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Cost Justifying a WH PDF Print E-mail
Written by Cecilia Chee, Singapore   
Tuesday, 04 October 2011 16:49



Cost Justifying a Warehouse Management System
Executive Summary
In today’s competitive marketplace, the primary focus of many organizations is on improving customer service. To accomplish this, companies are embarking on a wide range of process-improvement initiatives. In many cases, increasing customer service levels involves adding personnel and increasing overall expenditures. Unfortunately, these additional expenses can erode profitability.
One proven method for increasing customer service without incurring additional long-term expenses is the implementation of a warehouse management system (WMS). The WMS concept and technology are not new. These systems have matured into time tested methods for reducing inventory costs while increasing overall efficiencies. Implementing WMS technology within an organization already using an ERP system allows that company to achieve a higher return on their software dollars and provide the best possible service to their customers.
Our firm possesses a strong background in delivering distribution and warehousing solutions. This allows us to offer a powerful, intelligent and full-featured WMS solution to our customers. The better WMS solutions consists of three integrated modules – warehouse management with radio frequency (RF) technology, integrated shipping, and Work-In-Process tracking. The result is a system that provides a new standard for inventory accuracy and visibility through all phases and operations within a facility. 
WMS can provide an organization with tangible benefits quickly, improving warehouse operations and increasing efficiencies without adding headcount. By implementing a WMS, a company achieves a number of dramatic benefits. They include:
  • Directed put-away and directed order picking
  • Warehouse capacity management
  • Radio Frequency (RF) capability for data capture
  • Load planning
  • Cross docking
  • Picking optimization
  • ABC stratification
  • Interleaving of work
These benefits translate into direct cost savings. The extent of these savings depends on a number of factors including existing inventory levels and accuracy, premium shipping costs and personnel currently required for picking, packing and shipping. Our firm will provide a quantified cost saving summary after further study and analysis.
Categories for Potential Cost Savings
The categories presented in this table are based on accepted industry standards and represent areas for high-visibility cost reductions. Our consulting company will assign dollar values for cost savings to each category after an on-site study of the current warehouse situation.
Tangible Costs
Inventory reduction of up to 10% (one-time savings). Inventory visibility and accuracy.
Reduced inventory carrying costs up to 35% (industry average). Lower inventory levels; higher space utilization.
Reduced investment based on cost of money @ 8% Reduced inventory.
Premium shipping costs Reduced shipping errors.
Personnel handling paper - potential headcount reduction or resource redeployment* WMS automates the management of order and priorities, eliminating paper.
Personnel handling order picking - potential headcount reduction or resource redeployment* RF based picking productivity increases efficiencies.
Personnel handling shipping paperwork and confirmation - potential headcount reduction or resource redeployment* Eliminate preparation work for shipping documents and ERP ship confirmations.
Eliminate physical inventory Cycle counting will replace physical inventory requirement.


Last Updated on Wednesday, 05 October 2011 13:37
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