Turning Fixed Costs into Variable Costs

With regard to the cost structure, the effects of Cloud Computing on warehouse management are best illustrated using the following bar graphs. The left graph shows the total one-time investments costs for hardware (computer for the WMS server and database), software (server licence, user licences, interfaces, individual programming), and implementation costs (project management, specifications, migration/test, training, start-up assistance/acceptance) for both projects (typical implementation and cloud-based implementation). The right graph shows what percentage of the total costs is used for the monthly operating costs.

It is clear that the initial one-time investment costs are reduced by circa 56% while the percentage of monthly operating costs of the total costs rises slightly from 3.8 to 5.5%. This means that by renting hardware and software instead of purchasing it the costs for the IT support of warehouse process can be turned into variable operating costs. One also observes that – as already explained in the section on Saving Potential Over Time – the overall operating costs also decrease.