The return on investment for a warehouse management system, if you're an e-commerce retailer or a direct to consumer brand, is absolutely mind-blowing if you compare it to running an e-commerce fulfilment warehouse using paper and pen, or a substandard system. These two options are not fit for purpose and are not able to serve the most important person as far as your warehouse should be concerned: your customer.
A shift in mentality
Over the last 10 years that we've been supporting e-commerce brands, we’ve admired first hand a shift in mindset from the brands that have stood above the rest and continued to scale beyond their ‘initial hype’ phase. How? By really focussing on the customers they have and providing the best possible experience for them, every time they shop, rather than consistently worrying about attracting new people to their site. At its core, that experience is driven by the performance of the warehouse - did the order get confirmed, delivered on time and correctly?
This shift has actually allowed us to understand our own value as a WMS as well, and the ROI brands experience using the system. Yes we save costs on labour, time and we increase efficiency. But actually, what we do is safeguard these brands’ reputations, improve their ability to deliver great experiences to their customers, and ultimately help them build a community of loyal fans who are far better assets to them as a company than all the ads and paid posts in the world.
WMS then versus now
In the past, warehouse systems were just used for shifting boxes and pallets out to retail stores. It didn’t matter if you shipped late and it didn’t matter if you sent the wrong thing. Either the recipients were your own internal customer, and you could quickly make amends, or they were other businesses, and whilst they might be annoyed you’ve made an error, you have not ruined their Friday night by sending them the wrong size dress and you've not ruined Christmas by failing to send an order out on time. These are very real problems for D2C brands.
So, if you're running ‘pen and paper’ manual system, how is this ROI Calculator Tool going to be useful?
This might be painful, it might really suck… but we want to enable you to visualise how much money you are wasting right now with your inefficiency. This calculator gives you a way to accurately forecast your current labour costs compared to productivity and then apply further reasonable assumptions across different functions of your warehouse. What comes out the other end is a forecast Return On Investment. It might not be perfect, to the penny/cent, but what it will do is illuminate the areas that you can make savings. This will enable you to go to the different stakeholders in your business and begin the conversation about getting off pen and paper. Simply put, you cannot scale pen and paper up beyond a few hundred orders a day and deliver a great customer experience consistently.
Marketing is infinite, logistics is not
Your ability to grow sales is powered by platforms with seemingly infinite possibility, Instagram, YouTube, Facebook. And you can get really clever with email and sms marketing, segmentation and so on. All these social channels, and leveraging the power of influencers, has given your brand the opportunity to produce insane revenue growth. However, based on our earlier point about the best brands and their attitude towards customer retention through great experience, the economics of your business should not be built around winning a customer once. It is all about generating ongoing, repeat purchases. You need to realise lifetime value through delivering what your customers expect and demand of you.
Is your business ready for a WMS?
We invite you to use this tool and recognise what your current status quo is costing you.
Remember! No decision is still a decision…
This does not just apply to smaller companies using pen/paper. Perhaps you have a technical team leading on your e-commerce stack and they've developed some of the functionality of the warehouse management system in house. You will always reach a point where, due to ever increasing challenges and heightening demand, you have to question: is this the way forward? Do we want to keep developing our own fulfillment technology or would we be better off re-platforming to a dedicated solution built for helping companies like us with a proven track record?
You can use this tool to get into the detail around your current efficiencies. Naturally, some of the areas that the ROI tool enables you to forecast savings in may not apply to you. For example, if you have implemented barcode labelling (meaning you barcode scan every single product at the point of dispatch) you are unlikely to have shipping errors. In that case, the tool still works! Just have the shipping error cost and the number of shipping errors as 0.
Second order thinking
In addition to the gain assumptions you make across these warehouse system specific processes, consider including in your soft savings. For example, the amount it costs you to support your existing solution, your developer rate per hour and even perhaps including the opportunity cost of having your best technical people working on the warehouse. You should probably ask yourself, could there be something else they could develop which would deliver even better growth for the business whilst you contract in the fulfilment solution to do their current job for them?