Let's be honest: business stinks!

When sales screech to a halt, most managers look for ways to cut spending. Money for projects, like a new warehouse management system (WMS), falls down the To Do list.

There are, however, arguments for investing now in new IT systems. In fact, 31% of executives recently surveyed by Accenture saw the current economic conditions as an opportunity to work on cost reducing projects.

Those contrarians may be on to something. 'When business slows, you can focus on projects that can give you an edge without having to get orders out the door,' says Tom Ryan, a director with eSYNC International, a Toledo, Ohio, consulting firm (www.exsync.com).

And since this is no time to gamble, you want a proven technology that will reduce costs and increase productivity.

A WMS fits that bill while also addressing larger supply chain issues.

'A WMS is no longer just about picking, packing, and shipping,' says Bruce Welty, senior vice president of industry solutions, EXE Technology, Dallas, Texas (www.exe.com). 'The software sits in the middle of every transaction, and provides the information that allows you to improve your business.'

Here's another incentive: if your business is slow, imagine what it must be like for software suppliers. They may be willing to deal.

System users, of course, cover the gamut of WMS experience. Some will want to consider the efficiencies to be gained from implementing their first WMS. Others may be using a legacy system. Still others may be looking to get more bang for their buck from a new system implemented in the last year or two.

Here, then, are three different scenarios for justifying a WMS in tough times.

If you think yours is the last warehouse without a WMS, you're wrong. According to John Hill of eSYNC Inter-national, only 10% of U.S. warehouses have implemented a WMS system. That means thousands of facilities are still managed on clipboards.

For those facilities a WMS is 'a guaranteed pay back,' says Chris Barnes, director of business development, Majure Data, Roswell, Ga (www.majuredata.com). 'There are direct labor benefits, as well as storage and inventory savings.'

Those savings can be quantified:

• Expect inventory reductions of up to 50% over time.
• Labor savings range from 20 to 40%.
• Administrative costs typically tumble by 15 to 25%.
• Space utilization increases of 10 to 20% reduce outside storage fees.
• Physical inventory costs typically fall by 75%.

Those benefits will increase as business improves. 'A WMS deals with thousands of repetitive tasks,' says Dan Gilmore, vice president of marketing for McHugh Software International, Waukesha, Wisc. (www.mchugh.com). 'Over time, they add up.'

What's more, a WMS may be the difference between keeping and losing a customer. 'The main reason smaller companies are implementing a WMS is that their customers are driving them to it,' says Dale Jeffries, president and CEO, Radio Beacon, Inc., Toronto, Ontario (www.radiobeacon.com). 'Avoiding charge backs for shipping errors alone can justify the cost of a WMS.'

And, if you need someone to maintain that system, now might also be the time to add an IT specialist to your staff. 'We're getting 10 or 15 qualified resumes a day,' says Chris Barnes of Majure Data. 'There's a lot of talent available today.'

How do you know when your homegrown WMS is no longer cutting it?

Start by looking at what it takes to get orders out the door. If you have the cast of Ben Hur working on the floor, your system may not be up to snuff.

'Most legacy systems don't provide picking options like zone picking or cluster picking to eliminate unproductive travel time,' says Dan Gilmore of McHugh. But flexibility in how you pick can save thousands of dollars.'

Next, look at whether your business requirements have changed since the original system was implemented. Have you moved from shipping pallets to eaches? Do you still batch your updates? Do you have to provide value-added services like compliance labeling?

Homegrown systems were usually designed to solve specific warehouse problems. They don't scale easily when sales jump, nor do they integrate well with newer technologies. Your customers notice the difference.

'We have a client using a homegrown system in one facility, and a best-of-breed system in the other,' says Gilmore. 'Their customers can tell which facility is shipping the order from the quality of the pallet building and the accuracy of the labeling.'

Another question to ask is whether you can still afford the maintenance costs to support an outdated operating system, or risk running a system from a defunct vendor. 'If you have your finger in the dike to keep your system running, you're putting your operation at risk,' says Bob Kennedy, vice president and general manager, MARC Global Services, Dulles, Va (www.marcgs.com).

In fact, there may be cost savings associated with migrating to a new technology. Barnes of Majure Data estimates that mid-market users can reduce their server costs 30% by switching from a legacy UNIX platform to Windows 2000.

Finally, legacy systems were primarily concerned with activities inside the four walls of the warehouse. Supply chain management today is focused on extending processes beyond the warehouse.

'The productivity in many warehouses today is good,' says Chris Riemann, principal consultant with PWC Consulting, New York, N.Y. (www.pwcglobal.com). 'But I can get another improvement if I can flow product through the pipeline and get it into stores 3 days earlier. I have to have real-time visibility to do that, and legacy systems just can't provide that.'

There is great interest in supply chain visibility and event management applications that allow users to track the status of orders and deliveries throughout the supply chain and alert decision makers when events occur that impact their jobs. In fact, this is a leading reason users are scrapping their legacy systems for a best-of-breed WMS.

If you implemented a WMS in the last few years, you may think your job is over. Now, however, might be a good time to fine tune your WMS strategy, or add functionality that can take your facility to a next level.

'There's always a period of discovery after an implementation,' says Ray Scipioni, industry consultant for Vertex Interactive, Fairfield, N.J. (www.vertexinteractive.com). 'In a complex business environment, you find gaps in the software once you're up and running. You also discover things you didn't realize you could do as you begin to use a package.'

Bob Kennedy of MARC Global Services agrees. 'A best of breed WMS has a lot of functionality that most users don't take advantage of,' Kennedy says. 'We suggest a review with the vendor or a consultant after a system has been up and running for a year.'

There are a number of applications that can rev up even a new WMS.

For instance, an added labor management module can produce an additional 15% in labor savings.

Dynamic slotting matches inventory locations against the real or expected movement of SKUs. That creates more efficient storage and picking.

Wireless access to the WMS from a cell phone or PDA can benefit managers on the go. 'There's no such thing as a 9-to-5 day for warehouse professionals,' says Kennedy of MARC Global Services. 'Wireless access allows a manager to stay in touch with the system at all times.'

Of course, beating the competition may be the best reason for updating a WMS even in a slow economy. 'If you have a bold vision of where your business is going, you can gain ground over competitors,' says Ryan of eSYNC.

After all, they're waiting to improve their businesses.

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