The advent of cloud-based computing power was a breakthrough for warehouse management. The most (WMS) can leverage the power of the cloud, Internet-enabled sensors, and customer-facing platforms to ensure maximum ROI and reduce expenses related to warehouse management. However, the cloud has introduced a new problem. Warehouse Managers can modify systems heavily, using cloud-based technology. Unfortunately, modifications can be a source of great savings as well as costs.

Now, consider the short-term and long-term costs of modification. Modifications are a business risk, and while they may pay off in the short-term, their long-term effects could be substantial. Before making the decision to modify a warehouse management system, Warehouse Managers need to understand these risks, the problems inherent in modification, and how to avoid unnecessary modification.

The Problem: Unnecessary WMS Modification Increases TCO

The costs of modifications begin by affecting the total cost of ownership (TCO) of a WMS. For example, Curt Barry of MultiChannel Merchant explains, a simple modification requiring an additional 120 hours of programming could have the net effect of increasing investment costs by $27,000. Although this may not seem like much, modifications in the era of cloud-based technology result in additional modifications upon each new version of the software. In other words, modifications using cloud-based technology will incur additional costs in perpetuity, increasing TCO.

Avoiding modifications wherever possible is the only solution to this problem. Before making the decision to modify a system, Warehouse Managers should redefine the requirements for modification and analyze how such modifications will benefit the overall operation. In some cases, modification may be cost-effective, but only if the costs associated with modification are less than the long-term cost savings for such modification. Furthermore, modern off-the-shelf solutions for warehouse management may include features that render most modifications useless. Essentially, a modern system may include features that achieve the same effect without necessary modifications.

How to Determine When Modification is Necessary

Determining if a modification is necessary is a relatively easy process. It should begin with a focus on avoiding all modifications. While this may seem impractical, it refocuses the mind and encourages all members of the management team to think outside of the box to avoid modification. As explained by Kevin Tedford of MultiChannel Merchant, today’s WMS systems are highly configurable and can satisfy most business requirements. To streamline modification consideration, follow these steps:

1. Identify the business need that modification will improve.
2. Calculate the average savings per order for the given modification.
3. Multiply the result from step two by the average number of orders processed by the system.
4. Calculate the initial cost of modification.
5. Multiply the result from step four by the average number of system updates per year. If you are unaware of what your vendor update frequency is, assume a value of four.
6. Divide the result from step five by the result in step three. This is the annual ratio of savings versus costs.
7. Even if you have a positive result from step six, remember the cost of inflation. Inflation rates may render projected cost savings useless if modification costs increase and your price points do not.
8. Reevaluate WMS vendors for systems that are easily configured to meet the needs of modification in another system.
9. Return to step one to determine if the modification is again necessary.
10. If WMS modification is necessary, get the opinion of a third-party expert, like Veridian, regarding the extent, costs, and savings due to such modification.
11. Proceed with the modification if advised by a third-party integrator, or move on to a new, prescribed system or solution.

Only Modify if No Other Solution Exists!

Being able to modify a system does not necessarily mean a Warehouse Manager should. Modern WMS is designed to meet most business needs, regardless of size, so modification of any systems may be unnecessary. Even a warehouse which is operating with legacy and ERP systems may have the option of implementing entire new platforms at a lower cost than the cost associated with modifying a newer, cloud-based WMS. If your organization struggling with determining whether to modify its systems, let the experts help. 

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