In an era of booming global digital commerce, the limits of traditional warehouse management processes are constantly tested. To keep up with customer expectations for fast, accurate, on-time shipping—without compromising quality or increasing costs—many businesses are turning to warehouse management systems (WMS).

What Is Warehouse Management?

Warehouse management is an umbrella term for the processes involved in running and overseeing the daily operations of a warehouse. Warehouse management considers everything from warehouse layout and labor management to day-to-day activities like receiving and managing inventory, fulfilling orders and coordinating with shipping partners.

Effective warehouse management optimizes and integrates all these facets of warehouse operations to maximize productivity and efficiency, facilitating fast, accurate order fulfillment while keeping costs low.

Warehouse Management and Supply Chain Management

Warehouse management plays a crucial role in supply chain management (SCM), broadly defined as the steps and processes required to transform raw materials into products delivered to customers. Warehouse management plays a crucial role in keeping supply chains running smoothly by efficiently managing the storage of goods—raw materials, finished products and other inventory—until they’re needed.

Warehouse management that prioritizes fast, efficient service without sacrificing quality can benefit the entire supply chain, helping businesses build long-term relationships with partners and customers.

On the other hand, warehousing snafus can negatively affect the entire supply chain. For example, if a manufacturer’s warehouse crew incorrectly stores sensitive components, employees will discover the damaged components when they’re scrambling to fulfill an urgent order. The manufacturer’s assembly team must then reorder the components from its suppliers and the customer ends up receiving the products late, costing the business time and money and potentially hurting its relationship with that customer.

Warehouse Management vs. Inventory Management

Warehouse management complements inventory management. Warehouse management organizes stock in a warehouse. Inventory management manages stock and trends for many warehouses or an entire company.

Warehouse management focuses on managing the goods within a warehouse: raw materials, materials in the process of becoming products and finished products (also known as “stock”). This includes ordering, storing, handling and picking inventory to make products or fulfill orders. Inventory management focuses on optimizing material and product levels to save space and money while still meeting customer demand.

Warehouse management includes not only inventory management but also warehouse organization and design, order fulfillment, warehouse monitoring and reporting, task optimization, labor management and resource scheduling.

What Is a Warehouse Management System?

A WMS is a software application that controls daily warehouse operations by automating processes and coordinating the warehouse’s many moving parts, including staff, equipment, inventory and orders.

Companies are increasingly turning to WMS to achieve the accuracy and efficiency needed to get products to customers on time without an unsustainable spike in costs. WMS solutions may be provided as part of an enterprise resource planning (ERP) suite of business applications or as standalone products that are cloud-based or on-premises.

What Does a Warehouse Management System Do?

A warehouse management system can provide real-time insights into any aspect of warehouse operations, from the location of each item to the number of employees on the packing floor. It helps manage and optimize warehouse processes ranging from workforce scheduling to picking items and shipping orders.

The software can make each of these steps more efficient, saving time and money since the supply chain is a major cost center for most companies.

How Do You Use a Warehouse Management System?

Warehouse management systems can be used to manage key warehouse operations, including:

Warehouse organization: By inputting warehouse size and inventory information (such as pallet size, object size and product use), a WMS can generate a warehouse diagram that will help a business optimize inventory storage by making the best use of available space.

Optimizing daily schedule: Taking into account current orders and available staff, a WMS can devise daily plans that schedule the right amount of labor and estimate labor costs. A WMS can also connect to transportation providers to schedule shipping and receiving times and locations. That ensures truck drivers arrive at the right dock at the right time and staff is ready for them.

Managing inventory: A WMS can gather information from mobile devices and machinery to record the movement of inventory throughout the warehouse. An associate can scan items when they’re received and again when stored, picked, packed and shipped. The WMS adjusts inventory levels in real time to help minimize waste while avoiding stockouts.

Order fulfillment: A WMS can facilitate fast and accurate order fulfillment. To fill each day’s orders, the picking team can use a highly detailed packing list—often on a mobile device that they carry with them—listing exactly what they need and where it’s located.

Monitoring and reporting: A WMS can document standard operating procedures to ensure employees follow them at all times and monitor warehouse operations to detect problems. The company can then analyze the data collected by the WMS to assess warehouse performance, find areas for improvement, create goals and track progress over time.

Types of Warehouse Management Systems

Like many other types of business software, there are different types of WMS, including standalone on-premises and cloud-based solutions and modules integrated into ERP suites.

Standalone On-Premises WMS

A standalone on-premises WMS typically offers basic functionality, including core warehouse management features such as inventory management, order fulfillment and shipping. This type of WMS generally requires an IT team to troubleshoot problems and maintain and upgrade the software. Compared to other types, on-premises WMS typically take longer to implement because they require custom integrations with existing business systems.

Cloud WMS

Cloud WMS are web-based, software-as-a-service (SaaS) solutions that users access through the internet. A cloud WMS has the benefit of a lighter footprint than an on-premises solution; there’s less need for on-site hardware and IT specialists.

It’s also generally faster to implement. Leading cloud WMS solutions are highly configurable, allowing companies to tailor them to their specific needs and processes. Cloud WMS can be integrated with cloud ERP suites and other warehouse technology such as mobile devices, conveyors and sorting machines.

WMS ERP modules

A WMS ERP module is natively integrated with a unified ERP solution that usually includes other modules for accounting, customer relationship management (CRM), human resources and inventory and order management. Since all warehouse data is stored in the shared database used by the other modules, everyone in the organization has access to the same up-to-date information at all times.

Benefits of a Warehouse Management System

Using a WMS can benefit your warehouse operations in multiple ways, boosting your bottom line while ensuring customers receive the right products on time:

  • Reduce waste: Better space, inventory and labor management can help minimize waste and cut costs.
  • Optimize warehouse processes: From receiving inventory to picking, packing and shipping, a WMS can use data analytics to pinpoint bottlenecks and inefficient processes.
  • Reduce human error: Devise simple, efficient practices for putaway, picking and packing to increase order accuracy and decrease time spent walking across the warehouse.
  • Track materials in real time: Trace inventory with lot and batch numbers to see exactly where a material or product is during each stage of its journey through the supply chain.
  • Improve customer and supplier relationships: Coordinate inbound and outbound operations by communicating with suppliers and transportation services to ensure orders are received and shipped as efficiently as possible.
  • Increase flexibility: A WMS can adapt to changes in order volume after a seasonal uptick in sales or help a business respond to an unexpected disruption like shipping delays due to inclement weather.

Common WMS Integrations

A WMS is often integrated with other business software such as ERP, CRM and transportation management systems (TMS).

A WMS can also integrate with other equipment within the warehouse, including automation machinery and robotics. These integrations can help the WMS track inventory and order fulfillment progress in real time and further optimize warehouse processes.

ERP and WMS Integration

Integration between the WMS and ERP can help the organization achieve broader improvements in supply chain processes. For example, a company might receive a list of orders via its ERP system. The ERP system communicates the orders to the WMS, which creates a plan for picking, packing and shipping them. Once the orders ship, the WMS automatically sends the shipment information back to the ERP system, which then shares it with the customer.

Warehouse Management System Use Cases

Each business has unique needs, so different companies may use a WMS in different ways. For example, a business that’s struggled with inventory management using manual tracking and spreadsheets might use a WMS to automate inventory tracking.

A business trying to keep up with increased customer demand could use a WMS to spot inefficiencies in the way the warehouse is organized and suggest a different layout that enables workers to store, move and pick more items in less time.

A larger company acquiring a smaller operation might adopt a WMS to consolidate its warehouse operations onto a single platform that provides real-time insights across the expanded business.

Implementing a Warehouse Management System

A carefully planned WMS implementation is a crucial step in getting a system that meets your business’s needs and drives major benefits. Best practices for implementation include:

  1. A clear plan. Define clear objectives: Exactly how does your company hope to benefit from a WMS? Create a structured plan and determine who will be responsible for key responsibilities such as project management, data migration and training.
  2. Effective change management. Switching to a WMS will change the procedures your warehouse workers are accustomed to. Communication is key to overcoming resistance to this change. Make sure your entire team—from HR to shipping—understands the implementation steps and schedule and how the new system will affect their daily workflows.
  3. Careful data migration. Transferring data from your old system to your new WMS must be executed with care to avoid duplicate data, data loss or data corruption.
  4. Thorough training. A well-trained staff that understands how to use the WMS will help the company fully realize its benefits. Some vendors provide on-site training, online courses, digital training sessions or other training materials.
  5. Adequate testing. Thorough testing is critical before going live. Test every possible scenario, using real data, to make sure the system works as expected. Compare results to your old warehouse management methods to make sure the business isn’t missing anything.

Choosing a Warehouse Management System

There are many WMS applications available, including software designed for specific industries and companies of various sizes. Since warehouse operations can vary widely depending on the industry and each company’s unique business needs, it’s important to carefully research options to determine how closely each product meets your requirements. For example, a food producer will likely have different warehouse requirements than an electronics manufacturer, and a midsized operation may have different priorities than a large enterprise.

A WMS should be intuitive and easy to learn, offer real-time insights into each aspect of your operations, be flexible enough to help your business grow and adapt to changing market conditions, and easily integrate with other business applications.