WMS Evaluation & Selection – Low Cost vs. Thorough ROI Approach
Ten years ago, many supply chain experts believed that the market for warehouse management systems (WMS) was rapidly contracting and substantially lower revenues would cripple the vendor community. Instead, the major players in this space are experiencing record years and a large number of other WMS companies emerged to fill market niches.
When considering the top tier, or tier one vendors as they are often referred to, relative to many of the niche providers, there is a huge discrepancy in license fees, implementation costs and ongoing maintenance/support expense. Opting for a lower cost WMS can be extremely tempting, especially with a cursory review of functional capabilities, at which level these systems appear to be similar. Many companies find this decision daunting and struggle to determine which system provides the best value. It is certainly not as simple as deciding on the lowest cost option. 
Fortunately, a process exists to systematically evaluate the options available in the marketplace, the WMS evaluation/selection process. By identifying the functionality and technical requirements that will enable substantial workforce performance improvements and understanding the security and redundancy needed to minimize risk and provide the appropriate level of visibility to management and customers, companies can objectively compare software systems to find the best ‘bang for the buck’. The evaluation/selection process also uncovers the true cost of purchasing, implementing and maintaining each of the WMS being considered, including:
- License/subscription fees
- Vendor integration and internal implementation costs
- WMS annual maintenance/support fees
- Internal ongoing operational costs for wave manager(s), superuser(s), etc.
To better understand the benefits of taking a disciplined and thorough approach to selecting a WMS vendor and package versus buying the low-cost option, take a look at the following examples.
These scenarios follow two Fortune 500 companies in the retail space that are at a crossroads for their e-Commerce fulfillment network.
Example one:
A company decided they needed to expand their e-Commerce fulfillment capabilities from the manual and obsolete software systems the distribution operations were currently dependent upon. The management team, unaware of the value of a disciplined approach to evaluating and selecting a WMS, viewed the WMS landscape, requested quotes and selected a vendor based primarily on cost, with minimal regard to the value proposition it provided. From there, the company designed its facility and operation around the base package of the WMS vendor. The operations team wanted to avoid customizations as much possible, since they did not identify the need for extensions or customizations before their internal investment request and, therefore, did not fund them. As operation design and planning progressed, the company identified multiple gaps of varying severity between how they felt they should run their business and what the WMS base configuration offered. This led to the operations team developing processes and workflows around the WMS to get close to their objective, although, in a less efficient, more cumbersome and costly manner.
Over the ensuing years, the company struggled with additional fulfillment costs due to higher indirect labor for troubleshooting, more inefficient processes leading to higher costs per unit shipped and longer fulfillment cycle times for their customers. For example, a department of more than 50 associates across multiple shifts existed for the sole purpose of reconciling customer order exceptions that they could have addressed through more systemic means. Fulfillment of these orders was often held for hours or days awaiting reconciliation, with the need to either upgrade shipping to next-day or accept that the delivery would miss the customer’s delivery expectation.
Example two:
Another company needed to modernize and upgrade to a more robust software solution to support its growth and ever-increasing customer service expectations. The management team followed a disciplined approach and first defined how each of their fulfillment nodes should operate to meet their customer service objective.
Based on the newly derived understanding of the current and expected future business requirements, the management team performed a thorough evaluation of potential WMS vendors and chose the one that provided the best value proposition for their specific needs. Additionally, the team participated in multiple workshops with their WMS vendor to design a system that addressed their objectives. The WMS aligned closely with their operational vision and could be configured to meet almost all operational needs, with flexibility for minor extensions to the system to plug any gaps. The company adjusted its schedule for going live with the WMS to account for due diligence as they focused and challenged themselves internally to ensure they took the correct assumptions and steps to execute their company vision.
Which company are you?
The second company incurred more up-front costs and schedule impacts due to very detailed and in-depth design reviews, intense configuration validations and logic extensions of the WMS system to fully fit their requirements. While the first company went live more quickly and with less cost, they pigeonholed themselves into a situation where their execution was tied to a WMS system and its capabilities rather than the ability and talent of their own teams. In the first example, the company discovered that, once the system was live in production, it was challenging and risky to incorporate significant changes.
Do you want to be the company that is defined by the “base” capabilities of an inflexible and out of the box solution? Or do you want to be the company that finds a partner whose solution will complement your operational needs and enable you to meet your customers’ ever-increasing expectations?
How 4SiGHT can help
4SiGHT’s deep pedigree in WMS evaluation, design and implementation equips our consultants to work with companies across a broad array of industries to help them optimize their operations through a proven WMS implementation process. We believe strongly that commitment to a structured approach to selection and implementation of WMS software results in a more successful go-live and, most importantly, in achieving a highly successful fulfillment operation.
Contact us to get started.
