Much has been written about the potential return on investment that a warehouse management system can offer companies in the wholesale distribution business.  This includes virtually all types of distributors.

Recapuring Lost Profits in Warehouse White Paper

It can also include manufacturers that make stock and sell products.  This white paper will review the three key areas of warehouse activity and how money (profits) can be recaptured.  These three areas are;

  1. Warehouse activities
  2. Receiving activities
  3. Picking/shipping activities.

3.  Picking & Shipping Activity

We have covered two areas where a company has the opportunity to reduce or eliminate hard earned profits from leaking out of their warehouse operation.  Picking and shipping are arguably the areas of the operation most fraught with inefficiency and mistakes,

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 SOs 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.

Shipping Accuracy

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.  That is very impressive for a manually run operation and sounds good till we look a little closer.  The company shipped an average of 650 orders per day.  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 effort that must be spent to make sure the errors do not continue.  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.

Request the full white paper: Recapturing Lost Profits in the Warehouse 

Visit our Warehouse Management Systems information page here

Posted by iCepts Technology Group-A Pennsylvania Accellos One WMS Partner