More than half of respondents specifically referred to their warehouse management systems (WMS) and stated the following reasons for the application’s failure to provide expected return on investment:
- The expected ROI is not clearly defined. From three months to three years, there were wide-ranging responses to the timeline for realizing ROI.
- There is disappointment with the perceived ROI. As many as 34% of responders were uncertain as to whether the software had met the company’s expectations for ROI.
- The application overpromised and underperformed. From vendors overstating software performance to endless modifications and IT drains, responders felt they did not get what they needed from the tool.
Achieving ROI: What’s your Strategy?
Unmet ROI expectations are not limited to software failures. Too often, expectations are not appropriately established, and there is no plan in place to define what ROI looks like for your specific organization. Ask yourself the following questions before developing a strategy for your WMS deployment:
- Does the WMS meet your organizational goals? The more you (and users in every department) understand the short term and long term goals of the company, the more likely you’ll be to set realistic expectations for a return on the investment.
- What is the cost of not changing or upgrading the WMS? Gain an understanding of how much money is lost annually due to fines, lost inventory, and labor. Before you’ve done anything with it at all, the saved cost from accuracy gains you can attribute to a new WMS can quickly justify its cost.
- How long is it going to take before the benefits of the system begin to outweigh its costs? Determine whether the investment needs to be customized to satisfy a realistic budget year estimate, whether short or long term, to achieve ROI.
- What do you expect to improve? Whether its labor management, inventory management, space optimization, fines, billing or operational processes, identify particular challenges for your organization.
How specifically will you define ROI?
There are four distinct ways that you can define, track and measure the ROI of a WMS.
- Inventory Management: Managing your inventory more effectively will help you limit other costs associated with doing business.
- Space Management: Utilizing space better, you can increase capacity, streamline warehouse processes, reduce the amount of travel your labor has to do throughout the day, and increase the overall efficiency of your operations.
- Labor Management: Proper labor management tracking and reporting can reduce labor costs up to 25 percent, meaning the ROI from labor management alone can justify the cost of a new WMS.
- Compliance Management: Transparency within your supply chain can go a long way toward minimizing financial and reputational losses in the event of a recall.
ROI and the Cloud
Upgrading to a cloud WMS is by far the most effective way to reach the desired ROI. 53 percent of survey respondents who chose to use cloud-based versions of their applications said that they realized ROI at a faster rate.