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When it Comes to Warehouse Management Consultants, Rates Do Not Equal Value

Beware the $65 per Hour Resource that Takes 5 Times as Long


Okay, call me a dinosaur. Yes, I’ve been around for a while. But being one of the software developers that arguably defined the some of the best ways to write systems for WMS and automation interface layers, I think there is something I need to say. (Editor’s note: Fralick was a pioneer in development of a WMS that was based on a Service Oriented Architecture, which is now becoming the industry standard approach.)

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I think we should implement the same sort of price comparison tool the supermarkets use. You know, the “And that’s xx cents per oz” (for those of us who look at such things). We should put a tag on each contractor, “And that’s really $xxx per hour”. We’d put the sticker on their forehead -


MARK FRALICK

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There is a lot of Warehouse Management System (WMS) business out there right now, and there have been a number of people breaking off of the WMS companies or partnering with them. Now, don’t get me wrong – there are plenty of good people out there, but there are also quite a few that are – well, "not so much."

You know the drill – some people who leave a software company are the very best (there are few of these), but more often they just seen an opportunity (whether their skills warrant it or not). There seems to be such a scramble for bodies that I fear people don’t know what they are getting or what they are paying for.


So, here’s the deal. There is a generally a focus on rates. I even have people at trade meetings bragging about how “I got this guy for $90/hr and he can do everything”.  Be careful here: rates are not often a good reflection of actual cost.

Say one of these Newbee WMS “experts" sells you some work (even to do just reports or queries) at say $65/hr. Nice rate, right? Well. "not so much" if they take 3 times longer than someone charging even $150. Five times longer between the best and the laggards is not uncommon.  Look, you can find guys and gals out there all day for under $50/hr. But is the effective cost of your job less? Not likely. The only instance where this sort of thing makes sense is when you’d be training them on product data structures, your requirements, etc

But, here is the little secret – this is what some of these guys are doing – selling you these cheap resources, and have you train them. They’ll spend 3-5 times longer on the first several jobs than they should and by the time you get them all trained up – whoosh – they are gone on another job. At your expense.

Once you get beyond reporting and other very basic software work and and actually into modifications that require real knowledge, the risks go way up (as do the costs). The problem with these systems is that they are, well, Systems – like living organisms.  Often if you poke one of these things ‘here’ – you’ll see the result of your action three steps later ‘there’. So, now think about bringing some guy in who says “Oh, yea I’ve been working with the XYZ system for 3 years – I was on staff with them even” or whatever. The thing about some of these guys is that they often get pigeonholed into some portion of the system and may not have very good breadth or even depth. This is not a guy you want anywhere near operational mods.

 

I spend a good part of my days, in my role as the expert to the experts, looking at these sorts of things and either fixing them or undoing them. It is a pain for everyone involved – especially operations. Now, that is not to say this it is all about price either. Some guys with good rates know a lot, some guys with high rates not so much (maybe you are paying for a brand name in this case from a big practice).

Here is a good example: one of my customers came to me with a quote on doing an integration from one of the big guys a month or two ago. They quoted 400 hours, at pretty high rates. I thought that seemed a bit high – so I looked at the specs. If I were to quote this job, I said to them, it would be 60-80 hours at the very most. So, how can you explain this wide variation? That consultant was obviously totally in the dark or was throwing a complete Newbee onto this integration and expecting my customer to pay for it. Even if they were to reduce their rate by one half, it is still not a good deal.


I previously wrote a piece on my distain for blended rates – for exactly this same issue.  So, what’s the answer? Well, I think we should implement the same sort of price comparison tool the supermarket s use. You know, the “And that’s xx cents per oz” (for those of us who look at such things). We should put a tag on each contractor, “And that’s really $xxx per hour”. We’d put the sticker on their forehead. Or for some situations we’d take our queue from the pharmaceutical guys “don’t take with xxxxxxxx” warnings. We’d put a “Don’t do operations mods with me” sticker on their forehead.

Okay, so more seriously, what’s the real answer to all this. First, be very aware that there are a lot of people scrambling for a relatively small number of very knowledgeable folks in this space.

Second, ask questions of the resources assigned to your project. If they are doing an operational mod, for example, they should be able to thoroughly explain why the mod needs to be done this way, what are to down-stream consequence, and the risks.

 

Third, when you take on a consultant or a consulting group, make sure you get right of refusal for resource assignments. If nothing else this gives you the ability to further negotiate rates for resource you identify as Newbees (I like the idea of doing a No Charge situation for these guys for a short time period and ramping up their rates over a couple months).

 

Finally, remember that there are deals to be had out there (especially if you are looking at acquiring infinitely more profitable licensable product), but don’t be fooled into thinking it is all about rate.


This article was originally written for Supply Chain Digest, a leading web-based Supply Chain publication and website, where Mark Fralick serves as technical editor and expert commentator in the area of WMS and execution system architectures.  You can see the article and feedback here.