There are a multitude of WMS solutions available today and the costs associated with each are varied. While navigating through the maze of WMS providers and features can be daunting, the good news for buyers is that competition is resulting in affordable warehouse management systems. The cost is even more attractive with the availability of creative price models including the emerging software as a service (SaaS) options. As an example, we recently had a customer successfully implement our entry level ADC system for ~$10K. This includes software, hardware and services.
First, let’s take a minute to explore the typical costs associated with the purchase of a WMS. These costs include:
- Purchase of the software license. In most cases you will purchase a license to use the software purchased.
- Cost to upgrade over time. Most software providers offer a limited upgrade path which often is limited to just adding users. Upgrading to additional functionality might require ditching your current solution and purchasing a completely different product. We refer to this as “rip and replace” and even though the solution provider might offer to discount the software, many of the services costs must be purchased. Ideally you should look for a price model that enables you to purchase the features and functionality you need today with an upgrade path on the same code set that will fit your growth into the future.
- Implementation services. Developers and resellers may offer implementation services as a part of the WMS purchase. These services can include; project management, installation, setup and configuration, customizations, training, testing and Go-Live. Selecting the right amount of services is complex but look for a good balance with an emphasis on testing. Also talk to references about where, based on their experience, they would invest in services.
- Project creep. Costs associated with project creep are the most frustrating and common detriments to the success of the project and the relationships between the partners. The most common reason for project creep happens when the customer reveals a previously unknown process that wasn’t discussed during the sales process. To deal with the process, additional costs are required. Project creep also occurs when the customer sees the benefits of the WMS during the implementation and envisions further benefits. This “wish list” expands beyond the agreed to project and results in more costs. Finally, the solution provider can also be the cause of project creep by purposefully limiting their capabilities during the sales process and then offering critical services during the implementation.
- Annual maintenance. Annual maintenance provides support for the WMS solution over time. Providers may provide varying support options. My recommendation would be to select a support plan that provides maximum service during the first year and then look to reduce the plan in subsequent years. The reason for this strategy is that implementing a new system is at first destructive to your former operations and users spend the first few months acclimating to the new system and processes. Support incidents are higher during the first year and then are reduced over time.
- Customization services. You have a choice (OK sometimes you don’t have a choice), you can use the application as is or you can customize it to meet your specific needs. If you need to customize the system, I would recommend that you break the customizations into 2 categories. Critical, must have customizations should be purchased up front. Non-critical, nice to have customizations can be quoted but don’t invest in them until after the software has been implemented and used in live production for a while. You will probably discover that these customizations are either not needed or need to be tweaked based on your use of the system.
- Integration into your ERP system. Getting inventory information, POs and SOs to the WMS and adjustments, receipts and shipments back to the ERP is the function of integration. Integration options can be the simple, but manual import/export of files between systems or a real time automated interface. Experience is another key cost factor. Selecting a provider with proven experience in your ERP will help reduce costs.
- Purchase of hardware. Hardware costs will depend on your current level of automation. If you are new to WMS automation, you will need to invest in mobile computers or scanners and the supporting accessories like holsters, battery packs and chargers. You will also need barcode printers. And you will connect these devices via wireless access points. The software may require server hardware and supporting operating system and database licenses.
- Purchase of warehouse automation hardware. If you are doing a complete overhaul of your warehouse operations, then you might look to invest in additional automation hardware such as conveyor systems or specialized racks. Technology is always evolving and we are seeing the emergence of robotic systems and new user interface devices.
- Purchase of supplies. While not a large cost, remember that new equipment requires supplies. As an example, barcode printers will consume ribbons and labels.
- The internal labor costs. Implementing a WMS solution requires the work of your staff. Not only must they perform their normal tasks but they must also dedicate time to the implementation.
If you are inexperienced in WMS automation, this might be a “holy crap” moment. But the truth is that for businesses, there has never been a better time to purchase affordable warehouse management systems. Let’s look at the traditional and emerging price models:
- The traditional model is where you purchase everything prior to Go-Live. You will still have some on-going costs like annual maintenance but the major expense is all upfront.
- Traditional leasing. For companies who don’t want the upfront costs, leasing has been a popular option. You simply finance all or a portion of the upfront costs. Even more appealing is that 0% financing is often available.
- As cloud technology has evolved, software as a service models have emerged. In this model you “rent” the software and server hardware paying a monthly service fee. This eliminates the upfront software and server hardware costs. The terms are usually for a minimum three years.
- SaaS expanded. The SaaS model is being expanded to include hardware and services.
- SaaS on site. In this model the software (and possible hardware and services) are monthly fees but the application runs on your servers in your data center. This is appealing if you already have a staffed data center on site.
In today’s competitive market there are affordable warehouse management systems to fit every budget.