What Is a Warehouse Management System (WMS)?

Regardless of the type or size of your business, you can use online retail management software to help you offer your products to people worldwide. Your business can grow with a great e-commerce plan, but first, you must decide how to manage your supply and customer support. Warehouse management systems are helpful in this situation. These tools give you the necessary resources to manage inventories, restructure processes, and cut costs.  

What Is a Warehouse Management System (WMS)?

The manufacturing and retail sectors frequently employ software called a warehouse management system (WMS) to monitor and control warehouse operations from when goods or supplies arrive until they depart. WMS is a combination of software and procedures designed to oversee warehouse operations from the arrival to the departure of goods and materials.

At the core of manufacturing and supply chains, warehouses store everything from raw materials to completed products. It aims to optimize the flow of goods and materials through warehouses efficiently and cost-effectively, managing tasks such as inventory monitoring, product picking, receipt, and storage.

Plus, a WMS enhances transparency into inventory levels, supports forecasting, improves inventory management, and boosts material handling efficiency. It is accessible from any location, whether on-site or during transit.

While warehouse managers primarily utilize WMS, it also seamlessly integrates with other systems such as customer relationship management (CRM) and inventory management systems. Sales and marketing professionals can leverage WMS data to track how quickly items are located, packaged, and shipped and to access delivery schedules and dates through TMS. This information can be transformed into detailed performance reports.

How Does a Warehouse Management System Work?

Because they house everything used and produced, from raw materials to final commodities, warehouses are essential to manufacturing and supply chain activities. The fundamental goal of the warehouse management system is to ensure the practical and economically viable transportation of materials through the warehouse.

When a customer orders, the WMS can check the product’s availability immediately because it has all the data. The WMS speeds the procedure by marking the order as set for packaging if available rather than requiring a person to check to see what is available manually.

Why Use a Warehouse Management System?

In the current online retail market, you must be able to deliver orders quickly and effectively. A warehouse management solution can reduce order latency, errors, and processing costs by helping you locate every product in the warehouse.

Using a WMS can reduce product delivery and processing times and help you keep track of what you’re selling. Knowing which things commonly leave your warehouse will help you modify your layout to simplify loading goods for staff.  Here are some notable advantages:

• Enhanced Efficiency in Operations: A WMS enhances operational workflows by automating inventory management, order processing, and shipping activities. This automation minimizes human error, improves accuracy, and optimizes warehouse operations. It also accelerates order processing, enabling the management of higher volumes without the need for more staff.
• Cost Savings and Improved Space Utilization: Although the WMS requires some capital to set up, it reduces storage and operational expenses by optimizing warehouse layouts and product placement. It promotes efficient space usage, potentially reducing the need for additional facilities. Moreover, it aids in reducing waste by managing overstock and preventing product expiration through strategic stock rotation.
• Visibility of Inventory in Real Time: Employing technologies such as barcodes, RFID tags, and sensors, a WMS offers immediate insights into inventory levels and movements. This visibility aids in precise stock control, enhances demand forecasting, and supports just-in-time inventory practices, thereby lowering inventory costs and enhancing supply chain agility.
• Optimization of Labor Resources: WMS tools help predict labor demands, optimize scheduling, and delegate tasks based on workers’ locations and skills. This optimizes workforce productivity, cuts down on idle time, and contributes to a more structured and positive workplace, which can improve staff morale and retention.
• Strengthened Customer and Supplier Relations: Quick and accurate order processing boosts customer satisfaction and streamlines interactions with suppliers. Efficient operations reduce wait times for loading and unloading, fostering stronger business partnerships.

Difference Between a Warehouse Management System and an Inventory Management System

A WMS tracks the movement and storage of products in the warehouse or distribution center. It also helps ensure that items are stored in the most efficient location and that the correct items are picked and packed. Warehouse management systems also enable the management of all warehouse operations and monitor employees’ performance. 

On the other hand, an inventory management system helps track available inventory, including raw materials, work in progress, final products, and components needed to manufacture final products. It monitors stock levels and informs businesses if and when they need to produce more products or when raw materials are required to manufacture them. 

While an inventory management system notifies users of a specific item’s availability, a warehouse management system provides information about the location of items within the warehouse, including the bin in which they are stored. 

The most significant difference is that a warehouse management system can help you manage employees’ work in the warehouse. In contrast, inventory management systems only deal with stock and finished goods, making warehouse management systems more complex than inventory management systems. 

Who Needs a Warehouse Management System? 

If you own a warehouse or a distribution center and want to run a competitive business, you need a warehouse management system. Relying on a manual system isn’t practical, and you risk losing customers if you can’t execute your operations properly. 

Even though many industries use warehouse management systems, six sectors are the most significant WMS users. Including retail companies that need a WMS to help manage the surge in online orders so that customers can see inventory at their brick-and-mortar stores and arrange for pick-up and delivery. 

The manufacturing industry is also one of the most significant WMS users as they need help tracking several types of inventory, from raw materials to finished goods. 

Third-party logistics (3PL) manage stock for multiple companies, so they need the WMS software to help ensure that consumers’ orders are kept separately and managed independently. Wholesale distributors also use WMSes to manage their extensive inventory and streamline labor costs. 

The healthcare and food and beverage industries also require the assistance of a WMS to accommodate the unique needs of their products, which can spoil or expire, and ensure that they are placed in a suitable location to be shipped on time. 

Difference Between Enterprise Resource Planning (ERP) and WMS

Understanding the distinctions between a WMS and an Enterprise Resource Planning (ERP) system is crucial due to their differing organizational roles. A WMS is a specialized tool designed exclusively for managing warehouse operations. It excels at providing real-time insights into inventory levels, enhancing the use of warehouse space, and streamlining the processes of picking, packing, and shipping items.

Key strengths of WMS include precise inventory management, warehouse layout optimization, and labor management—factors that significantly boost operational efficiency. This system is particularly valuable for businesses managing substantial inventory volumes or with intricate warehousing requirements, such as those in retail or e-commerce sectors.

On the other hand, an ERP system encompasses a wider range of business functions and aims to integrate and simplify operations across various departments. It manages inventory and spans finance, human resources, sales, and supply chain management. ERP systems offer a comprehensive view of a business’s operations, facilitating seamless data integration across departments and supporting strategic decision-making with its centralized management features. Although ERP systems include some warehousing capabilities, they lack the specialized functionality of a WMS in handling specific warehouse tasks.

An ERP system might be adequate for smaller enterprises, particularly if warehousing is not a central aspect of their operations. Larger organizations or those with more sophisticated logistical needs may find more excellent value in a dedicated WMS. In some cases, integrating both systems can enhance overall operational efficiency and data coherence within the company.

Types of Warehouse Management Systems

The type of warehouse management application a business chooses will depend on its size and activities. Warehouse management software comes in various types and installation techniques. A WMS might be an execution suite for a supply chain or a stand-alone system.

They also vary in complexity. Larger organizations utilize sophisticated warehouse management system software, while other small enterprises may only use a basic collection of spreadsheet documents. Additionally, some companies want their WMS specifically tailored to their firm’s size. Other organizations, in comparison, use WMS software that can adjust to various company sizes. A WMS can also be created to meet a company’s unique needs and the kinds of goods it offers. Some examples of WMS include:

1.    Cloud-Based WMS

Applications operating on a company’s internal servers were the original form of warehouse management systems. But as time passed, this model changed, and now that businesses are aware of the advantages of hosting systems in the cloud, cloud-based warehouse management solutions are more widespread.

In contrast to the on-premise model, a cloud service provider or WMS vendor hosts and manages the software, which is an essential feature of the cloud-based WMS—assuming responsibility for updating, setting up, and maintaining the company’s warehousing system.

Because cloud-based WMSes are more accessible and less expensive to manage, most are billed on a subscription basis, and small and medium-sized organizations choose them. However, more large businesses frequently utilize on-premises WMSes since they demand specialized systems that adhere to the needs of their particular industries and can handle the software on their own.

Pros of the Cloud-Based WMS

• The service provider manages the IT infrastructure and software updates, reducing the company’s IT workload.
• Typically has lower upfront costs compared to on-premise systems, with subscription-based pricing spreading expenses over time.
• Easily scales with the business, accommodating growth without the need for physical infrastructure expansion.
• Can be accessed from anywhere with an internet connection, providing flexibility for remote management and operations.

Cons of the Cloud-Based WMS

• Requires a stable internet connection to function effectively, which can be a limitation in areas with poor connectivity.
• May offer less customization than on-premise solutions, as it needs to cater to a broader range of clients.
• Hosting data externally raises potential concerns about data security and privacy, depending on the provider’s security measures.
• Switching from one cloud provider to another can be challenging and costly, leading to vendor lock-in.

Also, major WMS vendors like Microsoft and Oracle offer various deployment options, including cloud-based systems.WMS cloud-based vendors include Fishbowl, HighJump, and SnapFulfil.

2.    Integrated WMS

The integrated warehouse management system software is typically attached to your current ERP vendor. ERP systems control accounting, inventory monitoring, and billing. The order is taken, and the integrated WMS handles the order-picking procedure, the products, and the receiving and delivery of the goods. When everything is integrated into one database, managing and keeping track of the items you might need to invest money in is simpler.

For instance, if an item with a low profit margin is selling out quickly, you can stock a product with a high profit margin instead and reduce sales. You can keep track of all these financial analytics with an integrated WMS.

While many ERP systems include WMS capabilities, not all do; selecting an ERP system that specifically offers this feature is important. Some ERP vendors provide WMS as an additional, sometimes third-party, solution, whereas others offer a fully integrated WMS that doesn’t require any add-ons.

Pros of the Integrated WMS

• Integrates seamlessly with ERP components, facilitating cohesive management of business operations.
• Reduces errors and discrepancies by maintaining a single source of truth for inventory and related data.
• Offers comprehensive analytics and reporting tools that support better strategic decisions based on real-time data.
• Simplifies processes across different departments, enhancing efficiency and reducing time on order fulfillment.

Cons of the Integrated WMS

• Integrated WMS applications can be complex and may require a learning curve to learn the system’s core features.
• Integrating WMS with existing ERP systems can be complex and time-consuming.
• Initial setup, integration, and maintenance costs can be significant compared to standalone systems.
• Limitations in features and flexibility can arise depending on the ERP provider’s capabilities.
• Managing an integrated system can require more administrative oversight and training.

3.    Standalone WMS

The standalone WMS may include reporting tools that can aid in expanding your warehouse because it is designed exclusively for warehouse management. On the other hand, a standalone WMS is software with various capabilities to assist you in managing your warehouse. As a result, the standalone WMS might only contain a few features for other parts of your company’s operations, such as accounting and inventory.

Pros of the Standalone WMS

• It offers internal integration capabilities, which means businesses can incorporate the standalone WMS into their current systems without experiencing a total system overhaul.
• Tailored specifically for warehouse operations, ensuring detailed attention to related needs and processes.
• Includes powerful reporting tools that can analyze warehouse operations and aid in strategic decision-making.
• Typically simpler to use with a focus on warehouse management without the complexity of additional business functions.

Cons of the Standalone WMS

• It has a limited scope, meaning that only so many businesses can do it.
• It may not integrate well with other business systems, particularly those outside of warehouse management like accounting or HR.
• It lacks real-time information and isolates warehouse and inventory management steps from the rest of the business’s operations.

4.    Supply Chain Module

Supply Chain Management (SCM) ensures that products are delivered accurately, on time, and cost-effectively. It oversees the flow of goods and services, encompassing everything from raw materials to finished products through various stages of production and delivery.

Comprehensive in scope, SCM transcends traditional warehousing systems by managing the entire supply chain. Supply chain management software streamlines various aspects of business operations, including risk assessment and management of customer relationships, suppliers, transportation, material handling, and inventory.

It automates product lifecycle management, procurement, and inventory tracking. SCM platforms can integrate tools for managing fleets, inventories, and warehouses into a unified system, making them particularly suitable for larger companies and third-party logistics providers (3PLs).

Pros of Supply Chain Management:

• Automates and optimizes the flow of goods from suppliers to customers, improving overall operational efficiency.
• Provides tools for identifying and managing potential risks within the supply chain.
• Ensures timely delivery of products, which can enhance customer satisfaction and loyalty.
• Helps in reducing costs through optimized logistics and inventory management.

Cons of Supply Chain Management:

• Managing an entire supply chain can be complex and may require significant resources and expertise.
• Implementation of SCM systems can be costly, particularly for comprehensive solutions that cover multiple aspects of the supply chain.
• Reliance on SCM systems increases vulnerability to technological failures or cyber threats.
• Transitioning to or updating SCM systems requires effective change management, which can be challenging for some organizations.

Features of Warehouse Management Systems

WMS software products have a lot of standard features. They include the following:

• Inventory Tracking

With the aid of this feature, you may locate your products even if they have been relocated by using sophisticated tracking and automatic identification and data capture (AIDC) systems, including a barcode reader.

• Shipping

This function allows the WMS to transmit bills of lading before the shipment reaches its destination, create a packing list and invoice for shipment, and notify recipients of the impending shipment in advance.

• Yard and Dock Management

Effective yard and dock management is crucial for smooth warehouse operations. A WMS assists truck drivers in quickly identifying the correct loading docks, reducing wait times and enhancing overall logistics efficiency. More advanced yard and dock management capabilities support complex operations, such as cross-docking, where inbound goods are quickly redirected to outbound shipments without needing storage. 

• Warehouse Design

Businesses may tailor their workflow using this WMS function, ensuring the warehouse is prepared for inventory allocation. The WMS establishes bin slotting to maximize storage capacity and consider periodic stock variations. 

• Picking and Packing Products

This feature includes zone selection, batch selection, and wave choosing. Warehouse personnel can also use the site zoning and project interleaving functions to set up pick and pack activities effectively.

• Labor Management

Utilizing key performance indicators (KPIs) that show whether employees deliver above or below expectations makes it easier for warehouse managers to monitor employees’ performance.

• Enhanced Receiving and Storage

A Warehouse Management System (WMS) significantly streamlines the processes of receiving and storing inventory. It facilitates efficient inventory storage and retrieval, allowing for quick access to goods when needed. Advanced technologies such as pick-to-light and pick-to-voice systems guide warehouse workers in locating items with precision.

• Detailed Reporting and Analytics

A robust WMS offers comprehensive reporting and analytics tools that empower warehouse managers to assess the performance of their operations. By analyzing key metrics, managers can identify trends, pinpoint inefficiencies, and discover areas for improvement.

Benefits of a Warehouse Management System 

Although operating a WMS might be costly and complicated, the benefits to organizations outweigh these drawbacks.

A WMS can assist a company in lowering labor expenses, increasing inventory accuracy, increasing flexibility and responsiveness, decreasing picking and shipping errors, and enhancing customer experience.

Modern WMSes work with real-time data, giving the company access to up-to-date data on orders, shipments, receipts, and the movement of goods. 

Disadvantages of a Warehouse Management System

Even though WMS has countless benefits, there are also some disadvantages to implementing one in your business operations. Some of them include:

• For large-scale businesses, managing the maintenance of the WMS master data might be too difficult. 
• The additional steps in between the picking and receipting are time-consuming
• Maximizing the WMS benefits will require expert knowledge, and it isn’t always possible to have thorough knowledge. 
• Using a warehouse management system is only better if standard logistics functions are insufficient for your business operations
• While WMS provides a better automation system, it requires more attention and maintenance. 
• Because of its complexities, it is more prone to errors. 

How to Choose the Right Warehouse Management System 

Here are some criteria to help you select the best WMS for your business:

• Budget/ROI

By reviewing the gains you stand to benefit from the warehouse management system, you can determine a budget. Think of receiving a return on investment in better customer service for increased customer retention and revenue, improved processes and efficiency, increased productivity, reduced costs from efficiency gains, and better inventory management. 

• Functionality 

When choosing a WMS, look for one that can perform your business’s most important functions. Some essentials are space, labor, equipment utilization, and better operational insight. You also want a WMS with up-to-date barcoding, serialization, and mobility technology. 

• Vendors 

Look for vendors that offer solutions that best fit your needs and budget. Consider their experience and expertise in your industry, how they handle upgrades if you need customization for their software, and what their training process involves. 

• Request related information 

You should maintain a broad list of vendors and target at least two to three of your essential requirements. You should also consider the time to value where after implementing the warehouse management system, it may take between a month or a year to see the required ROI. Therefore you must request information on how quickly you can reach your ROI target based on the time to value. 

• Build a project team

A project team should oversee researching available vendors’ solutions and implementations, from designing to going live. Depending on the organization, this team may be known as the supply chain management team. Your team should have the required management privileges to ensure that the WMS is tailored to fit your business’s needs. Your organization’s business units should determine how the WMS should work for the organization instead of the IT department. A WMS impact on business unit operations can be structured when there are correct inputs at the right time. 

Top Warehouse Management System Vendors 

Numerous suppliers offer WMS software as standalone systems and components of complete ERP suites. Some of these suppliers consist of:

• SAP: SAP’s Warehouse Management System (WMS) is embedded within its SAP S/4HANA ERP platform, offering robust capabilities ideal for large-scale manufacturing and distribution enterprises. It excels in managing high transaction volumes and intricate supply chains.
• Oracle: Oracle’s WMS Cloud, a component of the Oracle ERP Cloud suite, is praised for its versatility, particularly in analytics and business intelligence. This feature set makes it attractive for companies seeking comprehensive insights into their warehouse operations.
• Microsoft: The WMS solution from Microsoft is integrated into its Dynamics 365 (D365) ERP system. It is recognized for seamless compatibility with other Microsoft products and is noted for its user-friendly nature, making it suitable for small to medium-sized enterprises.
• IBM: IBM offers sophisticated WMS solutions that are often part of broader ERP and supply chain management platforms. These solutions focus on delivering real-time data and enhancing the efficiency of complex warehouse operations. IBM’s emphasis on cloud and AI technologies facilitates automated processes and enhanced decision-making.

Many other different WMS software providers concentrate on particular industries and business sizes. Some of them consist of:

• Softeon: As a leading provider of warehouse and distribution software, Softeon delivers targeted solutions to industries such as retail, e-commerce, and third-party logistics (3PL). It is noted for its customizable and flexible options, catering to businesses with unique workflow requirements.
• Fishbowl: Fishbowl is celebrated for its intuitive user interface and is favored by small to mid-sized businesses. Its seamless integration with QuickBooks positions it as an ideal choice for companies seeking an efficient, budget-friendly WMS that also offers robust inventory management features.
• Basware: Basware is a specialist in procurement and financial processes, offering WMS solutions that enhance and streamline supply chain operations. Its software is particularly well-suited for businesses that require an integrated approach encompassing financial management.
• SnapFulfil: SnapFulfil is a cloud-based WMS provider targeting e-commerce, retail, and third-party logistics sectors. It prioritizes rapid deployment and scalability, making it a superior option for rapidly expanding companies.
• Infor: Infor’s WMS is integrated into its comprehensive CloudSuite, providing industry-specific solutions tailored for manufacturing, distribution, and logistics sectors. It stands out for its extensive functionalities, including multi-site management and predictive analytics.
• Sage: Sage provides WMS solutions designed for small to medium-sized enterprises, emphasizing user-friendly features such as inventory control and order management. Sage focuses on combining ease of use with affordability.
• Aptean: Aptean offers a variety of WMS solutions aimed at specific sectors, including food and beverage, chemicals, and distribution. Thorough inventory management and warehouse optimization features distinguish their software.
• ASCTrac: Specializing in supply chain and warehouse management, ASCTrac tailors its solutions to industries that demand high compliance, such as healthcare and pharmaceuticals. Its focus is on precision and traceability within warehouse operations.

Conclusion

Regardless of your industry, warehouse management system software benefits your organization. If you want to run a successful firm in today’s world, you should consider adding a WMS to your business operations to help streamline your inventory and process orders rapidly. However, before acquiring a system, you must first understand your business goals and what you aim to achieve, as different types of software offer different characteristics. While immensely advantageous, WMS has various drawbacks, including needing expert knowledge to maximize their benefits, attention, and regular updates. Also, look for a vendor that understands your industry and requirements.

Frequently Asked Questions