How Much Does it Cost to Update Your WMS? And What to Consider?

Here's the scenario. You've been running a legacy warehouse management system (WMS) for 15 years, and recently have a hard time keeping up. You're missing key integrations, there is no API to connect with other systems, the manual processes involved cost time and money etc. You begin looking into other options, and soon enough you find out just how staggard the price X features can be. This oftentimes happens when you are in the busiest time and are at the very end of your limits. In doing research you come across a few good solutions. The problem is they don't tell you the absolute costs to change out. So what is a operations VP or manager supposed to do? From my own experience, we've dealt with this frequently and it's becoming a popular area of discussion. I'll give a breakdown of a few top tier solutions as well as some second-tier options to run through the absolute cost considerations to make.

First of all, we need to consider that depending on the size of the business and functionality requirements the cost and scope will vary widely. This post will focus on the small and medium enterprise market, as this is where we focus.

Tier 1 vs. Tier 2 Solutions

To distinguish between the top-tier solutions and second-tier solutions you can look at the market they predominantly serve. Top-tier solutions such as Microsoft Dynamics, Oracle Netsuite, SAP, Info, JDA, or Highjump are actually ERP solutions with a WMS add-on. They comprise a full suite of enterprise resource planning tools to handle accounting, resource management (offices/warehouses), allocation of supplies, people, and reporting across the entire organization. These are BIG systems that are meant to integrate across all functions and business divisions. They also come with a hefty price tag. The price for implementing these ERP systems with a WMS module is comprised of the consultant fees to setting up and customizing, license costs, hardware systems, integration costs, and system upgrades (for on-premise).

Second-tier systems are focused more exclusively on the actual warehouse management aspect. These solutions typically are not a full-blown ERP, though some will have ERP-like modules (see Odoo). These systems, like SKUSavvy, Fishbowl, 3PL Central, Logiwa, and TradeGecko are very good in warehouse & inventory management but oftentimes will defer to integrations for other resource planning aspects. These systems rely on integrations with accounting providers, marketplaces and other channels, human resources planning and beyond. These systems may even be integrated with your ERP system. The advantage of using a tier 2 system and integrating with your ERP is to cut costs, improve functionality, and lighter operating costs to upgrade or add modules.

Level 1 Considerations

Below are the big essentials to consider when updating. Depending on your own requirements this will help to determine what costs you'll need to consider.

• ERP or WMS - these do not need to be mutually exclusive, however, the price you pay will be dramatically different (as seen below)
• Hardware - will you run RFID scanners, use hardware attached to mobile devices, or simply use a phone's camera to capture barcodes? All are possible but they will come with different price points. Hardware get's expensive quickly, and can also become outdated quickly. For our own SKUSavvy, we provide the option for both hardware attached to the phone (via BlueTooth) or simply using the phone's camera via the Scandit SDK
• Integrations - depending on your current systems you will need to consider what the new systems will need to connect to and if those integrations are supported natively. If they are not, you'll be planning for your own custom development to integrate
• Robotic Warehouse Automation - Admittedly this is not a major concern for smaller warehouses. At the medium and large enterprise level, it's becoming crucial to compete. We did a whole write up on robots in the warehouse to explore what's possible after visiting an Amazon Fulfillment center
• Manufacturing & Delivery - depending on your business you may require the WMS to also have a production module. Many will have this natively as an option. Furthermore, if you handle your own distribution across a fleet you'll either need to integrate with your routing & delivery software or find a solution that can handle both, such as SKUSavvy (much harder to find than you may think)

Level 2 Considerations

These are the actual features within the software which will make it easier to perform the tasks you need. Many of these are standard features within most WMS. Others may be outside the normal scope or not included at all - this is marked below. I've put them in order of how they are used within the warehouse.

• (Standard) Product Check-In - when product comes in from a vendor, you should be able to scan the products according to the purchase order. The system should automatically alert your admin of any discrepancies to be dealt with quickly.
• (Not Standard) Purchase Ordering & Lead Timing - creating and sending out automated purchase orders can save a boatload of time. Depending on replenishment quantities for a product POs can be generated and sent out automatically or queued up for admin approval. Lead timing is something that typically is not included with a standard WMS. It allows you to predict based on the last PO date and delivery date how far in advance you should consider the PO to be sent out so you aren't holding more inventory than you need. It can save a lot of money, but many times will be an afterthought or will require custom building (For example, this is included with our premium account on Distribution Hub)
• (Standard) Multi-Warehouse & Cross-Docking - Most WMS will offer you the ability to handle inventory across a network of warehouses. This enables you to have logic in place for where orders should be routed and which warehouses have the inventory available to fulfill an order. This also enables you to cross-dock inventory (that is to send X units from Warehouse A to Warehouse B) to reallocate based on demand.
• (Not Standard) Warehouse Layout and Allocation - here's another functionality piece typically not included in any tier 2 system. This enables you to track each storage area within a warehouse as well as the capacity available for storage. The typical use case is to scan items into a bin location so that you can scan any bin and it will provide the products contained, as well as available space
• (Standard) Inventory Tracking - this is the standard amongst WMS allowing you to scan inventory barcodes, view details, assign the product to new locations and to confirm inventory accuracy from warehouse to customer or shipment
• (Standard) Order Management - you may have orders coming from Amazon, your website, WalMart and beyond. Consolidating these orders into your WMS is crucial in being able to ship out orders quickly and efficiently. Most WMS will enable you to integrate with your various channels directly. We utilize Elastic.io to handle integrations directly with over 1000+ different software platforms
• (Not Standard) Palletization - automatically assigning customer orders to a pallet is typically a manual task. But, with modern WMS you can have this be automated, which will tell a picker which products to place on one pallet so as to maximize utilization of the pallet
• (Not Standard) Capacity Planning - knowing exactly how much space your warehouse can store is a valuable addition. Not only that, but knowing exactly how much space a certain bin or shelf can hold enables you to automate the process of storing the product in the correct location based on seasonality, back-orders or customer purchases
• (Standard) Pick-and-Pack - this is an essential function of every WMS and enables your employees to see incoming orders while divvying up the picking across the workforce. Most WMS will allow you to determine which pick method with work best: wave, batch, order, etc.
• (Standard) Shipping - shipping product across different carriers and creating shipping labels is standard across most WMS. The difference may be in which carriers they provide access to. For dHUB clients, we utilize Shipstation and EasyPost to give access to over 100+ carriers worldwide.
• (Not Standard) Fleet Routing & Delivery - in our experience (and this is why we created dHUB in the first place for a client) there has not been any WMS to also handle fleet routing & delivery of a product. This is typically handed off to a routing software, but the benefits compound by having it all in one place. This enables you to deliver the product, gather proof of delivery, collect a payment, and issue an invoice directly within a mobile app for your drivers. It's incredibly valuable to have this within one system as it cuts down on manual tasks and route planning while also enabling a 'closed-loop' system which can optimize over time automatically.
• (Standard) Reporting - All WMS will offer some sort of reporting module. This can be very simple (exports to Excel) or complex with multi-variant reports you can generate. Most often, you will do your reporting directly within the ERP or accounting software which you have integrated.

Costs

Ahh, the fun part, how much will this dang thing cost to get up and going? It's no secret that implementing a WMS will not be the cheapest thing to do. This, of course, depends on how many standard vs. non-standard modules you need, whether tier 1 or tier 2, and how much customization is required. Here's a good breakdown:

Perpetual Licenses

In this model (which is much less common in the day of SaaS - software as a service) you are paying for the software upfront, with limited ongoing costs.

Upfront Cost - low scope of functionality

• 1-5 employees - $15,000-$30,000
• 6-15 employees - $45,000-$90,000
• 15+ employees - $90,000-$190,000+

Upfront Cost - broad scope of functionality

• 1-5 employees - $40,000-$50,000
• 6-15 employees - $60,000-$150,000
• 15+ employees - $150,000-$200,000+

Modifications and Additions - $10,000-$15,000 per module addition

Yearly License Fee - Up to 10-15% of base license cost

SaaS License

Upfront costs - 1-2 years of the monthly amount

Ongoing Cost - low scope of functionality

• 1-5 employees - $79-$199/month/employee
• 6-15 employees - $49-$149/month/employee
• 15+ employees - $29-$99/month/employee

Ongoing Cost - broad scope of functionality

• 1-5 employees - $199-$399/month/employee
• 6-15 employees - $149-$299/month/employee
• 15+ employees - $99-$299/month/employee

These costs are obviously an estimate, and we've based these estimates on the pricing pages from Zoho, Fishbowl, Odoo, Distribution Hub, TradeGecko, Highjump, Software Advice, and Capterra. These costs do not include unforeseen costs such as additional modules, custom software development, custom integrations, additional server space (for open source) and yearly maintenance fees charged by some vendors.

Generally speaking, you'll be looking at a low-end cost of $20,000 to a high-end cost for larger, more complex businesses of $150,000. For evaluating a perpetual vs. SaaS license you should note that typically perpetual will be more expensive until about year 7-10, though you will not receive the type of software updates that come regularly with SaaS licenses. There can also be different fees associated with on-premise vs. cloud vs. hybrid deployments.

If you have questions about this price and feature guide feel free to contact us. You can also find more information on our own warehouse & delivery management system on our website.

I look forward to some comments either in agreement or disagreement with the information presented here. If you have something to add, please leave a comment and I will add the information into the article if it is a valid point.

Visit the SKUSavvy blog for more articles specific to the wholesale distribution industry.