What is a Warehouse Management System (WMS)?

A warehouse management system (WMS) consists of software and processes that allow organizations to control and administer warehouse operations from the time goods or materials enter a warehouse until they move out.

What does a WMS do?

Warehouses sit at the center of manufacturing and supply chain operations because they hold all of the material used or produced in those processes, from raw materials to finished goods. The purpose of a WMS is to help ensure that goods and materials move through warehouses in the most efficient and cost-effective way. A WMS handles many functions that enable these movements, including inventory tracking, picking, receiving and putaway.

A WMS also provides visibility into an organization’s inventory at any time and location, whether in a facility or in transit.

Where WMS fits in the supply chain

The supply chain can operate only as quickly, accurately and efficiently as warehouse processes permit. A WMS plays a vital role in supply chain management by managing order fulfillment processes, from receiving raw materials to shipping finished goods.

For example, if raw materials are not received properly or parts are misplaced in a warehouse, the supply chain may be slowed or disrupted. WMSes are critical in ensuring that these processes work smoothly by tracking inventory and making sure that goods are stored and sorted properly, as well as shipped and tracked accurately.

This article is part of

Guide to supply chain management

• Which also includes:

• 5 potential benefits of blockchain in supply chain logistics

• The supply chain sustainability software market demystified

• Top 5 inventory management challenges for manufacturers

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A WMS is often used alongside or integrated with other related systems, including ERP, transportation management systems (TMS) and inventory management systems.

Figure 1. Each of the three main SCM systems has a particular role in managing orders and sharing data with the other two. The WMS manages the data and processes relating to the movement of goods through a warehouse.

Figure 1 shows each system’s role in processing orders and the types of data they need to share with each other to ensure that the right product gets to the customer on time.

The role of the WMS is to help users manage the fulfillment, shipping and receiving tasks in the warehouse or distribution center, such as picking goods from shelves for shipment or putting received goods away. Its role in inventory is to track the inventory data that comes in from barcode readers and radio frequency identification (RFID) tags and update the inventory management module in the ERP system to ensure it has the latest information. An integration link synchronizes the inventory data that is stored in the ERP system and the WMS.

For its part, the ERP system handles the accounting and most of the invoicing, order management and inventory management. The TMS is where the shipping process is managed. It is essentially a repository of detailed information about shipping carriers but is also a transactional and communication system for planning, executing and tracking the shipments. Sometimes a TMS will be integrated with the WMS to enable better coordination of the inbound and outbound logistics tasks that occur at the interface of warehouses and freight shippers, such as palletization of goods, labor scheduling, yard management, load building and cross-docking.

Usually, orders come in automatically from ERP or order management systems that are integrated with the TMS. The ERP system also outputs the order information the TMS needs to prepare and execute shipments. Besides basics like customer name and address, data from the ERP system also includes detailed information on items to ensure the right products are shipped. The TMS returns the shipment details that the ERP system needs for its accounting and order management functions, such as the tracking number, carrier name and costs. The shipment information might also go to a customer relationship management (CRM) module to help update customers about the status of their orders.

Types of warehouse management systems

Warehouse management software comes in a variety of types and implementation methods, and the type typically depends on the size and nature of the organization. They can be standalone systems or modules in a larger ERP system or supply chain execution suite.

WMSes can also vary widely in complexity. Some small organizations may use a simple series of hard copy documents or spreadsheet files, but most larger organizations — from small to medium-sized businesses (SMBs) to enterprise companies — use complex WMS software. Some WMS setups are designed specifically for the size of the organization, and many vendors have versions of WMS products that can scale to different organizational sizes. Some organizations build their own WMS from scratch, but it’s more common to implement a WMS from an established vendor.

A WMS can also be designed or configured for the organization’s specific requirements; for example, an e-commerce vendor might use a WMS that has different functions than a brick-and-mortar retailer. Additionally, a WMS may also be designed or configured specifically for the types of goods the organization sells; for example, a sporting goods retailer would have different requirements than a grocery chain.

Figure 2. A WMS plays a vital role in supply chain management by managing fulfillment processes, from receiving raw materials to shipping finished goods, and helping ensure that goods and materials move through warehouses in the most efficient and cost-effective way. A WMS handles the functions that enable these movements, including inventory tracking, picking, receiving and putaway.

Features of warehouse management systems

Many features are common to WMS software products (see Figure 2). They include the following:

• Warehouse design, which enables organizations to customize workflow and picking logic to make sure that the warehouse is designed for optimized inventory allocation. The WMS establishes bin slotting that maximizes storage space and accounts for variances in seasonal inventory.
• Inventory tracking, which enables the use of advanced tracking and automatic identification and data capture(AIDC)  systems, including RFID and barcode scanners to make sure that goods can be found easily when they need to move.
• Receiving and putaway, which allows inventory putaway and retrieval, often with pick-to-light or pick-to-voice technology to help warehouse workers locate goods.
• Picking and packing goods, including zone picking, wave picking and batch picking. Warehouse workers can also use lot zoning and task interleaving functions to guide the pick-and-pack tasks in the most efficient way.
• Shipping, which enables the WMS to send bills of lading (B/L) ahead of the shipment, generate packing lists and invoices for the shipment and send advance shipment notifications to recipients.
• Labor management, which helps warehouse managers monitor workers’ performance by using key performance indicators (KPIs) that indicate workers who perform above or below standards.
• Yard and dock management, which assists truck drivers coming into a warehouse to find the right loading docks. A more complex use of yard and dock management enables cross-docking and other functions of inbound and outbound logistics.
• Reporting, which helps managers analyze the performance of warehouse operations and find areas to improve.

Cloud-based WMS

Warehouse management systems, along with other enterprise systems such as ERP, began as systems that were run on an organization’s on-premises servers. This model has been changing, and cloud-based WMSes are more common as organizations realize the benefits of running systems in the cloud.

The main characteristic of a cloud-based WMS versus the traditional on-premises system is that the software is hosted and managed by the WMS vendor or a cloud service provider. This takes the burden of installing, managing and upgrading the system off the organization’s IT department.

Because they are easier to install and less costly to manage, cloud-based WMSes tend to be favored by SMBs. Larger enterprises often deploy on-premises WMS because they need highly customized systems that meet the requirements of their specific industry, and they have the resources to manage the IT requirements.

Pros of cloud-based WMS include the following:

Faster implementation. Traditional on-premises WMSes can typically take months to implement, whereas cloud-based WMS deployments can be completed in weeks, depending on the complexity. This means that organizations have a faster path to a positive ROI and can take advantage of the cloud WMS capabilities sooner, which is a huge benefit in the fast-paced modern economy.

Fewer upgrade hassles. The SaaS deployment model for cloud-based WMS includes regularly scheduled upgrades where all the updates and configurations are handled by the vendor. This means that organizations are always on the latest version of the software and spend minimal time and resources managing each upgrade.

Lower costs. Cloud-based WMSes do not require hardware, software installation and IT administrators to manage them. Therefore, they have lower upfront costs and sometimes ongoing costs than on-premises systems. They also do not require customizations or modifications, which can be costly for on-premises systems. Upgrades to on-premises systems can also be expensive, as they can involve reinstalling and reconfiguring the software and, in some cases, upgrading the hardware.

Scalability. Cloud-based WMSes can be scaled quickly as organizations grow and supply chains become more complex. They are also more flexible and can be reconfigured as business requirements or market conditions change.

Cons of cloud-based WMS include the following:

Long-term costs. While cloud-based WMSes often have lower upfront costs than on-premises systems, paying for licenses on a monthly or annual basis may be more expensive in the long run. Organizations may also incur additional costs for implementing new modules or premium support packages.

Customization. SaaS WMS software generally can’t be customized, making it less suitable for organizations that need to modify the software to meet their specific processes or industry requirements.

Updates. Cloud-based WMSes are usually updated on a regular basis for all customers. While this ensures that systems are always up to date, it may require that customers change processes regularly to keep up with the new software, and users may need retraining each time the software is updated if the changes are significant.

All of the major WMS vendors (IBM, Microsoft, Oracle and SAP) offer a variety of deployment options, including cloud-based systems. WMS vendors that are primarily cloud-based or cloud only include Fishbowl, HighJump and SnapFulfil.

Warehouse management system benefits

Although a WMS is complex and expensive to implement and run, organizations gain numerous benefits that can justify the complexity and costs.

Implementing a WMS can help an organization reduce labor costs, improve inventory accuracy, improve flexibility and responsiveness, decrease errors in picking and shipping goods, and improve customer service. Modern warehouse management systems operate with real-time data, allowing the organization to manage the most current information on activities like orders, shipments, receipts and any movement of goods.

WMS and IoT

Connected devices and sensors in products and materials help organizations to ensure they can produce and ship the right quantity of goods at the right price to the right place at the right time. All of these capabilities have been made cheaper and more widespread by the internet of things (IoT).

Such IoT data can integrate into a WMS to help manage routing of the products from the pickup point to the end point. The integration enables organizations to develop pull-based supply chains, rather than push-based ones. Pull-based supply chains are driven by customer demand, which allows the organization more flexibility and responsiveness, while push-based supply chains are driven by long-term projections of customer demand.

Top WMS vendors

A number of large enterprise software vendors sell WMS software as standalone products or as modules in comprehensive ERP suites. These include:

• IBM
• Microsoft
• Oracle
• SAP

There are a variety of other prominent WMS software vendors, many who focus on specific industries or company sizes, such as SMBs. These include:

• Aptean
• ASCTrac
• Basware
• Blue Yonder (formerly JDA Software)
• Click Reply
• Epicor
• Fishbowl
• HighJump (acquired by Körber in 2017)
• Infor
• Manhattan Associates
• Rootstock Software (which acquired Kenandy in January 2018)
• Sage
• SnapFulfil
• Softeon
• Tecsys