6  Factors That Influence WMS Project Cost and Schedule Over-runs

   

We had a recent conversation with the President of a $65 million multichannel company. They had decided to replace their systems several years ago, using a disciplined approach to the evaluation and selection for their new warehouse management (WMS) solution. The problem is, two years later and they were still implementing the new WMS system.  Feedback from the President was that the implementation was so poor, that they had to switch integrator's part way through.

This, unfortunately, is not uncommon to hear among WMS and ERP installs.  The problem was the integrator had no experience with multichannel businesses – their background was in manufacturing distribution – not retail or consumer ecommerce. The installation is close to being complete, but the services for implementation are two times higher than planned.

Unfortunately, higher costs and far longer schedules are all too common when replacing major systems.  

Read: Understanding the Cost of Ownership

As you contemplate replacing systems here are 6 factors to estimate, and control, based on our WMS selection and implementation experiences:

  1. Vendor and System Integrator costs. Selecting the Systems Integrator is as important as selecting the right system for your business. Some software manufacturer’s sell and install with their own staffs, while others sell and install through a partner network of certified Systems Integrators. Be sure to solicit bids and compare the capabilities of multiple Integration firms. Some companies contract, use and fire several Systems Integrators before they find one that finishes the install properly. This elongates the schedule and escalates costs. Do the candidates install the WMS in your industry, and in your size company? Spend extra time with references to understand why they selected the Integrator? Did they deliver on-time and within budget? What would they do differently?
  2. Professional services for the implementation. Whether you use the software developer or a systems integrator to implement, one of the major costs are professional services. The vendor proposals will contract for a block of time which is the best estimate as the Systems Integrator understands your operation and requirement. These costs are not fixed price so the vendor has the right to notify you in advance of changes to estimates as the project progresses. If you decide to discontinue the implementation it is typically all sunk costs not refundable. Implementation services will include technical team project management; review of all specifications for the project; input and weekly updates to project plans; developing any integrations, modifications including specifications, programming, testing and file conversion; and process changes in your fulfillment center. The time spent will be tracked by task (activity) and hours spent. They are invoiced at least monthly.

    Most companies do not do a detail study and then estimate the costs. The point is that whatever it takes is what you’re going to pay for. If your company doesn’t keep up its original contracted plan timeline, the vendor may invoice you for time that their people are idle, or have to reassign them on another project.

  3. Server and handheld devices. Most vendors no longer re-sell server hardware. For on premise solutions, they will give you a configuration based on several factors, but they generally do not warrant that it is sufficient.  It is on each company to ensure that they push the vendor to prove out the configuration of the server so that there are no issues at go live.  Many WMS vendors either re-sell handheld devices, or they have a partner to purchase from.  Companies should be careful to stick with those devices that have been tested, and are certified to work with the WMS system that was selected.  Not doing so could have very costly impacts on the project.  Finally, the wireless access points need to be properly specified and installed for the handheld devices and printers to function properly.  It is highly recommended to utilize and experienced company to perform a site survey and deterine the type and number of units required.  These hardware items are critical to the solution running properly, with no lags or response time issues. 

  4. Changing your fulfillment processes. Don’t underestimate the tasks that must be performed prior to going live on a new WMS solution.  To get the full benefit of a WMS solution, companies must consider other factors such as how processes in the warehouse will change within each department.  These should be reviewed in great detail, and mapped out so that each department can be properly trained.  Consider the change management aspects, and add additional resources where needed. 

  5. Loss of fulfillment center productivity. When a new WMS goes live, often times the employee productivity starts below what was being achieved with the old system. The more complex the new implementation, the longer it typically takes to reach the expected productivity. For example if you are implementing a WMS as well as a new sortation system which employees are not familiar with, it will take time for the actual experience to become ingrained in their work habits and experience. We have seen some very large ecommerce fulfillment centers take 3 to 6 months to gain the productivity initially planned. Build into your planning over-time and preparation by line managers to look for ways to reduce this.

  6. Lack of project management experience and available resources.  Most companies do not undertake major system upgrades but every 5 to 10 years. The management team in the fulfillment center most likely does not have this skill-set.  The project management role cant be solely passed of to the software vendor’s team or your IT’ department. Coupled with the fact that most companies are very lean, they do not have the management resources to be involved with project management several days per week initially to full time the closer to the go live date. When you talk to vendor references, make this a key series of questions about how they projected managed the implementation.

Here are five major ways to manage the risk of higher than budgeted costs and longer implementation timeframes:

Involve and get buy-in from all stakeholders. There will be many benefits outside the center.

Reference checks and site visits. During reference checks in the selection process, use it to understand more about these projects. What changes did the system mean to their operation? How did they project manage the implementation? Did the vendor deliver on-time and within budget? What were the categories of cost that had the highest overage? If the referenced site is a good fit, ask to go see the system in operation with a number of manager’s.

Project tracking software. Most vendors will use a project tracking system to manage their portion of the project. Many companies don’t have that experience with this type software and it isn’t the easiest to learn initially. Learn to use it from the very beginning for all your project management planning, tracking and weekly reporting.

Improve your project management and consult an expert

Continual projection of costs and schedules with accounting and management, each month formally re-estimate project costs and schedules.

Perform a risk analysis before you contract with a vendor. Overall, what is your tolerance for risk so you are better informed to make this important decision, and deal with unforeseen problems. Involve all stakeholders in the risks analysis. What happens if the cost is 30% higher from a longer schedule? What if it takes six months to gain the productivity planned? How will customer service be negatively affected? Itemize these types of scenarios before signing the agreement.

WMS can bring great benefit to many companies. The investment in money and time is huge for many businesses.

 

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