In today’s fast-paced businesses, warehouse technology upgrades make or hinder your success. It would seem obvious that a practical approach to upgrading and replacing WMS systems is part of business planning. Yet, many companies still rely on outdated tech, leading to significant financial and operational impacts.
During 2021’s semiconductor shortage, outdated inventory management systems created severe disruptions in component flows, leading to an estimated $210 billion in lost revenue for the global automotive industry.
This can seem sensational or that smaller businesses were immune. In practice, this story plays out in small ways every day in every business.
“I’m aware, it’s a one-off. The damage is done, I only have time or budget for a fix”.
Supply chain issues are like water leaks
The longer they go, the greater the damage. There is a concept in continuous improvement: ‘The Cost of Poor Performance’. It’s a compounding number of the total impact of an unresolved issue or performing below the engineered specs.
That dollar value can get big quickly.
I’d bet there’s a critical business system that’s actively holding your business back right now. But you’ve chosen – actively or passively — the high cost of ‘doing nothing’.
IT’s budget leak
The most immediate impact of using outdated warehouse systems: financial burden.
Businesses allocate approximately 15-20% of their IT budgets to support obsolete systems. Any time you’ve heard ‘technical debt’, this is the financial hit. It costs money to stay put.
This diverts resources from more productive uses and binds companies to inefficient warehouse technology. Over time, these costs add up, making it more expensive to maintain old systems than to invest in new ones.
- High Maintenance Costs: Maintaining legacy systems costs up to 30% more than modern systems
- Increased Downtime: Older systems are prone to failures, leading to downtime that costs businesses a range of $130 (SMB) to $9,000 (ENT) per minute
Do not fall for the sunk cost fallacy. It doesn’t matter how much time, headcount, or money you’ve spent on that system; if it’s not lifting you up, it’s weighing you down.
Doing less with more
Delaying warehouse technology upgrades significantly impairs productivity across the entire organization.
Poor performance, increased downtime, and integration difficulties are common issues. For instance, older systems do not support the requirements of modern cloud workflows, resulting in slow, asynchronous operations and data, and wasted time.
- Increased Error Rates: Older systems tend to have higher error rates, resulting in rework and inefficiencies.
- Manual Processes: Outdated systems often require manual data entry and processing, which is time-consuming and prone to errors.
- Slow Operations: Legacy warehouse technologies can slow down operations by up to 30%, limiting your revenue potential and increasing costs in areas such as labor and customer service.
Productivity losses from outdated systems hinder your ability to compete effectively and meet customer demands. You’re spending so much time keeping the old ways going that you can’t apply focus to improving the business.
On the flip side, in 2023, Deloitte reported that organizations completing major legacy transformation programs achieved these benefits (via Digital Insights):
- 25% reduction in technology operating costs
- 40% faster time-to-market for new capabilities
- 35% improvement in system availability and reliability
- 50% higher end-user satisfaction ratings
Old warehouse technology, old exploits
Even the best-designed systems eventually show their age. Often, it isn’t the system itself, but rather foundational technology and assumptions from when it was designed. Legacy warehouse technologies lack the latest security updates, making them vulnerable to cyberattacks. Vendors sunset their older versions, leaving you with no updates, sub-standard support (if any), and expensive third-party consultants.
- Higher Risk of Breaches: Companies using outdated systems are 3x more likely to experience a data breach. The average cost of a data breach in 2024 was $4.53 million.
- Compliance Issues: Outdated systems may not comply with current regulations, leading to fines and legal issues. These will also compound the problems while trying to correct them. Related Read: how to stay ahead of supply chain compliance changes.
- Loss of Customer Trust: Data breaches damage your reputation and erode customer trust, impacting long-term business relationships. More than half of consumers will leave a brand after a single bad experience.
As time goes on, the risk only compounds, nearly ensuring an event will happen in a public and costly way. Making security a critical concern will alleviate these risks, saving significant financial loss and reputational damage.
Discover what Deposco’s warehouse management software could for your operations in as little as 90 days!
Fixing the water damage isn’t hard
A study on the maintenance costs of legacy systems in the United States indicates that approximately $337 million annually is shelled out to operate and maintain just 10 of the government’s legacy systems.
Would you wait to fix inefficiencies like these if you knew a warehouse technology upgrade could deliver positive impacts to your bottom line in less than 90 days with almost no risk to business continuity?
Fixing the water damage from outdated systems leads to lower labor costs, improved inventory management, and faster order execution.
- Labor Costs: Wipe out inefficiencies that could increase your labor costs by up to 20%.
- Inventory Management: Replacing outdated inventory management reduces overstocking and stockouts, which can cost businesses up to 10% of their annual revenue.
- Faster Order Execution: Accelerate order execution, resulting in higher sales and satisfied customers.
- Supply Chain Adaptability: Keep up faster, easier, and cheaper with supply chain changes.
Operational inefficiencies from legacy warehouse systems hinder your ability to deliver products and services efficiently, which in turn impacts customer satisfaction and profitability.
The competitive side of upgrading
Finally, just like the cost of not doing something, you have to consider the cost of not being able to do something else. When you choose to ride it out, you’re making a choice not to do all the other things that moving would have allowed.
Modern warehouse management software provides real-time data, automate routine tasks, and integrate seamlessly with other game-changing innovations, giving your business a competitive edge.
- Greater Revenue Opportunities: Companies that fail to upgrade miss out on potential revenue growth of up to 15%.
- Competitive Advantage: Businesses using outdated warehouse systems are 2x as likely to fall behind their competitors.
Think about how many customers you lost or turned away because you couldn’t implement the capabilities required to serve them effectively. You may not have the exact number, but you probably have a ballpark, then multiply for a few years.
It’s time to stop leaving money on the table, doing nothing.
Take action today
The costs of not upgrading your warehouse technology systems – direct and indirect – have a far-reaching impact on your business’s financial health, productivity, operations, security, and even your market relevance.