As you compare your WMS requirements against the detailed demo and presentations of a shortlist of vendors, it rapidly becomes obvious that selecting the most effective WMS is NOT a “one size fits all warehouses or businesses”. The core system (often referred to as the base or vanilla system) will have certain functions that will personalize the WMS to your business through site-specific configurations at implementation time and without program changes. Add-on modules are available to extend the core system with additional functions such as Labor Management (LMS), Slotting, Transportation Management (TMS), automation, and other systems integrations, to name a few. Large WMS users might have custom programming accessible from the WMS’ user library to provide specific functions not available in the core WMS.
As you draft your budget for the WMS implementation, it’s important to understand how add-on modules will affect the total cost of ownership.
The total cost of ownership includes equipment, the number of users for licenses, annual maintenance fees; vendor and consultant professional services; any new personnel required to make full use of the add-on system; and IT effort required to implement. All these factors affect the investment, the expected benefits, and return on investment.
In our consulting and systems implementation experience, there are 11 factors involved in budgeting for add-on WMS modules. This blog will help you more accurately budget the add-on systems.
Determine Requirements and Benefits To Be Gained
If you believe you need the add-on module in question, what additional benefits will be gained? It is critical to justify the need for the add-on modules. We often see companies signing add-on licenses before they have a detailed understanding of the core WMS capabilities. Signing is often well in advance of actually being able to implement the add-on. The cost justification may have a major impact on the entire project from a budget and timeline perspective. For some companies, they have no choice but to purchase the optional modules because its' functionality is required from day 1. For other companies, the add-on functionality can be acquired in the future and delays the immediate investment.
As part of the justification, you should clearly be able to state what functionality the desired optional module will provide and its benefits and savings. If it’s not required from day 1, maybe identify it for management as a desirable add-on and be budgeted in the future.
Before making a final decision about including the add-on in the budget, be sure you can answer the following considerations. How do these affect the project costs return on investment?
Add-on Seamless to WMS
Add-on modules that are developed by other software vendors sometimes are not “seamless” in the way you have to use the add-on system versus the core WMS functionality. By “seamless”, we mean are function keys, devices and system logic in alignment between the core and add-ons? Or do you have to use the add-on in a different way from the base system that will require more training and maybe employee confusion? It’s important to get at a detail level a demo that shows how the two work in conjunction together.
Need for Additional Professional Services
Who will implement the add-on systems? As an example, if you decide to implement a Labor Management system, does it require more professional services from the vendor of the add-on system? Even more importantly, to gain the highest value from an add-on system such as a Labor Management system will it require new processes, disciplines, and best practices to be developed and implemented for your warehouse operation to get the maximum benefits?
Additional Staff Required to Gain Benefits
If the optional module covers functionality that you have never had before, you may not necessarily have the right staffing to successfully implement and use that module. If your analyzing productivity data and improving staff for the first time, it probably makes sense for one person to become the subject matter expert and to do a lot of the analysis. This might require you to hire new staff or move them from another department and impact on payroll.
Change in Number of Licenses
Does the add-on module add to the number of licenses needed? Some modules are a site license so however many you need doesn’t affect it. If license-based, are the users managing or being managed by the add-on module already included in the license count? Don’t overstate who needs access to the module
Training and Implementation Costs
How does the add-on module affect the implementation and/or training time and costs? Additional modules and functionality will require more time to install and train the employee on the module. Be realistic about how much can you implement at once? Can the warehouse people absorb and gain productivity with both the Core WMS and add-on modules?
Annual Maintenance and Support Costs
How does the add-on module affect the software maintenance costs? Oftentimes, software vendors will focus on the costs of what the optional modules are without discussing the increase to maintenance and support costs. Maintenance costs are typically based on the list price of the software plus optional modules – not the negotiated software price. If the number of users for the add-on modules is overstated, it will also add to the maintenance and support costs. This is another reason for scrutinizing how many concurrent, or named, users are needed for the additional module.
External Factors to Gain Benefits
What is needed to gain the benefit from the add-on module? One of the major external factors is, does it require data not in the WMS? For example, with a Labor Management system, does the module require historical production data (and how much) to start use and gain the benefit from improved productivity? Typically, how long does the use of this system take to see results?
Are there integrations required to get the required data? If it requires technical support from another system provider or internal IT, have you determined the cost and schedule?
IT Skill Sets Necessary
If you’re considering developing integrations in-house, does IT have the programmer skill sets and availability to do so? What are the costs for integrating into the WMS? What will be the on-going programming effort required to upgrade any custom code (user library) when a vendor has an upgrade to the core system? Can you use a vendor resource as an option?
Realistic Implementation Schedule
Answering the above questions, how do add-on modules affect “Go Live” timelines? If the timeline is pushed out, how does this affect the budget? Does this slippage add more internal payroll costs from not implementing on time? Do you understand the internal process changes required to implement the system? Once you start implementation, vendors’ project managers, programmers, and implementation specialists are assigned to your project. If you cannot complete your tasks in the agreed-to timeframe, the vendor may continue to invoice for project management and/or reassign personnel. Have you budgeted contingency dollars for unknowns? If the schedule slips, you may have to select another implementation window and be assigned another vendor team. All this causes project slippage, cost over-runs, longer return on investment, and management questions.
If the add-on module is a requirement, be sure to understand the modules at a detailed function level. Be sure you know the total cost of ownership and the benefits expected. Be sure your planning and budget is realistic to deliver the benefits, on-time, and within budget.