Many manufacturing companies get to a certain point in their growth cycles very successfully relying on an entirely paper based operation. It has been common in the Asia Pacific markets as businesses have grown rapidly, had the ability to employ large numbers of warehouse staff cost effectively and had no real need to provide customers with an audit trail of operations. This is now changing. Labour and operational costs, especially in China, have risen significantly and are causing companies to either consider outsourcing warehouse operations to a less expensive country or make a strategic business decision to invest in warehouse management (WMS) technology. Added to this comes an expectation from international customers for greater stock accuracy and visibility that a WMS will bring. This article highlights 10 telltale signs that indicate when your company needs to consider investing in a warehouse management system (WMS).
Firstly, let’s be clear that there is never actually a wrong time to implement a WMS, but there are some overriding factors that we hear from companies who are making the transition from paper to technology. Most typically their desire to implement technology arises from their ambitious plans for significant growth, which is going to be a problem to achieve and sustain based on current warehouse operations.
So what are the common warning signs?
1. Not finishing the order pool
One obvious indicator is not being able to complete the day’s order pool. In other words, you are not managing to process all the orders coming in – which is especially relevant if timescales are tight and products need to be picked the same day. This problem often actually arises because of another issue – stock being difficult to find. Not having accurate visibility of where stock is located in the right quantities means you are relying on the knowledge of your operatives to find stock around the warehouse. If they happen to be off work, or during busy periods, you will struggle to maintain the required throughput levels.
2. Increasing customer returns
Many companies expect a high level of returns because they are selling products that customers will buy multiples of, with a view to returning any that are unsuitable. It is especially common in the fashion and apparel industries and this tendency is built into the business model. But what about when returns are occurring because you have shipped the wrong items? Unless it is part of your service offering, any company with a returns rate of 3% or more needs to question why. Is the issue arising because of poor picking and dispatching accuracy? Could it be resolved using technology to improve control over the process?
3. Time spent on staff training
High levels of forecasted growth usually means more people being employed and at this stage you need to consider whether the strategy is to sustain that growth with a larger workforce, or with technology to automate key processes and improve efficiency. In the long term, the latter is always more profitable and in many cases means you can achieve your growth objectives without the need to increase headcount significantly. Growth usually means more staff are required but will they be the right staff?
4. Coping with seasonality and demand peaks
Linked to the previous point, most companies experience demand seasonality of some kind and a requirement to employ extra staff to cope with busy periods in the warehouse. Annual festivals, such as Christmas, Eid, Diwali, Chinese New Year and Hanukkah, plus seasonal weather changes, create sudden peaks and can bring training and productivity problems.
Employment costs increase because extra people are needed, many of whom are untrained and will need time to get up to full speed. This usually increases training costs because new workers need to be supported by an experienced warehouse operative at the start of their shift. If these people are employed through an agency and change every few of days the productivity of the person tasked with helping them get up to speed is also eroded.
Unless your company completely avoids any seasonality, this will be an ongoing problem. A WMS can relieve this situation by enabling your warehouse manager to identify how to do more with the resources already available. How can you fulfill demand with the assets and resources you already have rather than immediately employing additional resources?
5. Spending a large proportion of time on administration
How much time should your warehouse manager be spending on administration?
The answer always depends on the size of your business. But if your staff are spending a disproportionate amount on administration – reporting and planning, processing orders, manually inputting information into the system – you need to question whether it is time well spent.
6. Spending a large proportion of time firefighting
Warehouses are dynamic environments and a certain amount of unexpected problem solving and trouble-shooting will always be required. That is normal, but longer-term problems occur when your people are treading water on a permanent basis and spending more time dealing with anomalies and queries than doing the job they are employed to do. For example, if your inventory manager never gets the chance to properly count and manage stock because they spend too much time resolving day to day stock queries.
7. Ability to comply with unexpected audit requests
Demand for traceability at all levels has increased. This is due to a requirement for safety compliance, product recall management and also an expectation among customers for greater product provenance information. Although not impossible, it is very difficult to achieve and manage product traceability records manually on paper and requires the highest levels of discipline.
In some industries, the level of information captured may not be adequate and a dedicated track and trace system becomes imperative to deliver the digital audit trail expected by your customers.
It is also increasingly common for your customers to request an unannounced audit and require an immediate report showing all stock deliveries to verify the provenance of raw materials. This is especially common in the food industry and a decision making factor for many firms.
8. Having to check quality into a process
Linked to the issue of time spent on admin is the increased requirement to invest time in auditing warehouse processes. If your company needs to double check your processes and employ additional staff to complete quality check procedures, it’s a good indicator that technology would be a worthwhile investment. This will ensure that greater accuracy (i.e. quality) is built into your processes as a whole, rather than a final verification check which has the knock on impact of slowing down the process even more.
9. Warehouse metrics slipping.
On Time In Full (OTIF) is a classic metric that immediately highlights whether procedures could be improved with the addition of a warehouse management system (WMS). In addition, the percentage of returns being processed is another classic indicator. With the exception of the apparel industries, a returns rate of higher than 3% highlights a picking accuracy problem that can be addressed with technology.
10. Poor trust in the process
Overall, when problems like the ones described in this article occur over a longer period of time, it creates a lack of trust in the warehouse process. People from across the business stop believing their operational reports and question the accuracy of information arising from the warehouse. Customer satisfaction levels drop, service level agreements cannot be met and the warehouse gets the blame.
There is no one size fits all answer to when your company should consider implementing a warehouse management system, but these 10 warning signs provide very useful indicators that just about every industry sector can identify with.