Do you know what's in your warehouse or have a clear idea of your inventory levels? If the honest answer is no, then you're not alone.
According to a study by the Georgia Institute of Technology, 70 percent of U.S. warehouses do not have a warehouse and inventory management system (WMS). This implies that most companies also do not have a clear picture of their supply chain. On the other hand, if you're one of the few who have had a WMS for several years, chances are it's either outdated or not cost-effective for your particular business.
Does My Business Need an Upgrade?
For the construction industry, materials handling is as important to the bottom line as the actual execution and the ability to track inventory items from receipt to release is a necessity. In many ways, implementing from scratch with no pre-existing WMS is easier. The majority of warehouse and inventory management systems were put into place back in the mid-1990s and unfortunately, those systems weren't designed to easily be upgraded, or the original vendors no longer support those systems. In other cases, the cost of an upgrade can be just as costly as a new implementation.
Before upgrading, businesses should understand the benefits and limitations of their current platform and should evaluate what makes sense for their specific operations. If you are looking for radio-frequency identification (RFID) and voice controls, chances are that an upgrade is not only necessary, but cost effective in the long term. Companies in the past relied on the more traditional on-premise software that required more customization, but today's systems include on-demand, or web-based systems that are inexpensive and more flexible with a company's existing back-office operations. Also, software vendors are usually more than willing to adjust their offerings to meet the specific demands of customers, but companies should always understand the cost and time limitations.
The Business Case
From a practical perspective, a paper-based inventory system has an average of 90 percent accuracy, while an automated WMS has 99 percent accuracy. Although 90 percent may sound reasonable, this can represent unacceptable loss when you consider the potential losses in revenue. For a typical business, that amounts to thousands of dollars lost in revenue or savings-each month. Improving shipping accuracy can lower labor costs, reduce time spent re-creating shipping documents due to errors, and present consolidation opportunities saving time and fuel. This doesn't even include the ability to secure new business due to ease of use through higher service levels and increased customer satisfaction.
Whether considering an upgrade or a new WMS implementation, having the IT resources to address implementation and any customization is crucial. This is especially true of on-premise enterprise software that not only requires investing in additional IT infrastructure (e.g., servers) but can take several months for implementation, while upgrades require constant maintenance and monitoring.
Using a web-based WMS can cut down significantly on implementation time. Also known as Software-as-a-Service or SaaS, a web-based system is accessible through any browser with a live Internet connection. The cost difference between on-premise licensed software vs. web-based software can be significant, regardless of whether it's an upgrade or a new implementation. While a traditional software approach typically runs into thousands or tens of thousands of dollars, web-based system can be had for a few hundred dollars per month.
Because most construction companies have relatively simple inventory management and order fulfillment requirements, a web-based system is more than enough to meet their needs. Functions including purchasing, receiving and put-away, inventory control, order fulfillment, shipping, integration and mobile computing are more than accessible and can be operational within a few weeks at a fraction of the cost of traditional on-premise software.
In addition, a web-based approach also uses social networking tools to improve customer and partner collaboration. Through secure information sharing, collaboration and Web 2.0-functionality not commonly found in traditional enterprise software - a typical business can save thousands of dollars per month by having real-time information.
Integration needs serious consideration because it usually requires significant time and resource commitments depending on complexity and customization. Whether it's on-premise or web-based software, only vendors can make those customizations. And, responsive customer support is essential when integrating with an existing ERP system.
Thinking In and Out of the Box...
Inventory traceability is at the foundation for any construction company whether it's a single project or multiple ones. In the constructionindustry, companies store and allocate hundreds of thousands of dollars worth of their customer's materials. A huge responsibility, improperly handled materials can result in lost, damaged and stolen property, and ultimately, financial loss and poor reputation. Accurate record keeping, however, can be expensive and time prohibitive when it comes to monitoring and tracking.
IDC Construction, a renovation and construction company based in Woodstock, GA, understands the inherent need to minimize the loss and damage of construction materials. Devoted exclusively to hotel renovations whose clients include InterContinental Hotels, Marriott, and Hilton, among others, IDC as with any inventory-centric company saw the imperative to have a clear understanding of exactly what materials are on hand, where they are allocated, and when they should arrive at their final destination. With any type of company, this basic information in necessary for making knowledgeable, real-time decisions every day.
Because IDC needed inventory traceability quickly and wanted the ability to provide its customers with a real-time view specific to their inventory levels, order process and work procedures, the company decided to go the web-based approach. Unlike traditional on-premise software, where patience and time are necessary, a web-based approach provides a secure and easily configurable view for information sharing with customers all with a few clicks of the mouse.
Making the Best Decision
In assessing any WMS, scalability to fit and grow with the business is key. While traditional on-premise software can be robust in features, it is costly in time, money and resources to scale. In many ways, scaling traditional software can be as complex as an upgrade depending on the degree of integration. Construction companies tend to require more flexibility because of the fluctuations with acquiring new customers and an increasing number of subcontractors.
Companies considering an inventory or WMS upgrade should understand the options due to the rapid advancements in technology. While traditional on-premise software is more robust, it can offer an overwhelming list of unnecessary features at a higher cost. On the other hand, a web-based SaaS WMS potentially offers the right amount of features and configuration flexibility at a lower cost. When considering an upgrade, it's no longer about your storage space, but about creating a complete supply chain execution strategy that saves as much as money as it brings in.
Construction Business Owner, December 2009
