What is a Warehouse Management System? A Complete Guide

A warehouse can be a scary place. Those thousands of SKUs stocked across a football court and even a garage-size storeroom can be complex and require careful coordination to ensure that everything runs smoothly.

Warehouses typically contain a large amount of inventory, which is a significant investment for a company. From receiving and storing inventory to picking and packing orders for shipment, many warehouses operate on tight deadlines, with orders needing to be fulfilled quickly to meet customer demand.

This can create a sense of urgency and pressure for warehouse managers and employees and any loss or damage can result in financial losses and negatively impact the company's reputation.

For example, one notable case of warehouse management failure occurred in the UK in 2018, when the retailer Tesco was found to have significant issues with its supply chain and inventory management systems. The company was reportedly struggling to keep up with demand for some products, while others were overstocked and sitting on shelves for extended periods. They also had problems with its transportation and logistics systems, which led to delays and missed deliveries.

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So, how do you ensure that everyone in your business follows proper procedures and protocols to avoid some potential scenarios that could lead to a "nightmare" situation?

The answer is WMS or Warehouse Management System.

Organizations must invest in robust warehouse management processes to take the burden of day-to-day warehouse operations off the shoulder and maximize their equipment, space, and labor investment. So, be it a manufacturing or warehousing industry, they will need their inventory management systems in place.

This article spells out everything you need to know about warehouse software systems and why retail or eCommerce businesses should not miss out on this solution.

What is a Warehouse Management System (WMS)?

A warehouse management system is a software platform created to manage and optimize the operations of a warehouse or distribution center. It provides real-time visibility into inventory levels, helps track the movement of goods within the warehouse, and automates various warehouse processes such as receiving, put-away, picking, packing, and shipping.

As a result, organizations can increase the efficiency of their warehouse operations, reduce inventory carrying costs, and improve customer satisfaction by ensuring accurate and timely order fulfillment.

WMS software also offers analytics and insights to help warehouse managers make data-driven decisions about inventory management, labor allocation, and process optimization solutions.

Simply put, the task of a warehouse management system is to track and manage the inventory. Well, that said there’s something alike that does the same. Wondering what are we referring to? It is a cloud-based inventory management system. It helps businesses effectively manage their inventory. Both systems provide features such as tracking stock levels, managing orders, and enhancing inventory flow.

What Does a Warehouse Management System Do?

Over time, the functionality of warehouse management software has significantly developed, thanks to the advancements in technology and changes in the way businesses operate.

The earliest WMS warehouse management systems were essentially electronic versions of manual systems, with barcode scanners and handheld devices replacing pen and paper. But today, these software products leverage the power of automation. For example, automated guided vehicles (AGVs) and robots can move products around the warehouse and reduce the need for human intervention.

You can even integrate the inventory warehouse management software with other business systems, such as enterprise resource planning (ERP) systems, transportation management systems (TMS), and supply chain management (SCM) systems. This allows you to share real-time data between systems, thus increasing efficiency and reducing errors.

Moreover, with the growing use of data analytics, warehouse management software has become more sophisticated in its ability to provide insights into warehouse performance. Advanced analytics can help identify areas for improvement, such as identifying bottlenecks, improving inventory accuracy, and optimizing picking routes.

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Features and Functions of Warehouse Management Systems

From receiving goods to shipping them out, WMS performs a wide range of tasks. Some key warehouse management system features include:

Inventory Management

A WMS helps keep track of inventory levels and locations so that warehouse managers can optimize storage space and prevent stockouts. The managers can even track the movement of inventory on-the-go by integrating it with a mobile inventory management system.

Order Management

Order management is another important feature of WMS. You can receive orders from various channels, such as online marketplaces, and automatically direct workers to pick the right products and pack them efficiently.

Warehouse Optimization

With proper WMS software in place, businesses can optimize the layout of a warehouse and guide workers on the most efficient paths to take when moving goods from one location to another.

Barcode scanning and RFID tracking

A WMS can use barcode scanning and RFID (radio-frequency identification) technology to track products as they move through the warehouse, ensuring accurate inventory counts and reducing the likelihood of errors.

Reporting and analytics

Generating reports with a WMS on various warehouse metrics, such as inventory levels, worker productivity, and order fulfillment rates, offers valuable insights to improve operations over time.

Integration with other systems

Last but not least, you can integrate it with other systems in your business ecosystem to provide a holistic view of the entire supply chain.

Who Uses Warehouse Management Systems?

Companies that have a warehouse or distribution center for storing and managing inventory typically benefit the most from WMS or warehouse management systems. This includes retailers, manufacturers, wholesalers, and other businesses that need to store, track, and ship large quantities of goods.

Take a look at the top industries that commonly use WMS:

Retail – Apart from retail management software, retailers use warehouse management apps to manage inventory and orders from their online stores or brick-and-mortar locations. Hence, WMS helps merchants improve their supply chain, minimize the risk of stock shortages, and optimize inventory.

eCommerce - eCommerce warehouse management systems help businesses efficiently track orders and fulfill shipments for their online stores so that they can cater to rapid customer demands.

Wholesale and distribution – Another industry utilizing WMS software is wholesalers and distributors. It helps them streamline inventory tasks, track shipments, and optimize order fulfillment.

Manufacturing – Warehousing management systems are a popular tech invention in manufacturing software solutions for a lot of use cases, such as production process tracking and supply chain management.

Logistics and transportation – For logistics and transportation companies, WMS can schedule the transports and track shipments as they move through the supply chain.

How a Warehouse Management System Fits into the Supply Chain

A warehouse management system is an essential component of supply chain management. It helps organizations to optimize the movement and storage of goods within their warehouse or distribution center by working as a critical link between the upstream and downstream activities.

On top of that, warehouse control system software tracks the inventory levels, monitors the status of goods in the warehouse, and provides real-time visibility to all stakeholders in the supply chain.

This way, WMS ensures that the right product is available in the right quantities, at the right time, and at the right location within the warehouse. This helps businesses minimize inventory holding costs, reduce order cycle times, and improve customer service. It also empowers you to make better decisions regarding inventory management, warehouse layout, and labor allocation.

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Inventory Management System vs Warehouse Management System: What’s the Difference?

One genuine confusion that business owners might be wondering about is how warehouse management systems are different from inventory management systems. Let us help you there.

Although both these systems are two related but distinct concepts in the world of business logistics. Here's the difference between inventory and warehouse management systems:

Inventory management involves overseeing the flow of goods and materials into and out of a business. It involves keeping track of inventory levels, monitoring demand and sales data, forecasting future needs, and ensuring that products are always available for customers.

Warehouse management, on the other hand, focuses specifically on the physical storage and movement of goods within a warehouse or distribution center. It includes tasks such as receiving and processing incoming shipments, picking and packing orders, organizing and storing inventory, and shipping products to customers or other locations.

So, while an inventory management system is all about making sure that the needed products are available at the right time, warehouse management systems focus on the efficient movement and storage of those products within a physical space.

Different Types of Warehouse Management Systems

There are several types of warehouse management systems available in the market and you should be aware of the most important ones to choose the best possible warehouse management solution for your business. Here they go:

1. Standalone WMS

These systems are standalone software applications designed specifically for managing warehouse operations. They typically include inventory tracking, order management, and shipping/receiving capabilities.

2. ERP WMS

ERP warehouse management tools are integrated into larger ERP software suites that perform multiple business functions, including finance, HR, and supply chain management.

3. On-Premises WMS

This type of WMS software is installed on local servers and is managed by the IT department of the company. It usually offers more control and customization options but needs a higher upfront investment.

4. Cloud-Based WMS

You can host cloud-based warehouse software systems in the cloud and access them via the Internet. They offer the benefits of remote access, automatic updates, and scalability without requiring the purchase and maintenance of on-premises hardware and software.

5. Open-Source WMS

Open-source WMS is an open-source software platform that is typically free to use and modify. It might be suitable for smaller businesses or those with customized needs.

6. Third-Party Logistics (3PL) WMS

These software products are for third-party logistics providers that offer warehousing and fulfillment services to multiple clients like multi-tenant capabilities and billing functionality to manage invoicing for multiple clients.

7. Automation Warehouse System

Automation warehouse systems work with warehouse equipment, such as robots or conveyor systems. You need to integrate them with sensors and other tools to automate inventory tracking and order fulfillment.

8. Supply Chain Modules

These software solutions manage various aspects of warehousing in supply chain management. It streamlines operations like procurement, inventory management, transportation, and logistics.

Benefits and Drawbacks of Warehouse Management System

Although the advantages of warehouse management systems outweigh their drawbacks, you should know both sides to avoid any potential hurdles and implement successful warehouse management strategies:

Warehouse Management System Benefits

• Increased Efficiency - Warehouse management software can automate many warehouse processes, reducing the need for manual labor and increasing efficiency. This results in faster order processing times and improved accuracy.

• Better Inventory Management - With real-time visibility of inventory levels, a web-based inventory management system can help you reduce stock-outs and overstocks. Naturally, it leads to better control and reduced inventory holding costs.

• Improved Customer Service - You can improve order accuracy and speed up order fulfillment times of your eCommerce business, leading to better customer service and higher levels of customer satisfaction.

• Reduced Labor Costs - Automating warehouse processes with a WMS can reduce the need for manual work, which can drastically reduce labor costs.

• Enhanced Traceability - Since warehousing management systems provide real-time insights into inventory management in warehouses, you get enhanced traceability and accountability.

Warehouse Management System Drawbacks

• Cost - Implementing a WMS can be expensive as it needs high hardware, software, and maintenance costs. Thus, building a warehouse management system for small business can be challenging.

• Implementation Time – The software development lifecycle of a WMS can span up to several months or even years, depending on the complexity of the system.

• Integration Challenges - Integrating a WMS with existing systems is not easy as it requires extensive customization and integration work.

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Top Warehouse Management Software Examples

There are many different warehouse management apps available in the market, each with its own strengths and features. Here are some of the top ones, with their features, benefits, and drawbacks of each:

1. SAP Extended Warehouse Management

SAP WMS is a software system that provides end-to-end logistics and supply chain management capabilities.

Features

• Real-time inventory management
• Automated picking and packing processes
• Streamlined warehouse operations

Benefits

• Improved inventory accuracy
• Increased order fulfillment rates
• Reduced operational costs

Drawbacks

• It can be complex to implement
• May require specialized skills and resources

2. Manhattan Associates WMS

Manhattan Active Warehouse Management is one of the best warehouse management systems that offer real-time visibility into warehouse operations to optimize operations and reduce costs.

Features

• Slotting optimization
• Transportation management
• Order streaming

Benefits

• Advanced features like voice picking and labor management
• Flexible architecture that allows for customization
• Integration with other Manhattan Associates supply chain software

Drawbacks

• Can be expensive
• Steep learning curve

3. Oracle WMS

Next on our list is Oracle warehouse management software that helps businesses automate their warehouse operations.

Features

• Inventory tracking
• Order management
• Advanced reporting capabilities

Benefits

• Offers real-time inventory tracking
• Provides mobile device support
• Has a user-friendly interface

Drawbacks

• Cost might be an issue
• Difficulties with integrating with other Oracle products

Factors You Should Consider Before Choosing a Warehouse Management System

Developing an efficient WMS application is a one-time investment that needs careful consideration and decision-making. There are several factors to consider, such as:

Scalability: A good warehouse inventory management software should be able to handle a growing business, so it is important to choose a system that can scale with your business needs.

Integration: You must choose a warehouse management platform that can integrate with your existing business systems, such as your ERP, TMS, or CRM.

Ease of use: The system should be user-friendly and easy to navigate for both warehouse managers and employees.

Customization: Customization should be one of the top priorities of an inventory warehouse management system to meet your specific business needs and workflows.

Cost: The cost of the WMS is also a crucial factor to consider, including both the upfront costs and ongoing maintenance and support costs.

Vendor reputation: The reputation of the software product development company also matters. You should check their level of support and customer service.

Security: Warehousing management systems must have robust security measures in place to protect your data and inventory from theft or other security breaches.

Training and support: The WMS vendor should offer comprehensive training and ongoing support to ensure your team can effectively use the system.

Future of Warehouse Management System

The future of WMS or warehouse management systems looks promising. Technology advancements such as artificial intelligence (AI), machine learning (ML), and robotics are going to heavily influence this part of custom application development. These technologies have the potential to improve warehouse efficiency, accuracy, and productivity, as well as reduce costs and increase customer satisfaction.

Another major trend in this field is the increasing use of Internet of Things (IoT) sensors and devices. Businesses can implement these devices throughout a warehouse to collect and analyze real-time data to optimize inventory management and improve overall efficiency. Additionally, the use of AI and machine learning algorithms can predict demand for products and enhance the picking and packing process. organizations can also leverage the power of AI to automate routine tasks and free up warehouse workers to focus on more complex and higher-value activities.

Hence, we can safely conclude that the future of WMS looks bright, with continued innovation and adoption of new technologies driving efficiency, productivity, and customer satisfaction.

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Over to YouThe result of implementing a successful warehouse management system is nothing short of amazing. Before WMS software, organizations had to struggle with keeping track of inventory levels and locations, which led to lost or misplaced products and wasted time searching for items.But now, with real-time visibility into inventory levels and locations, anyone can streamline their inventory management processes, optimize warehouse layout, and increase their overall efficiency.Our advanced software development services can help you build the best warehouse management system by bringing our two-decade-long expertise and experience to the table.We start by understanding your business processes, your inventory management practices, and your specific requirements for a warehouse management system so that we can gather all the necessary information and analyze it to come up with the best solution for your needs.So, if you're still using manual inventory management processes, it's time to consider the power of a warehouse management system to transform the way you do business and see the continued benefits this system brings to our operations.