We have covered in previous posts two areas where a company has the opportunity to reduce or eliminate hard earned profits from leaking out of their warehouse operation.
let’s turn our attention to arguably the area of the operation most fraught with inefficiency and mistakes, picking and shipping.
Improved Picking Productivity
One of the major gains a WMS provides a warehouse is the automation of the pick process. Most WMS solutions provide various methods for automating and guiding pickers through the warehouse in a logical and efficient manner. You have the ability to create pick paths and pick processes that best meet you business needs. By doing so you greatly improve the speed and accuracy of the picking process and that equals savings. You eliminate “dead heading” and backtracking: by sequencing location picking procedures. Here is an example of the savings;
- Average number of pickers in warehouse 10
- Average # of hours/picker/year 1600
- Average hourly rate w/burden $18.00
- Estimated productivity improvement 20% (industry avg.16% to 20%)
- Estimated saving per year $50,400.00
By Integrating the WMS to the ERP or business management software significant savings occur. By creating an automated system you virtually eliminate paperwork and all the labor associated with it.
Reduced Clerical Effort
Electronic/RF data processing of sales orders will eliminate manual filing systems and the need to update and track orders as they are closed/fulfilled. Real-time picking and order confirmation will eliminate the need to keypunch and verify sales order transactions. The overhead costs related to these processes which were once done manually are saved and the funds once used to pay people to do this work are returned to the bottom line. This does not even take into account the elimination of data entry delay and errors that cost thousands of dollars annually.
Paperwork Production
Real-time picking will eliminate the need for any paperwork transfer to data processing. The amount of paper and printing costs virtually goes to zero. You become a much more ecologically efficient and aware organization.
Picking/Shipping Accuracy
The use of RF and scanning will reduce errors. Errors are so costly in many ways. Just fixing one error can cost hundreds of dollars. Recently a WMS prospect said that they were already 98.5% accurate in their outbound shipments. Very impressive for a manually run operation. This sounded good till we dug a little deeper. The company shipped an average of 650 orders per day. At a 1.5% error rate meant 9.75 errors per day went out the door. An Industry average on the cost associated with rectifying a shipping error is 75.00. That means that this prospect pays in a 5 day week at least $3,600.00 to fix shipping errors. If you multiple that by 52 weeks the number becomes a staggering $190,125.00. This does not take into consideration the customer ill will caused by the errors or the additional time and efforts that must be spent to make sure the errors do not happen in the first place. This is not to say that a WMS will eliminate all errors. But cutting errors by 50% or more, meaningful dollars are returned to the cash flow of your business.
Intangible Benefits
- Automatic order sequencing by shipping routes.
- Better scheduling.
- Eliminate error prone pick lists and paper trails.
- Automatic outbound order verification
- Increase inventory accuracy (verify quantity, site, location by pick).
- Eliminate expediting charges.
- Reduce or eliminate checking process during order packaging.
- Better customer service and satisfaction.
In closing a “Best of Breed” warehouse management system can turn your warehouse operation from a cost center into a profit center. The return on investment a business can realize can be substantial and obtained quickly. It’s well worth your time to investigate this technology and determine if it will help you recapture lost profits.
