With a constrained budget, it is often hard to justify significant investments in new supply chain software, especially when applying a standard ROI analysis. The question remains if a business can afford not to. The supply chain is a highly dynamic environment and investing in the right supply chain solutions can significantly improve workflow efficiency, transparency, and processes. Plus, it can also enable new business models, for example by helping brick-and-mortar retailers embrace e-commerce as an additional channel. These criteria are key to justifying new investments in supply chain technology and achieving demonstrable return on investment (ROI).
Consider geographic needs
The investment needs of a business are largely dictated by the supply chain challenges of their particular environment. These can differ significantly by geographical region:
Transparency and efficacy are key elements in the US, which means investment in workflow and process improvements is crucial. Firms here demand more system-directed activity to enhance visibility and reporting, leading to more accurate measurement and control of investment. The lack of available warehouse space calls for warehouse optimization, especially in light of diversified product lines and distribution channels to meet increasing customer demand.
High labor costs in Australia make it necessary to reduce dependency on it. This means investing in systems that allow businesses to rapidly adapt to market fluctuations, such as through automation equipment or autonomous mobile robots (AMR). Compared to most businesses worldwide, where ROI is expected over ten years or more due to volatile market conditions, Asian markets are more focused on the next 3-5 years. Although they plan for the long term, they need to be more pragmatic about for example what stock to buy in to remain competitive.
Many businesses here already have at least a basic level of supply chain technology in place, especially in terms of warehouse management. Hence, main drivers for new solutions are increased workflow efficiencies and development of new business models. Both software capabilities and automation are underlying enablers for these improvements. The investment in the latter is further fueled due to scarcity and cost of real estate for warehouses, which encourages the development of multi-level facilities that have to be enabled with automation components. They reduce dependency on high labor cost.
Justifying the investment
Instead of taking a classical ROI analysis as the primary measure, businesses often consider other criteria such as increased productivity, improved efficiency, or the ability to address increasing volume of online business first. Plus, they prioritize finding a vendor with the experience and means to satisfy their warehousing needs. The good news is that investments will eventually be recouped, especially considering that warehouse management systems (WMS) typically stay in use for 10-15 years.
Businesses commonly look to address the following objectives which contribute to long-term ROI:
- Workflow efficiency – Leveraging new WMS capabilities to improve current workflows can significantly increase efficiencies by improving throughput, accuracy, and speed of fulfillment.
- Supply chain automation – Introducing automation equipment can increase productivity and throughput, while reducing error rates. It can also compensate for reduced staff levels, for example, due to changed labor regulations as a result of COVID-19.
- Enabling new business models – e-commerce and multichannel business models are becoming increasingly important for organizations of all sizes. Modern WMS’ offer targeted functionality for efficient and accurate fulfillment of these orders, and help businesses stay relevant and competitive.
- Optimizing operations – Modern WMS’ and other supply chain solutions improve the visibility of your warehouse processes and inventory. This helps you proactively identify bottlenecks and address potential shortages and disruptions to order fulfillment processes.
- Avoiding compliance fines – Advanced supply chain solutions centralize your data and increase transparency. They also offer functionality to manage compliance and audit processes - from quality management procedures to safe storage of hazardous goods.
Upgrading an existing system
It can also be the case that an older warehouse management system is now lacking essential capabilities or requires specialist resources to operate. In this case, investment needs are more functional. That means upgrades are crucial to ensure continued smooth warehouse operations and are often not subject to an ROI analysis.
If your business is looking to upgrade or introduce a WMS, there is more to consider than the immediate monetary aspect of ROI. It is not just about improving current operations but also being prepared for the future, in terms of risk mitigation as well as scalability.
In order to implement a system, look for a highly experienced supply chain partner with global experience such as Körber who can help you identify areas for process improvements and efficiency gains. As every warehouse is different, the warehouse management solution will be, too. By tailoring it to your requirements and underlying businesses, your partner will help you maximize the ROI of your warehouse management investments.