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Building the Business Case – Finding the Payback for SCES (LMS, TMS, WCS, WES, WMS, WPM & YMS)?

Developing your business case for a new or upgraded Supply Chain Execution System (SCES) begins with detailed profiling and assessment of current operations.  Map material flow and information flow – and, then, compare them.  In many cases, there is inadequate correlation between the two – material goes one way and information goes another, asynchronously!  This disparity creates time lags that impact the accuracy of inventory and affect space, equipment and workforce utilization, order processing, shipping efficiency, throughput, and customer service.  Disparity analysis not only lays the foundation for development of a functional specification that defines SCES performance requirements, but also highlights opportunities for cost reduction and avoidance.  Look at the potential impact of the system on process flows as well as the efficiencies that might be realized in terms of people, equipment and space.

Take a hard look at the number of times a given item is handled as it moves into and through the facility.  How many people are involved in the process?  What kind of paperwork is generated?  Who or what completes and processes it?  When?  In the yard, the office or on the warehouse floor?  How are storage locations selected?  How long does it take an operator to store an item once it has been received?  How are inventory records maintained?  What view of inventory is available to customer service for allocation to incoming orders and response to shipment inquiries?  How are orders released and transmitted to the warehouse for picking?  How long does it take an operator to locate line items for order filling?  How many orders are lost because inventory cannot be located in time for shipment?  How do you handle multiple orders for the same product when demand exceeds available quantity?  Are picked items staged or loaded directly on trailers or delivery vehicles?  How is shipping paperwork generated?  How long does it take?  And, the list goes on.  From this evaluation, identify the potential cost savings that are likely to accrue upon SCES  implementation.  What, for example:

  • Is the value of a precise real-time view of empty storage locations?
  • Is the value of a real-time view of available inventory by SKU, quantity, expiration date or lot number and exact location?
  • Is the value of a system whose inventory accuracy permits you to replace full physicals with scheduled and event-driven cycle counting?
  • Is the value of a system that accepts receipts as they arrive and tasks available operators to store or cross dock?
  • Is the value of a system that can task an operator who has completed a storage move to perform a pick or inventory location count as opposed to deadheading back to the dock?
  • Is the value of a system that automatically generates shipping paperwork for an order once the last line item is picked and moved to a dock staging lane or trailer?
  • Is the value of a system that date- and timestamps each transaction and identifies the operator who performed it?

Once your list is complete, quantify the current costs of warehouse and yard operation and administration.  Match these costs against those you might realistically expect to incur once the SCES is up and running.  The table below provides a framework and a number of the criteria current SCES users identified in crafting their requests for funding.

* Labor Management, Transportation Management, Warehouse Control, Warehouse Execution, Warehouse Management, Workforce Performance Management and Yard Management Systems 

Inventory Turn Improvement Inventory turns are a function of forecast accuracy, production efficiency, accurate inventory records and solid order management.  An SCES will contribute to improved inventory turn by providing visibility of existing inventory availability to customer service.  The informed use of this information will drive its value to increasing inventory turn. The SCES will have a positive impact upon inventory turn by increasing order fill rates, controlling stock rotation and timely exception resolution.
Real-Time Visibility Using GS1 standard barcode labels and/or RFID tags, SCES links specific inventories and lots to specific accounts and orders throughout the fulfillment process. Visibility enables Lot Traceability and has many benefits including SCES-driven stock rotation and the maintenance of historical files to facilitate recall in the event of a problem.
Operations Management SCES provide ready access to information on inventory, equipment and labor availability, order and shipment status and performance anomalies. Elimination (or, at a minimum, significant reduction) of the amount of time spent by management on exception-driven decision making will produce benefits in the other areas suggested to the left by allowing managers to manage.
Customer Service Quick Response and its successors depend upon the real-time access to information on inventory availability, order and shipment status provided by contemporary SCES. Benefits include the capability to provide customers with more accurate information at the time of order placement & throughout fulfillment.

Don’t miss the St. Onge webinar Software: WMS: Optimizing the core of your distribution universe presented by our Howard Turner, Director, Supply Chain Execution Systems on Modern Materials Handling’s Virtual Summit on 12:30PM EDT on July 28, 2022. Click on this link for the entire event.
—John Hill, St. Onge Company

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St. Onge Company is Proud to Have Been Ranked Among the Highest-Scoring Businesses on Inc. Magazine’s Annual List of Best Workplaces for 2023

We have been named to Inc. Magazine’s annual Best Workplaces list! Featured in the May/June 2023 issue, the list is the result of a comprehensive measurement of American companies that have excelled in creating exceptional workplaces and company culture, whether operating in a physical or a virtual facility.

From thousands of entries, we are one of only 591 companies honored.

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