking flow including an example of what the labels look like and where they are located.
- Excel spreadsheet of current inventory – to determine the proper material handling normally the vendor would like to see:
- Number of items with unique SKUs
- Volumetrics of items
- Velocity of items (units per day)
- Orders per day (average and peak)
- Unique Processes that make your business more successful than your competitors. They are your secret sauce that you will want to maintain in the future system
- If the process is not a competitive advantage – adopt the WMS Base approach
Searching for a WMS starts with understanding the current state of your operations and being able to visualize where you can go with new processes and a WMS. Do your homework and you’ll be one step closer to finding the right fit for your operations.