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Down economy strategy 3: Recession Rx– SaaS-based WMS

Looking to cut your IT costs? An outsourced WMS may be the answer. But beware: While they will work for some, they aren’t for everyone.
By John M. Hill, Director, St. Onge Company
September 22, 2011

The media is full of prescriptions for maintaining the health of your supply chain, not the least of which is outsourcing.  From 3PL’s to public warehouses to contract manufacturing, staffing and services firms, there are multiple options available to those companies looking at outsourcing as a means of continuing to service their markets while containing costs in these challenging times.  But, what if the complexity of your operations, the down real estate market, training concerns, your commitment to current employees or anyone of a number of other issues make you wary?  Are there other alternatives?

In concert with initiatives that can be mounted to fine-tune your physical plant and streamline processes to improve throughput, employee productivity and do more with less, have you looked at the alignment between warehouse operational needs and your information systems?  Are you getting the most from them?  I can hear you now: “Of course we’ve looked at them and there is more that we could do, but there’s a freeze on capital expenditures and the entry fee for a new or upgraded WMS is beyond our threshold!”

What if the entry fee were waived or so dramatically reduced that you were able to buy WMS functionality on a subscription basis without the typically large up-front costs associated with in-house deployment?  What we’re talking about here is Software-As-A-Service or SaaS – an approach to software outsourcing that has been embraced by a number of transportation management systems (TMS) users and is beginning to gain some traction in the warehouse arena. 

Internet-based, an SaaS WMS application is developed, hosted and maintained on secure servers by a software provider who “rents” its services to multiple clients who, in turn, select and use those functions they need to manage their operations.  Potential benefits beyond the lower cost of entry include significantly reduced start-up costs and time, transparent upgrades and refinements as part of the subscription fees and minimal requirements for internal IT staff support.  Another benefit of running the same core software used by the SaaS vendor’s client base is access to user-driven innovations and enhancements that the vendor develops and extends across the application.

Sound too good to be true?  That was my initial reaction, but after some digging, I’m ready to say that an SaaS-WMS may very well be viable for smaller to mid-size companies or even larger organizations whose requirements can be handled by the functionality they offer and do not require extensive customization.  The arbiter here, of course, is what constitutes extensive customization?  The answers will vary between vendors – and, there are a number of them. 

Other considerations that should be examined include the costs and complexity of facility set-up for the WMS (location mapping and labeling), product bar coding / RFID tagging and scanning, user training, ERP or host integration and Internet connectivity; i.e., how solid is your Internet link?  What happens if it goes down?  Still interested?

If so, you’ll need to profile your operations, define those functions you must have in order to meet performance improvement targets, calculate anticipated benefits, talk to SaaS and on-premise solution providers, obtain costs, measure risks and build the business case.  That said, you may find that an SaaS-WMS is just what the doctor ordered.

In March of 2009, Modern posted three strategies for reducing operational costs in a tough economy on our website. The idea was simple: In good times, distributors and manufacturers focus on processes and technologies that enable growth. In a tough economy like the one we’re experiencing now, the focus is on reducing costs to maintain margins. The best improvements will continue delivering results long after business improves. While those lines are now 2.5 years old, they still resonate today.

About the Author

John M. Hill
Director, St. Onge Company

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