What is a warehouse management system?
In this guide:
What is warehouse management?
In the supply chain, warehouse management is about supervising the daily processes and activities of a warehouse – storing and moving materials and products that are crucial for businesses to operate. It involves receiving goods, organising storage space in a warehouse, scheduling work, fulfilling and shipping orders, and managing inventory levels and stock locations. Effective warehouse management is essential for the flow of materials and proper functioning of businesses.
What are the benefits of warehouse management?
The behind-the-scenes operations of a warehouse are vital to ensure timely fulfilment and delivery of orders. That is why all the processes and day-to-day tasks involved in the running of a warehouse need to be as accurate and efficient as possible. Warehouse storage space must be optimally planned and streamlined for maximum storage of inventory and to make it easy for employees to find items in the warehouse. Stock needs to be rotated as required and inventory levels adjusted to reflect movements. Employee numbers should be sufficient to be able to fulfil orders efficiently and to communicate effectively with suppliers and haulage businesses for timeous arrival of items and products and shipping of orders. Good warehouse management can minimise the cost of providing a fast, high-quality service. This benefits the entire supply chain and makes relationships with stakeholders – suppliers and customers – stronger.
What is a warehouse management system (WMS)?
A warehouse management system (WMS) is software that gives complete insight into a business’s inventory and manages supply chain fulfilment operations, from the distribution centre to the store shelf. It is also called warehouse management solutions or warehouse management software, and people often refer to it as WMS software or WMS systems.
WMSs optimise the warehouse, distribution, supply chain, and fulfilment activities within a business, helping to streamline and improve these processes, right from when goods first enter the warehouse, through the putaway process, and all the way until they are shipped or returned.
What does a WMS system do?
WMS systems support distribution, manufacturing, asset-intensive, and service businesses, in other words, the entire global supply chain. WMS software must ensure that goods and materials move through warehouses in the most efficient and cost-effective way. A WMS system handles many functions that enable these processes and activities and provides visibility into an organisation’s inventory at any time, regardless of location, whether in a facility or in transit.
By automating many of the tasks associated with managing a warehouse, warehouse management system can help businesses improve their overall efficiency and productivity.
Warehouses of all sizes can use a WMS software.
The importance of a WMS software
To meet changing customer needs, businesses need to respond quickly. Warehouse management software that optimises their ability to fulfil purchases, plays an important role in enabling this.
Supply chain and warehouse management is challenging, increasing in complexity as businesses grow. To keep up productivity, all the processes in a business must work optimally.
The logistics industry has been slow to adopt digital technology. Many still rely on Excel spreadsheets, online inventory alerts, reports, etc. However, using separate systems and computer programs often leads to duplication, errors, and time wasted on too many different manual processes. Warehouse management software brings all the necessary processes into one central location, with the following positive outcomes:
- Less human error and more accurate inventory
- Better customer service and improved stakeholder relationships
- Minimised expenditure and increased profit
- Better security
- Better just-in-time practices
- Maximised facility and business growth potential
- Improved efficiency and productivity
Key features of a warehouse management system (WMS)
A warehouse is a central location where procured goods are stored and distributed for further processing. A WMS software makes it easy for warehouse employees to stay on top of operations and carry out their day-to-day tasks efficiently.
Here are some of the top features to look for in a WMS System:
The receiving feature of a WMS minimises receiving errors by tracking inconsistencies between purchase orders and products received.
2. Ability to manage orders
By regulating the flow of products through a warehouse, a WMS can help to manage orders more effectively, with less data entry, and more speed.
3. Ability to manage inventory
Tracking inventory data with radio frequency identification (RFID) tagging and barcode reading automatically updates information in the system, ensuring it is always current and accurate, and instantly available. Keeping track of the inflow of inventory into a warehouse gives visibility of stock and allows operators to gauge supply and demand for procurement purposes as well as for optimal use of space.
4. Picking and packing
Picking lists and quantities are easy to generate and print and employees can be given directions on handheld devices to inform them where products are, along with the best route and equipment to use to get to the items.
5. Managing workforce
A WMS system can let employees tag in an out of their place of work. It allows them to record their normal working hours, overtime hours, and leave.
6. Analytics capabilities
Data from live tracking enables real-time visibility into stock levels and filtering data can assist with KPI analysis to identify areas that need to be improved on.
7. Assessing and managing risks
Analyse operational data to create projections, plan accurately according to demand and predict customer behaviour trends.
8. Financial management
All aspects of a business can be tracked and reported on with WMS software, and metrics can be set and analysed to gain insight into product sales, customer sales, sales channels, employee performance, and seasonal trends.
More functions of a WMS System:
- Planning layout
It is critical for a warehouse to maintain a well-organized layout design. A WMS system helps with planning the layout of a warehouse to simplify accessibility and optimise activities and processes.
- Processing orders
Providing oversight of order processing to help with accurate order fulfilment and timely delivery.
- Digitising documentation
Automating warehouse management to minimise paper processes.
Benefits of a warehouse management system (WMS)
Specific features can vary from system to system, but in general, here are some of the benefits WMS software offers:
1) Ability to manage everything in one system for greater visibility and control
A WMS software digitises the full warehousing and distribution process, from receipt of goods to storage, from order picking to shipping, providing a real-time view of all warehouse functions and inventory in one place. Visibility of inventory is a significant benefit of a WMS system in any warehouse operation, as it provides live information about what items are in stock, how much stock there is, and where it is located. This way, companies can plan well in advance to avoid running out of stock. A warehouse management system tracks items from the point of entering the warehouse, as well as all their movements on the floor and when they are transported.
Having this visibility helps to project and predict demand, showing which items are popular, when they are popular, and with which customers. It can also help to identify overstocked items, which makes it possible to adjust future volumes of those items or to move stock from one facility to another to balance inventory levels.
2) Ability to trace stock
WMS software can make it easy to trace items precisely, by using serial, batch, or lot numbers. This information can be retrieved to trace items when recalls are necessary or for service maintenance.
3) Easy to adapt to fluctuating demands to optimise storage capacity and reduce expenses
Warehouse management software helps to manage fulfilment and transportation processes more effectively by balancing the peaks and troughs of seasonal, economic, and customer changes. It helps to:
- Analyse tasks, workload, and materials to determine how best to use warehouse floor space.
- Maintain an accurate, real-time view of stock levels to use warehousing space more efficiently with a visual stock location browser that can be quickly switched between capacity, utilisation, or availability with colour-coding to easily see full or empty locations. Costs are reduced because less time is spent moving, placing, and locating items.
- Spend less time searching for high-frequency and fast-moving goods by specifying certain locations as pick faces. This allows warehouse staff to perform picks at ground level without the need for a forklift bringing down pallets and returning them back to higher levels.
- Keep stock in the pick faces topped up using system-generated replenishment reports.
4) Warehouse operations can be run in tandem with transport operations
Warehouse management software that integrates with transport management systems make it possible to align transport jobs with warehouse operations, showing inventory information, transportation information, and more, all in one place. Jobs can be exported from a WMS system to a transport management system without having to enter it on both systems. Job numbers feed back to the WMS and both teams can see each other’s job reference numbers. Integration also makes it possible to keep customers updated through notifications of shipment progression.
5) Optimised use of warehouse employees’ skills and improved security
WMS systems use the skill sets of warehouse staff, where they are in the warehouse, what equipment they use, and the jobs that need to be done to determine the best person and time to allocate the jobs to. They can also give clear, automated directions for stocking, so employees no longer need to spend unnecessary time finding out where stock items belong, or when they should be put away. Tasks can be allocated daily or on a schedule by using workforce predictions. Assigning work appropriately helps employees work more efficiency and reduces operational costs.
In addition, continuous scanning of items that employees are handling saves time and speeds up recording by removing the need to double-check accuracy of picking, ultimately improving customer service and satisfaction.
6) Appropriate staffing
A WMS system provides a more accurate picture of the staff levels required. Not having too many employees when business is slow can save money, and by taking in more people in busier periods, employees have more support.
7) Improved security
When employees use their unique user IDs to enter transactions and record activities, it creates an electronic audit trail showing who handled which items and when they handled them. Being able to associate specific employees with specific transactions promotes responsible behaviour, honesty, productivity, and accountability. Also, access levels can be user-defined to protect sensitive information.
8) Improved working conditions
When warehouse operations run smoothly, employees experience less stress and they are better able to use their work time productively. Less stress also means they’re less likely to make mistakes, use incorrect equipment, or carry out tasks unsafely. Employees who feel that they are empowered to do their work effectively and therefore appreciated, are more invested in the success of the business. As a result, they are more productive, and the business’s profitability increases.
9) Less waste
More efficient stocking and inventory management results in less waste. For example, storing temperature-controlled items in the correct way will ensure that they don’t spoil. Inventory tracking helps to move older items first so they don’t expire, and fulfilling orders accurately reduces waste and minimises returned and excess stock.
10) Easy invoicing
Top WMS systems have built-in features for billing management or they can integrate with billing or accounting software of third-party vendors. All activities connected to a specified provider can be tracked and charged accordingly and accurately. The software can also integrate with different sales channels to make online payments possible.
11) More accurate order fulfilment
Having real-time visibility of items in stock and stock levels means errors are less likely to occur, for example accepting an order for an item that is out of stock or mixing up orders and sending the wrong item to the wrong customer. Orders are consistently fulfilled more accurately and at the correct times, and customer satisfaction increases.
12) Supply chain optimisation
By streamlining warehouse processes, operational efficiency is increased and costs are decreased. The cost savings can be used to improve operations in other business-critical areas, both internally and externally. When receiving processes improve and delivery times decrease, it helps delivery partners to use their resources and equipment more efficiently to manage inventory levels more effectively. Furthermore, with current and accurate data at hand, risk is reduced and reliability improved, which benefits everyone in the supply chain – from shippers and suppliers to customers. And when management of inventory is brought in line with fulfilment, operations are optimised, which leads to a reduction of the costs usually associated with the length of time stock is kept as inventory.
13) Additional warehouse automation possibilities
Warehouse management software makes it possible to employ further automation in warehouse operations. Using mobile phones to streamline activities and operations, tasks are digitised, which reduces paperwork. Automation, for example automated picking and packing, simplifies processes, improves accuracy of tasks performed, accuracy of information and data, and promotes continued efficiency improvements in warehouse operations.
14) Implementation can be phased in to accommodate ongoing improvement plans
Enabling improvement on a continuous basis is central to WMS software. This is especially easy when the system is cloud-based. Ongoing improvements allow warehouses to include more processes when necessary to stay current and efficient.
How do warehouse management systems work?
WMS software is designed to ease the entire process of warehouse management, including inventory management, auditing, and picking processes.
Warehouse management software can be tailor-made to fit each business’s unique needs.
What’s the difference between a WMS and a TMS?
While a WMS deals with the control of freight while it’s on-site at the shipper’s facility (to manage inventory and warehouse operations), a TMS deals with the movement of freight to and from their facilities (to manage the movement of freight). Some companies use a WMS to manage transportation, and some use a TMS to manage their warehouse, but oftentimes they are unique, independent systems.
The relationship between a WMS, TMS, and ERP
A WMS is often used alongside or integrated with other related systems, including ERP systems, transportation management systems (TMS), and inventory management systems.
The role of the WMS is to help companies fulfil, ship and receive tasks in a warehouse or distribution centre, and update the inventory management module in the ERP system to ensure it has the latest information. An integration link synchronises the inventory data that is stored in the ERP system and the WMS.
The ERP system handles the accounting and invoicing, as well as order and inventory management. The TMS is the system used to manage transportation processes.
What are the essential warehouse management processes?
A WMS solution should provide real‑time visibility across different warehouse functions and processes. Here are the essential ones:
1. Receiving and stowing
Warehouse management software should provide clear instructions for each user so they know how to receive, unpack, retrieve, pick, pack, and ship inventory.
2. Inventory tracking
Inventory tracking is monitoring stock levels so you know which SKUs are in the warehouse and the exact locations in which they are stored, or if they are in transit from a manufacturer or on the way to a store.
3. Picking and packing
For each new order, the picker will receive a packing slip of the items ordered and storage locations at the warehouse. Once an order is picked, it is handed off to a packer.
Once the order ships, your WMS software should be able to automatically send e-commerce order tracking information back to the store so customers can track their shipments.
A warehouse management system should provide out-of-the-box operational and inventory reports across the warehouse. This may include accuracy in fulfilling orders (total mispicks, mispacks, etc.), total orders fulfilled by the hour to measure the efficiency of staff, orders shipped on time, and much more.
Types of warehouse management systems
So now let’s look at the four main types of warehouse management systems:
Standalone WMS systems enables day-to-day warehouse operations, and they are customisable and dynamic. Most businesses purchase standalone systems for their warehouse management features and nothing else.
2) Supply chain modules
These warehouse management systems also require investing in supply chain planning applications with warehousing features.
3) Integrated with enterprise resource planning (ERP) systems
Some ERP systems offer select warehousing features without warehousing management being a core function. Keep that in mind when shopping for ERP software.
These systems provide faster integration, they increase security and reduce costs. On-premise solutions usually aren’t always the most reliable option when factoring in maintenance costs and installation. You might end up paying large sums to handle installation and infrastructure.
A cloud-based WMS has several huge advantages. Because they are maintained and hosted by a provider, you drastically reduce implementation and installation costs. They are also scalable, making them perfect for start-ups and smaller businesses thanks to their low cost of entry and ability to adapt as the business grows.
Who uses a warehouse management system (WMS)?
WMS systems are ubiquitous. If you spend more than a few minutes on the internet, or just do a quick Google search, you will see how many WMS vendors there are. While most companies can use a standard WMS, some have more complex requirements. Here are 4 examples of industries with unique WMS requirements:
Manufacturers have complex warehouse requirements. Their operations include raw materials and manufactured items, so a WMS is a necessity.
A manufacturer might combine different parts with different stock-keeping units (SKUs) into a new, fully-assembled product with its own SKU. A WMS integrates with existing enterprise resource planning (ERP) software to help staff maintain stock levels and keep production on track.
2) Retail and consumer products
Physical stores use complex WMS systems to keep track of on-premise stockrooms, which function as mini warehouses. And thanks to the explosion of online shopping, they stock inventory for all in‑store and online orders they need to fulfil.
3) Third-party logistics businesses
Third-party logistics (3PL) companies manage the logistics and orders of other businesses, so they always need a warehouse and a WMS to manage the array of different shipments. As a result of the different orders each third-party logistics company handles, each needs a custom WMS to suit their needs.
4) Wholesale distributors
Large wholesalers need a WMS to help them manage inventory and shipments while still completing orders quickly and accurately.
Which Warehouse Management System (WMS) is best?
While there is no single ‘best’ WMS, the best WMS for your business is the one that meets all your requirements and is tailored to suit your unique needs. When looking for the best WMS for your business, always keep your requirements in mind, along with the potential ROI that the WMS offers.
It is important to have a good understanding of any software you purchase to make sure you get the most out of it. When choosing a WMS provider, decide what is important to your business, your processes, and your employees, and find out how the provider can support you in your day-to-day operations. When you have made your decision, find out what to expect during implementation, when you go live with the system, and in the months and years afterwards.
How to choose the right WMS / What to look for in a warehouse management system
There are different warehouse management systems on the market, offering different features, capabilities, and benefits. While they may seem quite similar, they may work in different ways. So, when you decide to invest in a WMS system, consider following these 7 steps to help you choose the right system for your business:
1. Calculate the return on investment (ROI)
The justification process is important because it helps you set a budget for your project and focus on the functional must-haves rather than the nice-to-haves when selecting suppliers. Three key areas to consider are:
- The potential for a WMS to provide improved stock accuracy by reducing errors, providing real-time information, and enabling perpetual inventory counting.
- The potential for increased productivity and cost savings through improved labour, equipment, and space utilisation.
- Improved customer service through overall improved warehouse control, and greater pick and dispatch accuracy.
2. Understand your existing systems
If your enterprise resource planning or business system already has a WMS module, analyse it first. The same due diligence applies to this selection as to any other system, but normally any small shortfalls in functionality are outweighed by reducing any risk of systems not interfacing with each other reliably and accurately.
3. Evaluate each provider’s in-house development capacity
In-house development is sometimes viable if the overall requirements are particularly specialised or require specialised integration with existing in-house systems.
4. Ask for information
First, prepare a short request for information (RFI) document, no more than a few pages long. In this document, describe your business, roadmap or future business direction, warehouse, and plans for the warehouse. Then describe in broad terms what you want to achieve with the WMS.
5. Make your decision
Choose the most appropriate WMS supplier for your warehouse. Use a decision matrix, considering the various criteria you have evaluated.
Do you need to integrate TMS and WMS?
While WMS systems and transportation management systems usually remain separate, promoting interoperability between these two platforms will open new workflow processes and opportunities for better management.
When technologies communicate with one another, the resulting data can be used as value-added and actionable intelligence. It’s akin to sifting through raw digital content and extracting helpful insights.
This means you can plan better and avoid potential pitfalls.
Data sharing between the two platforms gives users access to information about manufacturing, warehouse processes, distribution and more.
How much do warehouse management systems cost?
The cost of implementing and running a WMS will be based on your business’s unique needs. With a cloud-based system, you only need to pay for as long as you need the system.
- Cloud-based WMS price: A standard cloud-based WMS deployment typically includes an upfront payment for the first 6 to 12 months, with monthly payments around £1,500 per month thereafter. Expect to pay £9,000 to £18,000 in upfront setup costs for a cloud-based WMS.
- Licensed WMS price: A licence for a WMS system can cost between £2,500 and £10,000 per facility, based on the requirements of the system. An annual maintenance fee, usually a percentage of the initial licence fee, may also be charged.
Warehouse management systems (WMS) training
Your WMS vendor should be by your side for training of process development, software implementation, operational procedures and change management. Also hire or train one employee to become the internal trainer to help new staff get to grips with the WMS. This will also help keep future costs down.
How long does it take to implement a WMS?
Implementation depends on several factors, but the short answer is that for a first-time implementation at a brand new facility, the process should take six to eight months, accounting for those individual tweaks.
WMS implementation can be broken down into the following six crucial steps:
Step 1: Clearly define the outcomes
The implementation of a WMS can be complex, so clearly defined requirements will make the entire process easier and ensure the outcome is aligned with your business goals.
It also allows for faster implementation. All team members from all departments should be present to discuss the requirements and examine potential pitfalls when integrating with existing ERP and any legacy programs.
Step 2: Define the integration process requirements
Integration is usually split into ERP and MHE integration.
ERP integration is about ensuring that you have the most appropriate data with relevant actions taking place in the right system. This includes physical quantity ownership. The WMS must be the master of the quantity in the facility and pass the information to the ERP. Single-sided entries in either system will result in inventory imbalances.
MHE automates warehousing functions and material movement. The requirements of the integration of the MHE to your WMS depend on the agreed processes and which system is responsible for each action.
Step 3: Get the right team in place
It’s all about teamwork!
It is essential to have a team with clearly defined roles and responsibilities in place. Neglecting this stage of the process may affect implementation, delay processes, and increase costs.
Step 4: Testing, training, and go-live planning
To be successful, you’ll need a structured and measured approach to testing and training, which should take place across four phases:
- System testing
- Integration testing
- User acceptance
- Volume testing
This part can be extremely stressful but is non-negotiable for successful WMS implementation.
Step 5: Project and change management
Project management and change management resources are critical to a successful WMS implementation. If your company doesn’t have these internally already, hire for or outsource the role.
A Change Manager with years of experience should also be a top priority.
Step 6: Go-live
The focus should be on timing, volume planning, and a go-live support team. Try and plan the go live date during a lower trading period with less pressure on volume.
The future of Warehouse Management Systems (WMS)
Thanks to new technology, warehouse management will become even more automated, reliable, and efficient. Ultimately, this helps businesses to improve their bottom line, productivity, and profit margins.
These are the most common forms of warehouse automation. Warehouse management robots can pack and transport almost anything. They save time and eliminate the risk of human error and injury.
2. Drones for warehouse management system
Drones can complete warehouse activities up to 50% faster than people. Drones can be used to scan and transport smaller items quickly.
3. Wearable tech
Small wearable tech worn on arms or wrists can help with the picking and sorting of goods, entering prices, and scanning products.
4. Mobile devices / Smartphones
Warehouse management systems have developed from using paper and pen, to computers and laptops, and now smartphones. Most warehouse management functions can be done using smartphone apps. They can scan QR codes, capture information and data, track and monitor inventory for real-time, accurate information, and more – technology in the palm of one’s hand.
5. Smart vehicles and machinery
Smart, automated vehicles and forklifts make it much easier to manage a warehouse. They can be programmed to place items on the correct storage shelves or spaces and accurately pick products from where they are stored for delivery.
6. Live inventory management
Access to real-time inventory, picking, boxing/crating gives a business up-to-date information about all inventory (both incoming and outgoing), items that are returned or damaged, as well as reviews by customers. This allows them to keep the flow of inventory consistent by understanding what products to order when.