Issue Date: 11 May 2009
TIME TO INVEST IN NEW WAREHOUSE SYSTEMS!
By Alex Mills, Sales & Marketing Director, Chess Logistics Technology Limited
The suggestion to invest in new warehouse applications now may not at first glance seem the wisest counsel. But there are a number of good reasons why improving your warehouse systems and technology during a downturn could be a good idea. Taking such a measure might not only help your business in the short and medium term, it could also leave it more efficient and better organised to cope with economic recovery later.
We make an assumption here that your business has the financial reserves to consider such a move. But even if not cash rich, there are (credit crunch not withstanding) attractive tax efficient leasing options available that allow such projects to proceed if the business is stable with a reasonable cash flow. The key message is that improving warehouse efficiency by advancing the solutions you use is going to save money. The questions you’ll need to answer are: how much and how soon?
It is generally accepted that successfully implementing WMS delivers the better accuracy, productivity and efficiency that impact positively on physical operations as well as having a significant effect on cost reduction. High error rates alone can represent a large element of cost, which if saved can contribute substantially to WMS payback. Labour costs, when compared to rent, rates and utilities, are one element of warehouse operations over which you can exercise some control. Much is written about improving labour management for the simple reason that in the UK warehousing context, manpower is one thing that simply cannot be outsourced. Systems designed to promote efficient processes and improve productivity can therefore have only positive effects on cost reduction and bottom line profitability.
It is true of course that not all these benefits and savings can be delivered overnight and that some of the rationale for any WMS project is based on an eye to future cost reduction and efficiency. But it is possible to focus the impact of warehouse technology and systems on areas where they can deliver maximum punch. WMS and technology implementation often takes a phased approach, and a good warehouse systems company will be able to help you decide where key benefits can be realised faster within your own operation. These might be in obvious areas like pick performance or in fringe areas such as introducing EDI with customers or suppliers to help reduce manual data input and paperwork.
Another good reason for considering the implementation of WMS systems in quieter times is the lessening of the negative, though short term, impact of the change. There is inevitably some disruption and learning curve involved in implementing new solutions of this kind. Going ahead while lower volumes are being processed means that people can become practised in the use of new systems and technology and can in effect ‘cut their teeth’ under less pressure. This is not to suggest that companies can offer lower service levels while installing WMS, just that any pain which must be endured can be done so while volumes are lower. As any company that has tried to implement WMS in a time of high growth knows it can be a challenging, if not to say hazardous, exercise. For that reason people are often reluctant to change at such times which, though understandable, can result in bottlenecks and reduced performance when systems do not keep pace with expanded operations.
Timescale is an important factor with any implementation. But if we expect a WMS to provide tangible benefits within the timeframe of a potential recession then an expeditious implementation is paramount. Typically, and I speak from my company’s standpoint here, an implementation can be achieved within 3-6 months depending on the nature of the operation. This relies significantly on choosing the right supplier as well as having a full awareness within your own organisation of the work involved in hitting the timescale. But broadly speaking we are talking about realising potential benefits within months not years so this is more than a ‘jam tomorrow’ promise.
Those who have been in business for some years have probably experienced some ups and downs and know that business is cyclical. But, without wishing to challenge any political theories, that does not mean if it’s not boom, it’s bust!. Periods of economic slowdown can often be used positively for consolidation and improvement as a means to develop and perform better during stronger growth periods. This is true for warehousing and logistics operations where taking a cold, hard look at practices and processes, and improving systems and technology can be invaluable to regeneration. Those who grasp the opportunity may find it easier to withstand a period of recession and emerge stronger than their competitors when the economy recovers.