Modern cloud warehouse management software is the smartest growth investment a company can make. What is a cloud-based WMS? How have modern supply chain trends made WMS systems essential to growth? And what does the ROI of a cloud WMS look like?
Volume is outpacing warehouse operations
The ecommerce explosion of 2020 was quite the wake-up call for warehouse operations teams. Online ordering permanently switched into turbo mode, with peak season bringing an additional $183 billion in U.S. e-commerce spending—the equivalent of an extra holiday season in the same year—according to the 2021 Adobe Digital Economy Index.
Great for the business; but for the person managing a warehouse run on tribal knowledge, spreadsheets, or ERP systems, the “new normal” feels like Black Friday every day, all year long.
This dramatic shift in buying underscores the reality that modern commerce is growing faster than most warehouse operations were ever built to handle. Many companies face a record number of orders flowing in but lack the operational agility to convert that volume into sustainable growth. Conquering the uphill battles of modern supply chains requires breaking free from slow or siloed processes that are holding growth hostage.
Warehouse management systems remove the handcuffs
Warehouses need a more practical inventory management approach that doesn’t force operational wildfires to get orders fulfilled “at all costs”. The days of adding more humans, paying more overtime, absorbing high shipping costs for rush orders, or simply losing the sale because of execution problems—are over.
Let’s look at why and how companies are making cloud-based warehouse management systems an essential part of their growth strategy.
These solutions drive long-term value through productivity, cost reduction, accuracy and reduction of human error, speed and agility, enterprise visibility, and massive throughput improvements.
What is a cloud-based WMS system?
A WMS is a software application that helps manage the operations of a warehouse or distribution center.” These systems incorporate mobile devices along with barcodes and RFID scanning/sensing to streamline warehouse operations and workflows, such as:
- Receiving, put-away, stock locating
- Inventory management, cycle counting, task interleaving
- Wave planning and order allocation
- Order picking packing, replenishment, and shipping
- Labor management and performance tracking
- Automated materials-handling equipment interfaces
Extended capabilities, as components of an advanced WMS suite may include labor management, slotting, yard management, voice picking, parcel manifesting, value-added services, light manufacturing/kitting, and integrated billing for third-party logistics (3PL) companies.
What is the ROI of a cloud-based WMS?
Cloud WMS systems have a direct and positive impact on growth… On the floor, across the enterprise, in competitive territory, and in support of the growth roadmap. On average, companies can reap a 25% increase in productivity, a 20% gain in space usage, and a 30% improvement in stock use efficiency using a warehouse management system with integrated order processing.
The ROI of a cloud-based WMS solution happens in 5 main areas that are essential to growth (why not check out our WMS Savings Calculator now?):
- WMS on the floor – automated order picking, packing, and shipping
- Warehouse data collection – centralized order tracking, customer insights, replenishment
- Value-added services – kitting, self-serve billing integrated with tracking and fulfillment, SKU proliferation, personalization
- Scale the sales footprint – introduce multi-location, multi-channel, omnichannel, Direct-to-Consumer (D2C)
- Customer relations – full transparency to order tracking, accurate available-to-sell/promise inventory, real-time delivery estimates on website
Here’s a closer look into these:
#1: Labor and accuracy improvements on the floor
One of the biggest ROI areas for a cloud WMS deals with the hot topic of labor costs and shortages. Order-picking tasks alone make up around 50% of a warehouse’s labor costs. A cloud WMS system automates order picking to increase results, not headcount.
In addition, warehouse management solutions virtually eliminate human error–-which is the #1 root cause of fulfillment issues for 62% of companies. This translates to a significant reduction in fulfillment times. In addition to giving managers the ability to accurately evaluate the performance of all workers. Which ensures the best use of labor investments—with optimal workflows and full traceability at any given point.
#2: Data collection: track, sync, analyze, improve
A cloud WMS helps companies quickly analyze and track orders, identify up-to-date customer insights, and prepare earlier for emerging trends. These solutions centralize this data so that all teams have excellent and timely posterity of customer insights to make the best decisions.
Data analytics in a cloud WMS also improve replenishment, closing costly gaps between Available-to-Sell / Available-to-Promise inventory. Teams can quickly identify which products are doing well and which are gathering dust on shelves. Better syncing and management of this balance will significantly eliminate overselling and backorders, which can erode profits by $15 to $20 per backorder.
#3: Value-added services: differentiation
Cloud-based WMS software enables you to enter new competitive territory. Empowering you with value-added services like kitting and self-serve billing integrated directly into order tracking and fulfillment.
It also positions your company to offer a more attractive product mix. This can increase revenue, such as a broader assortment or personalization.
This video with Plant Therapy shows a great example:
#4: Expansion of the sales footprint – omnichannel
Given that 55% of consumers will pay more for a guaranteed good experience, a key growth strategy is to focus on perfect inventory execution no matter where the products are coming from.
The software lays a scalable foundation for new growth initiatives including multi-location, multi-channel, omnichannel, and Direct-to-Consumer (D2C). Having cloud-based enterprise visibility and collaboration empowers a company to minimize the growing pains and accelerate new profit sources with speed, scale, and precision.
#5: Improved customer relations, trust, and transparency
Customers expect more. If you don’t give it to them, someone else will. Best-of-breed cloud WMS systems get warehouse operations organized and streamlined to the fullest, enabling instant tracking, faster order fulfillment, faster customer service response times and visibility, and confidence that every delivery is exactly as desired.
Advanced cloud WMS solutions give customers full transparency into inventory tracking and real-time delivery estimates on your website. Providing this degree of transparency improves brand trust, attracts and retains customers, and creates top-line growth.
Companies are looking to parlay their return on investment in these 5 areas and scale that formula to drive future growth. This is evident in widespread investments in both physical warehouse expansions and the technology stack to support them.