Vendors Share Justification Tips

May 1, 2003
Here are some creative ideas from logistics execution system suppliers on justifying software:

Joel Stachowski, senior account manager for Lilly Software. With the economy being as tough as it is and with budgets being squeezed, WMS remains one of the best places to spend IT dollars because of its many measurable, tangible ROI elements. The timeframe for payback I've found is typically 12 to 18 months, but savings can be achieved in as little as six months or as much as 2.5 years depending on how much money and effort is invested. Payback timeframe varies broadly because no two companies have the same starting point from what they're doing from a systems, process or business organization perspective.

Leo Schmidt, senior product and marketing strategist for HighJump Software. Expect to obtain a third of savings from labor, another third from freeing up excess inventory and the last from other factors including improved customer satisfaction, taking better advantage of sales in your marketplace. Boosting service, being more accurate and shipping on-time improves the competitive advantage.

Scott Rishel, vice president, business development for irista. WMS can be used to consolidate several warehouses into one by better use of storage space and reduced safety stock, thereby reducing warehouse cost. Food producers are using WMS to prevent the wrong product being added to production runs, reducing scrap and recalls.

Daniel Labell, president of Westfalia Technologies. Integrating AS/RS and warehouse software eliminates the typical delays caused by workers and paperwork. Add that up over the course of a day, a week and a year, and the productivity savings are clear.

Claus Henkel, CEO of Knapp Logistics Automation. Our Web-enabled software allows the benchmarking of warehouse performance across multiple warehouses. The cost of investment is lessened by implementing best practices by comparing all your warehouses’ productivity in specific areas.

If a worker leaves a workstation, WMS can reroute totes intelligently to distribute the workload over remaining workstations rather than let work pile up at an empty station.

J. Craig Welch, senior WMS application development manager for SK Daifuku Corp. Manpower is automatically reduced when inventory levels are decreased and time is taken out of searching for product. By eliminating dual-entry of data, labor is further decreased.

Randy Feder, sales engineer for the warehouse management systems group for Ann Arbor Computer. Most buyers don't understand that workers who take the company's orders and handle post sale issues probably spend 30 percent of their time answering questions that a WMS can put at their fingertips. In addition, credits and returns drop precipitously when your error rates improve. A WMS shows customers that you have validation throughout your processes. That means that a lot of claims that are just bogus go away since customers know you have the transaction data for tracking orders all the way back — maybe half of the claims will disappear.

Stephen Legg, president of Real Time Solutions, a division of FKI Logistex. WMS can be justified by improving equipment utilization, including carousels, AS/RS, pick-to-light and RF-controlled carts. If you have a high-speed device and everything else in the warehouse is slow, it doesn't provide much value. It may be better for the WMS to run systems slower for a longer period to maximize productivity. Rather than cutting manpower, we see better ROI through equipment utilization.

Janine Renella, senior product consultant, sales for Manhattan Associates. Payback can be achieved in 12-24 months. Ways to measure increased productivity is decreasing deadheading and improving space utilization. Managing pick location size correctly makes sure you're not spending too much time replenishing pick locations that are configured too small. By adding bar coding and radio frequency data communications you can increase productivity immensely without even looking at labor savings.

James Tompkins, president of Tompkins Associates. Some people put labor productivity at the top of the list, but the big dollars come from having happy customers and reduced inventory. You have to consider return on asset increase from WMS, which means reducing the cost of funds tied up in excess inventory.

Jack LeVan, president and CEO of Vocollect. Calculating the cost per error is important for ROI. Error rates will decrease from 15 percent to 30 percent, based on past installations. We're focusing on adapting voice systems beyond orderpicking to include receiving, putaway and cycle counting. Six- to nine-month payback is typical for voice systems.

Robert Carver, Jr., vice president, sales and marketing for Logistics & Internet Systems (LIS) Inc. We see from 10 percent to 30 percent increase in labor productivity because of reduced deadheading. If you’re depending on lift trucks to move your material, WMS can increase the life of trucks by 25 percent due to less deadheading.

Dan Gilmore, marketing and strategy results leader, Red Prairie. Sometimes in the heat of systems design, you don't have the most efficient flow of goods. Match the best material flow with the software to drive ROI.

Steve Christensen, regional sales manager for Swisslog Software USA Inc. The ability to interleave work queues alone can increase productivity by 30 percent to 40 percent. A lot of companies stating they have 98 percent picking accuracy in fact employ many workers checking the orders. Manual double-checking isn’t necessary with the proper WMS, leading to savings.

John Seidl, partner with Tompkins Associates. More recently ROI calculations are driven by transportation savings enabled by WMS. The WMS function around wave planning and order fulfillment process is being more tightly coupled with the transportation software from the same WMS vendors to allow for zone skipping and more effective use of transportation carriers, especially in the area of parcel carriers, Fed Ex, UPS, etc. and more efficient of LTL and line haul carriers.

Roger Roundtree, vice president of marketing for Cadre Technologies. WMS software allows the 3PL to be more efficient with activity building. This is another module that lets 3PLs do a more accurate job of accounting for what they've done for each customer. The modules detail exactly how long products have been stored in the warehouse and what the charge for that is.

Steve Gant, vice president, supply chain system solutions for Softeon. WMS also determines up front your packing material. If you need a carton of a certain size to pack an order, the WMS will inform the order picker of this so that by the time the order makes it to the packing line, all it needs is a few labels attached and be sent out the door. There is a lot of labor involved in picking into totes, sending the totes to the packing line and repackaging the goods for shipment.

John Davies, co-founder and vice president of product marketing for Optum. Look for WMS to provide visibility of Advanced Shipping Notices to drive receiving operations. The WMS allows workload planning and scheduling so the right number of workers are assigned, permits priority order handling and improved inventory allocation which mean reduced purchases, better hub transfers and increased inventory turns.

Fewer Mispicks, Better Throughput Drive ROI for Liquor Distributor

The Oregon Liquor Control Commission (OLCC) knows the value of prompt service. Charged with the sale and distribution of distilled spirits to 238 liquor stores, military bases and casinos, the OLCC annually ships $254.5 million yearly in sales with 1.7 million full cases and an additional 2,150,000 bottles from its 124,000-square-foot distribution center located in Milwaukie, Oregon.

Steve Pharo, director of purchasing and distribution at OLCC was tasked with selecting and implementing a warehouse management system (WMS) on an aggressive timeline. Return on investment (ROI) was calculated on a need to reduce mispicks, to keep enough inventory stocked, to increase system throughput and track individual worker productivity. These factors all helped drive the adoption of a WMS and its return on investment.

After a selection process the OLCC selected RIMS (Robocom Inventory Management System), a WMS system by Robocom Systems International Inc. The project began in May 2002 and the WMS went live just ten weeks later -- on time and within budget. The OLCC granted acceptance of the system in September in time to meet its holiday business orders and allowed Oregonians to enjoy a collective holiday toast.

Once the new WMS system was in place, OLCC sought to further improve accuracy and cut operating expenses. After installation an operational review found a 20 percent reduction in split-case picking errors. Receiving time was reduced by 20 percent. There has also been a 15 percent improvement in efficiency for the warehouse scheduler/dispatcher. The OLCC has enjoyed an additional unexpected 66 percent cut in paper costs with its new radio frequency data communication network using portable, wearable terminals and scanners.

Considering the gains realized during the first few months of the new RIMS operation, the OLCC has targeted even more ambitious goals for the upcoming year. According to Steve Pharo, "Given the new-found warehouse flexibility and productivity, we will next be looking at statistics for space utilization, warehouse throughput and reduced safety stock." Overall, the liquor agencies are happy with the information on the new packing slips provided by RIMS as previous packing slips lacked sufficient detail.

White Papers Outline Justification Strategies

A white paper from irista, A Guide to Justifying Warehouse Management Systems, offers a range of savings areas for those contemplating a WMS purchase. They include these important benefits:

• Intangible: reduced backorders and safety stock, reduced freight costs and missed schedules, the elimination of information errors and reduced information lead time, real-time information and increased data accuracy.

• Strategic: Improved customer service and better total quality, reduced lost sales and the ability to deliver orders Just-In-Time and to perform automatic customer replenishment.

There is a helpful chart for calculating costs and savings. 10 pages. Find at or phone (262) 860-7000.

Also available is a WMS ROI Work Sheet, an Excel spreadsheet that covers inventory makeup, workforce, overtime and more. Contact Scott Rishel of irista at (262) 860-6613.

Warehouse Management System Cost Justification by Marc Wulfraat of KOM International, a consulting firm, offers extensive sections on quantitative cost savings with charts that you can fill in to help put a cost on direct and indirect labor. Potential WMS gains are evaluated for receiving/putaway, orderpicking, shipping and more. Outbound transportation savings is also covered. 27 pages. Visit to download.

Voice Technology: Cost Per Error and Return on Investment by Mike Miller of Vocollect discusses a survey on warehouse accuracy by Thomas Speh of the Warehousing Research Center and helps calculate a cost per error across a wide range of warehouse activities. 8 pages. Request a copy at [email protected] or visit

Exposing the Costs of Supply Chain Execution and Warehouse Management Software by HighJump Software and PwC Consulting, a division of PricewaterhouseCoopers offers sections on cost and inventory management, order management and customer service. 8 pages. Request from [email protected] or visit

A free ROI toolkit for WMS software is available at

ERP vs. SCE: Choosing Enterprise Resource Planning or Supply Chain Execution Technology for Supply Chain Efficiency and Savings by John Spain of Tompkins Associates offers a section on comparing ERP and SCE software in terms of general warehousing, labor management, supply chain visibility and more. Phone 800 789-1257 or find at

Project Evaluation Worksheet is a calculator for savings in receiving, quality control, rewarehousing and picking/shipping based on a four-page questionnaire. E-mail to [email protected] or visit

Beyond Software: Maximizing Value via Outsourcing by Adrian Gonzalez of the ARC Advisory Group is 15 pages long and highlights an executive overview of software outsourcing as well as helpful charts that compare Tier 1 to Tier 3 companies in their outsourcing of WMS, TMS, etc. Go to Click on "Resource Center," register, then download.

Logistics Execution Systems: A Guide to Understanding and Procuring LES is a 165 page guide from the LESA Product Group of MHIA. It provides a roadmap for procurement, presents justification worksheets and includes case studies and more. Order at $195 through MHI at 800 345-1815. Also see one-page case studies highlighting WMS applications at

ROI for TransportationSoftware

Rodger Mullen, president of Schneider Logistics provides this overview for return on investment for transportation management systems (TMS).

• Choose a vendor with a successful track record. Look for vendors that deliver measurable ROI with their technology, staff and processes.

• Assess your needs and match them carefully to vendor’s software. Not every provider has expertise in all areas of the supply chain. Managing the flow of material, funds and information is critical.

• Choose a vendor with a quick ROI. If a vendor has experience, expertise and an established network, it should deliver ROI in less than 18 months.

• Be honest about implementation. A key factor to ROI is the time it takes to get the software up and running. Top vendors can deliver a realistic timeline of about 90 days or less.

Schneider Logistics offers software for monitoring inbound shipments, route planning and transportation system improvement. Visit

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