By Poul Breil-Hansen As a main rule, warehouse managers, logistics managers and supply chain managers have in-depth professional insight into warehousing and logistics. They are on home turf when the discussion turns to delivery time, warehouse capacity utilisation and picking productivity. On the other hand, they are not on home turf when the discussion turns to which effect, in the form of pounds and pence, the same parameters have on the company’s income statement and balance sheet. They are in unknown territory when target figures and results have to be communicated to the CEO, CFO and Sales Director. Here, it is about translating the logistics target figures to another language and putting the logistics into perspective in relation to the company’s business strategic goals. In a white paper, the company High-Jump has cut down to the bone and identified five essential tips for the internal sales process in getting a WMS investment approved.
Tip 1: Understand your company’s strategy
In the majority of companies there is a set procedure for when the logistics manager wants to invest in a new WMS, the first step of which is to hold an overall presentation for senior management. The aim of the presentation is to examine if there is a basis to move onwards at all with the investigation into the sustainability of the investment. This step is an extremely critical step which involves a great risk that the project will suffer an early and unjustified death. The first step towards management support is, therefore, to become very well acquainted with the company’s business strategy or strategies as well as goals. The WMS project must have direct influence on one or more of the company's strategic goals if the investment is to have any chance of approval. The initial presentation to senior management must, therefore, contain detailed information about how WMS will contribute to the company’s strategic direction and objectives. For example, if a strategic cornerstone for the company is to improve customer relations, then it is crucial to make visible how WMS can accommodate the customers’ needs in an adaptable, fast and cost-effective way. Other strategic objectives could include the reduction of costs, compliance with requirements and regulations from authorities and compliance standards or improvement of quality control of products, for example. Ultimately, it is about your WMS project competing with other investments to get part of a limited budget, so the more value the WMS project can create for the company, the greater the chances are for management support.
Tip 2: Identify influencers from IT, operations and finance
The next step in the work to gain approval of the WMS investment is to identify key persons from IT, operations and finance, respectively. Check which interests and goals the three areas of activity have, how a new WMS can contribute to these goals and make a plan for how you can explain the WMS project to the key persons in a language and with examples that make sense to them. For example, IT would be interested in how WMS can be integrated into the company’s other systems, what the system's architecture is like as well as how maintenance will function in the long-term. Operations would be interested in being able to quickly meet the customers’ needs and simultaneously achieve effective processes. Finance is interested in insight into the concrete figures that can explain the system’s payback time, etc.
The goal is to create consensus among influencers about the WMS investment. You need to think about your timing in regard to when you involve the various influencers and you must ensure that you keep the influencers constantly informed on how the project is developing. Reports must be linked to the company’s strategic goals and the respective activity goals without, however, being too overtly tactical. For example, you could mention how the system will reduce IT costs without going into detail about how this works at a technical level.
Tip 3: Identify how WMS supports the influencers’ specific goals and needs
The next phase concerns checking which information and messages the key influencers need to hear and how you best can communicate this to them on an ongoing basis. The key here is thorough research. IT would want to know a great deal about how many costs and how much time a WMS implementation will entail for them and the precise role they will have to play. The majority of IT departments already fight a tough battle with tight budgets. Which features of the WMS system can make life easier for the IT department, how will updating and maintenance function and who will check on the system? What would the integration with other systems and with stock handling equipment be like, how can the system be rolled out to several locations and can WMS operate on a central platform or several de-central platforms? If you already have an ERP system, the big question is, of course, how would WMS interact with ERP? Operations would be interested in how WMS supports overall goals, but the department will also be concerned with how WMS will affect the daily processes. Operations would be more interested in how flexible WMS would be when the unavoidable need for change arises. They will have a strong interest in the improvement of cooperation relations between operations and IT and not making cooperation more difficult with the introduction of WMS. The finance department would be concerned with the system’s connection to the bottom line as well as target figures on factors such as Return on Investment (RoI) and Total Cost of Ownership (TCO). Up-front costs for the system will also be a factor, especially if this concerns a best-of-breed WMS and the company already has an ERP system with a warehouse management module.
Tip 4: Identify how WMS supports the company’s common goals and success criteria
What are the Return on Investment (RoI) and Total Cost of Ownership (TCO) for the project and what is the assessment of the supplier’s reliability? This is the agenda for the next research phase. In all simplicity, the RoI is a mapping of the benefits companies can gain by a specific action compared to a mapping of the costs connected to the action. In this instance, the action is the purchase and implementation of a WMS and the typical way to calculate the RoI is how much time will pass before the new system has paid for itself. The typical RoI on a WMS is in the region of 18 months, depending on how skilled the organisation is at profiting by the new system. The majority of WMS solutions are based on so-called best practice functionality and have the potential to continuously improve productivity and reduce costs in the long term – two crucial factors for a positive RoI. Setting the RoI requires a detailed and precise approach based on your company’s unique processes. A strong RoI analyse is comprehensive and comprises detailed target figures, specific examples and a specific assessment of all your company’s operation processes that would be affected by the WMS project. It must be YOUR company’s RoI and not a general RoI that is taken into account.
The TOC does not only include costs for the purchase of software licences and implementation of the system. The costs for the long-term maintenance are also taken into account. Many companies overlook the ongoing costs for reconfiguration of the system when the inevitable changes in the market and outside world make it necessary to saddle up again. The costs for the ongoing adjustment of the system can be quite considerable and therefore, it is essential to take into account how the individual WMS supplier tackles the ongoing adjustment and updating. It is possible to split WMS systems into two categories. The one category requires reprogramming in the system’s base when changes are to be made. This quickly results in a uniquely adapted system in which it can be very complex to make changes and in which the changes do not keep up when updates to new versions of the system take place. The other category is standard solutions in which the system base is separated from customer level and in which the changes will be made at customer level and the system base remains unchanged. This means that changes can be made by internal IT staff at much lower cost and that the changes will become effective when updating the system to newer versions. The latter category of WMS is interesting if a TCO view is applied.
Tip 5: Gain final approval from senior management by connecting WMS profits to business strategic goals
When the support and approval from finance, IT and operations is in hand, you must present the final project to the CEO, the executive board and perhaps also the supervisory board. Here, your presentation must focus on how the system will affect the bottom line, market position and competitiveness. Outline all the information you have obtained and make visible the connection to business strategic initiatives with which the executive board is familiar. This is when your research in phases 1 to 4 will really benefit you because with all this information and links to the business strategy, you will be able to present a strong business plan.
Source: White paper “The Five Sure-Fire Strategies for Gaining Management Approval for WMS Projects” (HighJump).