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CFOs are typically happy to leave details, like choosing a picking method or quality control protocols, to their warehouse managers. They are more concerned with the big picture—namely, strategic decision-making that will keep revenue up, bring costs down, and avoid unpleasant surprises.
For many inventory-based businesses, the answer to these concerns is a warehouse management system. Many forward-thinking CFOs understand how beneficial a WMS is in driving decisions on the warehouse floor, and how those decisions ultimately show up in the bottom line. Others might need a bit of convincing to overcome worries about implementing a new system—worries such as downtime during its launch, training on the new system, employee resistance, and of course ROI. Deciding the right time to implement a WMS is a matter of recognizing when the benefits outway those worries.
We have compiled 5 areas of interest for CFOs and the ways a WMS can either reduce a pain point or add value. For CFOs considering a WMS (or warehouse managers trying to convince them), these make a strong case in their favor.
A reliable revenue stream depends on keeping customers happy and making them into repeat customers in the future. Orders that are accurate, on time, and arrive in good shape make this happen, and it all starts on the warehouse floor. Manual systems are prone to human error, which can result in orders going out wrong or late.
Efficient picking with built-in quality control checks increases speed and accuracy. WMS helps in a number of ways:
Best of all, a WMS can track helpful metrics like the product return rate (along with the reason for return), repeat purchase rate, and customer retention rate. When these numbers move in an unfavorable direction (based on preset benchmarks) they can provide the proof necessary to convince the CFO that the status quo isn’t working.
Meeting customer expectations with the help of WMS increases the likelihood of repeat business, not to mention the holy grail of eCommerce—positive online reviews.
Since a WMS is a big investment, CFOs are obviously going to want to know how it will cut costs. Added efficiencies (as discussed above) are one way. Other savings can be found by thinking about a warehouse’s main pain points. Warehouse management software solves many of the costly problems that arise when a company is using outdated, manual methods.
These are just a few of the ways that a WMS will save money. There are many other areas where CFOs are likely to see the ROI of warehouse management software. You can read about them here.
One reason why CFOs are often reluctant to make big investments is that they first want to make sure they are using their existing resources in the best possible way. Once managers have done all they can to optimize warehouse operations, productivity will reach a plateau. A warehouse management system is a next step, pushing expectations and the ability to meet them even further.
With these two examples in mind, consider the WMS debate a manager might have with their CFO. The manager is ready to take the next step while the CFO is not convinced it’s necessary. A warehouse management system can actually “win” the argument for both of them! Here’s how:
A WMS serves two purposes. First, it is a diagnostic tool, capable of gauging just how efficient operations are, and pinpointing the problem areas that need work. Second, it demonstrates better practices and helps implement them where operations are lacking.
Why is this a win-win? If everything is running smoothly with the existing resources, the CFO will have metrics and reports that prove it. If there is room for improvement (which, face it, is almost always the case), there will be numbers to back that up, too.
Yes, there are things that can be done to optimize resources in every warehouse. And it makes sense to take a long look and make those changes before investing in a WMS. But once those resources are maxed out, warehouse management software can help the company push even further—something they will need to do if they expect to grow and scale. And CFOs must ask themselves what is more economical: Hiring more staff? Moving into a bigger building? Or investing in software that might eliminate those needs and adapt as the company grows?
Have any of these situations happened in your warehouse?
These are all things that keep CFOs up at night. Not only will WMS give a clear view of what is on hand, but predictive analytics can also show what’s to come.
The better able a warehouse can anticipate demand, the easier a CFO can budget and plan. Warehouse management software gives companies an advantage by providing the data and transparency necessary to know what’s around the corner.
For a company to be successful and grow, its CFO must make strategic decisions. Warehouse management software provides the data that makes it possible to do so. Every choice—from hiring another employee, to adding SKUs to a product line, to branching out to a new building or territory, or even outsourcing fulfillment to a 3PL—can be done with confidence when there is data driving the decision.
Compared to manual methods, a WMS provides a more efficient and comprehensive way to collect, organize, and analyze all types of information in the warehouse.
With a WMS, CFOs can back up every decision they make with reliable data. Not only will this give them confidence in the choices they make, but proof that those choices are working. We can’t think of a better way to justify the ROI of a WMS to shareholders and the rest of the C-suite.
Even though a CFO might see the logic of these five arguments for a WMS, that does not mean they will instantly commit. And indeed, some companies may not have reached the tipping point that justifies the ROI. Knowing when the time is right depends on overcoming these hesitancies:
Let’s look at a simple example: A company that does not have a handle on inventory consistently over-orders a perishable item. Each month $3000 worth of merchandise must be discarded. The extra stock also takes a worker an hour to unload and store each month, as well as taking up shelf space that could be used for another SKU. A warehouse management system will be able to anticipate demand and balance the inventory orders, improving the shrinkage percentage. If the WMS costs $2000 a month, the company will save money. Doing so will also reallocate carrying costs and the worker’s time to something else. And that’s just for one SKU. Implementing the WMS will potentially yield similar savings in many other areas of the warehouse.
A WMS gives clarity and transparency to the operations in the warehouse. As a result, the company’s decision-makers have better control over what happens next. They have the ability to guide the company strategically as it grows.
Yes, a WMS can be a significant investment. As CFOs do what they do best—analyze the ROI—they will discover the enormous benefit a WMS can have on the bottom line. If you are ready to improve the ROI of your warehouse, give us a call. We’ll be happy to help.
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