Introduction
I
just returned from a week long conference and as one of the speakers/vendors
there, I was not looking to receive the same thing that the attendees were looking
to receive. I was looking for clients; however, I mostly found "patients". I
found most of my time was spent psychoanalyzing what people had been told by
competitors and other logistics companies. Many of the people I spoke with were
confused about what was available. They had question after question about systems
on the market; the ROI they could expect; the time it would take to implement
a system; and of course, whether a system was for their company or not.
After
the conference and feeling like pop TV therapist, Dr. Phil, I realized that
people needed more education about what to look for when searching for a warehouse
management system (WMS) or any new technology for a warehouse. I began
writing on the plane ride home and came up with a list of myths of WMS solutions
and suggestions when searching for a WMS solution. You have to know what features
and functionality you are looking for when searching for a warehouse management
system. There are some good systems on the market that do a lot of different
things, but you have to know what your expectations are and how far those expectations
are from reality. The best way to separate fiction from fact is to bring in
an expert. Remember this is not like purchasing a car or a computer for you
home. You cannot simply ask several people a lot of questions and then assume
you are an expert. You have to begin with a foundation that is built without
bias. Only then can you begin evaluating system. In other words, you have to
know what your current needs are and what your future requirements will be before
beginning your search, not just what bells and whistles are available.
This
is Part One of a two-part series.
Part
One will describe the popular myths encountered when looking for a warehouse
management system.
Part
Two will describe how to assess your current warehouse processes to find the
best system that meets your needs.
The Myths
Myth
#1 Huge Staff Reductions
Everyone
I spoke with at the conference said she or he was told to expect to reduce warehouse
staff by as much as 30 percent in the first year. The first time someone said
this, my initial response was disbelief. After that, I had to respond to what
I considered to be "a lie".
For example, the very first system that I implemented as a customer resulted in major staff reductions in specific areas of the warehouse, mainly receiving and picking. However, this was not solely because of the WMS system. We had four receivers who worked to complete the day's receipts by 4:00 PM. With our manual system, the product arrived at 8:00 AM and each receiver would process paperwork then putaway the product. However, this old manual process didn't work well with the new WMS system, so we began our transformation by having the delivery drivers arrive an hour earlier, which gave our receivers an hour of uninterrupted work. We also divided the department into receivers and putaway people, which let receivers process paperwork and answer receiving questions, while the others focused on the putaway. The net effect was that we reduced the staff in the receiving department by one person while simultaneously completing the same amount of receipts by 2:00 PM. In other words, we reduced the staff by 25 percent and completed the work in twenty-one hours instead of thirty-two hours. But was the WMS system the sole cause of the increase in productivity? Of course not! However, you would not know this as prospect speaking with the vendor. They touted that their system reduced our staff by 25 percent and allowed us to process the same amount of work in less than 60 percent of the time.
Another
person at the conference was told that a WMS system would be up and running
in about three to six months. Again after giving a look of disbelief, I had
to respond. I have worked with several different companies' implementing WMS
systems and have yet to see someone properly implement a system in less than
a year. Obviously these were larger warehouses, but this was even the case for
ones that were 30,000 square feet with fifteen people. The problem was not that
the systems were too complex, but that these companies had problems that needed
to be addressed prior to going live on the system. Process failures are the
result of a company's culture and not the result of an archaic system. Therefore,
the culture must be addressed prior to, for example, installing barcodes.
Most people I speak with think that barcodes have been sent from heaven. However, once they purchase the software and begin dealing with consultants and software vendors—not to mention their own purchasing and customer service departments—they realize it will take divine intervention to get the system running. The problem is that as the frustration level gets higher, it takes longer to implement the system. Leaders of most organizations are under extreme pressure to produce, but execution must come from the middle managers. Middle managers are so overworked that they leave details up to the supervisors. Supervisors are so busy dealing with the day-to-day issues that things get overlooked and placed on the back burner. Pretty soon finger pointing starts and no one wants to take responsibility for taking so much time to do something that everyone thought would be so simple. Upper management was expecting to receive an ROI within eighteen months and it has taken twelve just to get the software working.
So what happens as the frustration level begins to rise? The implementation team begins throwing the once detailed plan out the window in an effort just to meet the new go-live date—a date that has been pulled out of thin air by their frustrated manager. Upper management begins citing "paralysis by analysis" with the common phrase being, "You guys are trying to over analyze everything and aren't getting any real work done. Get out there on the warehouse floor and get this thing up and running."
Fear sets in and the implementation team works to make the date, only to experience problems. Now the once demanding manager begins to wonder why no one saw these problems coming, and starts to ask, "What were all of those meeting for?" No one wants to say they did see the problems and that was why it took so long in the first place, but for the sake of time, the team chose to overlook the potential problems in order to get the system running.
As
I listened to one vendor tout an ROI in eighteen months or less, I began walking
away before I opened my big mouth and was forcefully removed from the conference.
I can tell you this as a consultant and as the president of a WMS systems provider:
You will receive every penny you invest in your system back, but whether that
will be in eighteen months or thirty-six months depends.
I
explained the problem with ROI in warehouses in an article several years ago
titled, " ROI
in Your Warehouse! (Real or Imagined?) ". You have to know what something
is costing you before you can expect a return on your investment. When you first
started reading, I began talking about cars, so let's go back there. Think back
to the old car you used to own before you became a success. Think about conversations
with friends and yourself to rationalize getting a new car. Your friend probably
said, "That car is costing you a fortune. It's always in the shop and is a gas
guzzler. Why don't you just get rid of it?" You probably said to yourself: "I
just had a new alternator put in, a new oil pump installed, and now the car
needs new tires and a new starter." You then concluded it was time to "invest"
in a new car. So you went to the dealership and the sales representative told
you about the gas mileage, the warranty, and of course the lumbar support in
the driver seat. You read the brochure, told your family and friends, went for
a test drive, and signed on the dotted line.
A little while later, something started rattling that was not included in the warranty and as you were paying to have the dealer fix it, you started to think "Did I really need a new car?" You ask yourself, "How much was I really paying to maintain the car I had?" With the new car, your Department of Motor Vehicles renewal fee is higher; your insurance is higher; however, it probably gets better gas mileage, but the tank is bigger. Because you never tracked the expenses of you old car, you don't have a point of comparison. Well, it is the same with your warehouse. You need a point of comparison to see if you really need a new system.
You have to know what you are spending to expect a legitimate ROI. When a vendor says that ROI will come in eighteen months, that assessment is based on what you are currently measuring. Vendors never tell you that the cost to implement is not included in that eighteen months. Nor will they tell you that the cost to have the system interfaced to your existing (possibly outdated) ERP system or cost for the consultants, the overtime you will spend, and the loss of customer orders because this new system requires a learning curve, is not included in that eighteen month ROI. These are all questions that must be asked prior to the purchase. You can't just walk out of a site visit with the vendor and be consumed by the "new car smell," and then ignore what the true costs will be to get your warehouse from manual to automated.
Every
penny you invest into the overall process will be returned to you! But when
a vendor says the ROI is eighteen months ask them, "Is that real or imagined?"
?
There
are a lot of great systems in the marketplace—there are probably some systems
that will cook breakfast for your warehouse personnel as they arrive to work,
but do you need that? Do you need to cross-dock your orders when your fill rates
are low, causing backorders to be received then putaway to stocking locations
so a complete order can be shipped? Do you need a function that will re-slot
your warehouse based on product movement when you can't even get your warehouse
personnel to complete their replenishment instructions and clean the warehouse
with regularity? These are all excellent functions that provide quantifiable
value to some companies and extra maintenance payments to others. I am not saying
you don't need the extra bells and whistles, but how often do you cool your
soda in the glove box of your car? Probably never! And it will be the same with
your warehouse. All you need are the basics to operate your warehouse effectively
and efficiently. You have to determine what those basics are then begin your
search to find them and implement them in a timely manner.