Intek

Introduction

See also Intek Support Contract

WMS (Warehouse Management System) is integrated application that manages warehouse inventory and locations using RF data collection devices. At WNA the WMS system implemented is acquired from a company called Intek. Intek’s WMS application is called Warehouse Librarian (WLib). Wlib sits on a Pervasive database

WNA conducted a year-long assessment of its WMS requirements and through the development of a requirements document invited a number of WMS vendors to compare their system’s functionality with WNA’s requirements and to quote a cost to implement and interface the application to IFS.

Intek was chosen on the basis that their functionality met WNA’s cost and functionality criteria as well as have proven experience interfacing Wlib with IFS. Before a Cap-ex was submitted to the Executive Management Team, Intek undertook a paid on site engagement to do a detailed analysis and costing of WNA’s requirements so that a solid cost estimate could be generated and form part of the original Cap-ex submission. With this firm cost estimate WNA also calculated the cost savings accruing from the implementation. The cost savings included better management of inventory, reduction in overtime and reduction in warehouse personnel. All four US sites agreed to participate in the implementation, whilst Polar took the option to defer any implementation for the foreseeable future. Upon completion of the pre-implementation stage it was estimated that the cost of the project would be $732,759 . This cost included the user licenses associated with the application; the implementation consultancy cost; hardware cost (servers, bar-code devices and networking infrastructure); integration services and miscellaneous costs associated with the implementation (warehouse labeling, electricians, etc). The payback was estimated to be $416k per year in labor savings starting in 2012 and $1m reduction in inventory generating a payback of 1.5 years and an internal rate of return of 49.6% . The cap-ex was approved in November 2010 and the project kick-off started in January 2011.

Current Status of Project and Analysis of Costs to Date

As of August 2012 three sites have gone live (Chelmsford, Lancaster and City of Industry) with Chattanooga currently due to implement in the 3rd quarter of 2012 and Go Live in October 2012. This represents a seven month estimated delay in completing the project. Some of the delays are due to integration coding issues incurred by the integrator whilst some have been requested by WNA so that Go Lives would not coincide with high levels of inventory in the warehouses. As of August 2012 $758,244.12 has been invoiced to the project. This means that the project is currently over budget by $(26,153.18). If we add to that the original estimate to implement Chattanooga and complete the project, the total cost would be $874,572.79 and the project would be over budget by $142,481.85 or 19%.

The Budget and Actual costs look closely correlated until July 2012 but in reality with the project behind schedule the actual costs should have been lagging budgets cost by a lot more. In effect the total budget for the project has been spent with one site to go. It should be noted that there is still a staged payment for software licenses to be made once the Chattanooga milestone has been completed, which is included in the new Chattanooga estimate. A breakdown of costs per site is detailed below.

Chelmsford

At Chelmsford the cost overrun was $90,465 or 24%. The Chelmsford implementation was the pilot site and as such the costs included the development of the WMS solution that would be rolled out to the rest of the sites. The major overspend was consultancy related and resulting from cost overruns relating to unforeseen complexity in designing the interface and additional consultancy costs associated with running the project, implementing the software and training the users. In addition a three month delay in going live (as per the Project Plan) added to costs. The Go Live effort itself was more difficult than expected and the consultants were asked to stay on site for a prolonged period until WNA was satisfied that the system was working as required.

Lancaster

At Lancaster the overspend was smaller in nominal values but greater in percentage terms. The overspend is most apparent in consultancy services from Intek and especially Internal costs. The internal costs overspend was driven by the unbudgeted cost of using a contractor, Mike Diamond, to implement the WMS hardware rather than internal IT resources, which the other sites had utilized and the failure to budget for a server in the original estimate.

City of Industry

Additional on-site support from Intek was requested by City of Industry in the wake of Walter’s resignation. Invoices have been received that cover the Go Live period and show, currently, that City of Industry is on budget. The software category includes the latest staged payment for Wlib licenses, which is paid upon the completion of each milestone. It should be noted that City of Industry had a much higher budget; $72k greater than Lancaster and $30k greater than Chattanooga which may account for its ability to hit the budget.

Post Go Live

City of Industry increased their user account from 14 to 18 in September 2012

Chattanooga

Prior to the analyst's departure the scheduled Go Live date was confirmed as October 8th 2012. In itself Walter’s resignation and search for his replacement should not necessarily delay the Go Live but WNA should review that date and ensure that it has the necessary resources on hand to complete as scheduled. Chattanooga represents a slightly different challenge to the other sites. Firstly, from a software implementation perspective Chattanooga uses Production Schedules and not Shop Orders, which means it will be using a different part of the interface and it is possible that they will encounter issues that have so far not been observed at the other sites. Secondly, from a technological and cost perspective, the RF Survey that was conducted earlier this summer concluded that the RF equipment would need to be enhanced compared to the other sites. The reasons given for this can be summarized as follows:

• 1. The thermoforming machines had a potential to generate more interference with the wireless access points that were communicating with Intermec bar-code devices.
• 2. The warehouses tended to have inventory stacked higher and more densely than the other sites, which may mean the signal strength was impaired.
• 3. The square footage of warehouse required to be covered by RF equipment was greater than originally estimated at the beginning of the project.

Subsequently, a new proposal and estimate was generated which greatly exceeded the original cost. Starting with the original estimated cost to implement Chattanooga, we see that the cost was budgeted to be $122,774.

The new estimate to complete Chattanooga is below

The new budgetary range is $174,500 to $205,400. The difference between the three options relates to whether a controller is required to work with the RF equipment. Putting that to one side, there has been a $50k increase between the original estimate and the lowest re-estimate. The items that have had a biggest cost increase are: • Interface Work, New Item $8k • Consultancy Cost up $15k to $30.5k • Wlib license up $6k to $35.7k • RF Equipment up $19k to $56.6K (Assuming no Controller) • 3rd Party Wiring up $8k to $11k The increase in RF equipment and wiring is driven by the recommendations included in the detailed RF survey that was summarized above (albeit the potential for interference from the Thermo-formers has been discounted by Chattanooga). The increase in integration cost and consultancy is driven by a very low estimate entered originally when the budget was set. The RF survey team also recommended an additional piece of equipment called an RF Controller. This increases the RF cost to $87.5k. The advantage of the controller is that the Intermec device would maintain contact with the network even when the signal to the wireless point is lost. It was thought that this might be advantageous if inventory was moved between the warehouses given that the distance between them is quite large. However, it is unlikely that one warehouseman would be working in multiple warehouses at the same time. A cheaper controller was also quoted (Option 2). Note: A conference call on Monday 13th August concluded that given the information and knowledge we have currently, an RF Controller is NOT required.

Using the lowest of the estimates (without an RF Controller) it is now forecasted that the project will be over budget by $ $168,946.34 with a total cost of $901,037.28

Figure 2: The New Forecast Line shows the completion of the project with the latest estimate for Chattanooga Capitalizing internal labor At the time of Go Live at Chelmsford it was decided to capitalize the internal effort up the point that WMS went live at the first site. The cost of the capitalized labor was $149,923. In submitting the new Cap-Ex this amount should be added. Therefore the cost of the project rises to $1,050,960 . The supplemental cap-ex submission will be for an extra $318,201

Polar Implementation Cost

This document excludes the cost of implementing WMS at Polar. If this were to change then a new estimate of costs and savings would need to be created. Additional unknown costs at this time It is understood that all known costs and contingencies have been built into the estimate but no guarantee that future unknown costs will be identified or that the implementation at Chattanooga is more complicated than expected or that Chattanooga decides to delay the implementation, which may increase estimates further. It also excludes any potential enhancements to the interface that would improve the performance of the IFS system as well as limit the number of errors and workarounds that the users have to undertake today.

Summary

• (a) Cap-ex authorization: $732,859.00
• (b) Spent to Date: $758,244.12
• (c) Forecast $ to be spent: $142,793.16
• (d) Forecast $ over cap-ex (c)+(b)-(a) $168,946.34
• (e) Cost of Internal Labor: $149,923
• (f) Supplemental Cap-ex Amount (d)+(e): $318,201

Timeline 2010