What is a warehouse management system? (WMS)

What is a warehouse management system?

A warehouse management system (WMS) is a software solution that organizes all warehouse activities through a single interface, giving users visibility and control of their entire warehouse operation. It produces real-time data to help goods, people and processes move in the most efficient and cost-effective way.

WMS software automates your warehouse processes by sending real-time data across functions such as yard management, goods in, stock control, materials handling, dispatch and transportation. It streamlines every process, from the moment goods enter the warehouse to when they leave.

With the rise in eCommerce, omnichannel retail and same-day delivery, the need for warehouses and distribution centers to operate with maximum efficiency has become paramount. To achieve this, businesses that have on-hand inventory are increasingly deploying warehouse management systems.

A growing market

In 2020, the global WMS market was valued at $1.9 billion USD, and is expected to reach $2.7 billion USD by 2025. Key factors boosting its growth include:

• The exponential growth of eCommerce
• The globalization of supply chain networks
• The growing share of cloud-based WMS software solutions
• Increasing awareness of WMS software among small-to-medium enterprises

Main features and capabilities of a WMS

WMS software enables system-driven processes and optimizes the flow of goods. Any operation with on-hand inventory can improve its operational efficiency and streamline processes from inbound receipts to outbound deliveries. The main features and capabilities include:

Inventory management – real-time inventory visibility; tracking stock levels; monitoring item locations; managing stock movements.

Warehouse location management – organizing storage locations; allocating items to bins or shelves; placing goods.

Goods in processes – streamlining receiving processes; managing goods arrivals; quality checking; updating inventory records; assigning storage locations.

Order management – order processing, including order creation, allocation and prioritization.

Shipping management – facilitating order picking, packing and shipping; optimizing routes; generating shipping labels; tracking shipments through to delivery.

Order picking and packing – optimizing pick paths; managing packing processes.

Returns management – tracking returned items; updating inventory; managing restocking or disposal.

Integrations – integrating with other tools, such as bar code scanning, RFID labeling, transportation management systems, ERP systems and logistics software.

Reporting and analytics – providing insights through dashboards and reports.

Mobile functionality – enabling real-time data entry, inventory checks and task management on handheld devices.

Benefits of a warehouse management system

A WMS presents a number of advantages, driving efficiency and accuracy across the entire operation, enabling:

• Real-time visibility - An intuitive interface provides real-time visibility into warehouse activities, helping to eliminate unnecessary and redundant work. With this visibility, the business can fine-tune its activities to changing market conditions and operate at maximum efficiency.
• Labor efficiency - By providing visibility of goods through methods such as radio frequency identification (RFID) tracking and barcoding, the system reduces errors in picking and retrieval. Warehouses can forecast labor needs, optimize travel time within the warehouse and assign tasks to employees based on factors such as skill level and proximity.
• Waste reduction - Stock level optimization is a built-in function of the WMS software and key to reducing costs. Because it identifies date-restricted and perishable stock, it also minimizes waste and overheads.
• Smoother returns management - With the rise in eCommerce, the returns process has become one of the biggest challenges for a warehouse operation. Through RFID technology, team members can swiftly return goods to storage, keeping the incoming area clear for further receipts.
• Shipping visibility - By sharing WMS data with the transport management system, the business has a holistic view over the movement of goods, through to their destination.
• Greater customer satisfaction - The WMS drives efficiency, accuracy and faster delivery, ensuring customers receive their goods on time and error free. Meanwhile, other stakeholders within the supply chain gain the visibility they need to support processes throughout the operation.

Benefits at a glance

• Real-time visibility into warehouse workers, labor costs, response times and productivity gaps, so businesses can take steps to become more efficient
• Faster and more accurate goods in, put-away and returns by scanning an RFID barcode
• Real-time view of inventory through automatic identification and data capture  technology, so you can keep minimal stock levels to meet customer demand
• Inventory tracking, ensuring the right goods arrive in the right quantity and enabling them to move faster through the warehouse
• More streamlined picking, packing and order fulfillment, optimizing picking paths through technologies such as pick-to-light, pick-to-voice and robotics
• Yard management, helping drivers find the right loading docks and cross-docking where needed
• Automatic generation of bills of lading, packing lists, shipment invoices and notifications
• Real-time visibility into transportation and shipping activities
• Analytics and reporting on metrics such as on-time shipping, inventory accuracy, distribution costs and order cycle time

Warehouse management solution (WMS) types

This section illustrates the three main types of WMS software: standalone on-premises, cloud-based and ERP-integrated or supply chain management system. Each has its pros and cons as shown:

Standalone WMS

A standalone warehouse management solution is fully owned by the business and is generally installed on-premises with its own hardware. The cost can be substantially higher than other options, but the customization capabilities support better data control. The business is also responsible for updates, maintenance and the associated costs. As the WMS ages, it becomes more difficult to implement new technologies and integrate with other platforms.

Cloud WMS

A cloud-based software-as-a-service (SaaS) warehouse management system can be implemented more swiftly with lower up-front costs and can easily be integrated with other solutions. It is also more flexible and scalable as the business grows, in responding to seasonal dynamics and other changing market conditions. The cloud-based SaaS automatically updates to new software versions, saving on manual intervention. It is completely secure and has robust disaster recovery capabilities. 

Integrated ERP and SCM-based WMS

A modular warehouse management system integrated with enterprise resource planning (ERP) and supply chain platforms more easily integrates with other systems such as accounting and business intelligence. This provides a holistic view so that the logistics chain can work as an integrated component of the wider business system. Organizations can gain a more transparent view of their whole operation and optimize its overall efficiency.

Cloud-based WMS

There are huge advantages to implementing your WMS on the cloud. For on-premises systems, businesses need to pay for continued hardware upgrades and vendor support contracts. With a cloud contract, these are all included within a monthly fee.

There is also a cost element to increasing capacity or refreshing hardware for an on-premises WMS system. The cloud is far quicker to deploy and has built-in best practices for international standards such as SOC1, SOC2, ISO, HIPAA and FedRAMP. You also have the flexibility to work from anywhere with complete security.

What to look for in a warehouse management system

Your WMS should have the configurable functionality and flexibility to align with your unique business processes, adapt to changing customer requirements such as peaks and troughs, and flex to future business demands. It should be modular, enabling you to add functionality as and when needed.

When you select a warehouse management system provider, it is important to ask if they will be able to integrate your WMS with your ERP software and other applications – such as transportation or yard management – and the automation equipment of your vendors. The system should also support the needs of operations of different scales and complexity (see text box).

Who needs a warehouse management system?

Small-to-medium warehouses
A WMS brings immediate visibility into your inventory, people and processes. You can tailor the system to fit your existing processes, with the flexibility to adapt it to your changing needs over time.

Large and complex warehouses
This may be, for example, an enterprise-level distribution center with a variety of complex processes and high throughput rates. Through a WMS, it could also integrate with the automated material handling equipment of its vendors.

Third party logistics (3PL) warehouses
A WMS should support multi-client operations with multiple product categories, all from inside the same warehouse. Other 3PL-specific functionalities include flexible invoicing systems and electronic data exchange connectivity.

The sustainability role of a warehouse management system

By reducing waste and increasing efficiencies, a WMS plays an instrumental role in making the supply chain more sustainable. Through real-time visibility into inventory levels and demand forecasts, warehouse operators no longer need to stockpile goods to meet uncertain demand. This means they can reduce waste, while saving the costs of excess stock and freeing up shelf space.

The World Economic Forum estimates that 85 million tons of plastic packaging are produced globally each year, with only 9% being recycled. By analyzing historical data and performance metrics, businesses can improve energy consumption, and optimize packaging materials and sizes to match the specific requirements of each shipment (see Adore Beauty case study below). This reduces the use of excess packaging and minimizes the environmental impact of producing and disposing of such materials.

Warehouse management system case studies

Adore Beauty: Creating a waste-saving solution

Adore Beauty is Australia’s number one pure play cosmetics retailer. The company needed a WMS to handle its large volume of stock-keeping units and be highly customizable to support future growth. It also had to reduce its amount of cardboard waste.

When paired with Cubiscan technology, Infios’s WMS was able to choose the right box size for each order with no manual operation. Our solution also replaced the company’s paper-based system with radio frequency (RF) scanner technology.

Parts Town: Delivering tangible productivity improvements

This international food service equipment parts distributor faced challenges with its previous WMS due to the system’s inflexibility and lack of support. Infios's solution delivered improvements in both speed and accuracy. It also provided the flexibility Parts Town needed for its rapid growth. Our warehouse management solution resulted in:

• A 30 percent improvement in inventory accuracy
• A 20 percent increase in picking productivity
• Streamlined training, enabling employees to follow optimal paths via radio frequency (RF) scanner instructions
• The creation of job opportunities by building a team around the WMS to customize and oversee its impact
• An enhanced end-customer experience

FabFitFun: Meeting huge order volumes

FabFitFun is an online subscription service for beauty, health and wellness products. It commonly picks and packs more than one million orders in the space of a few hours. The company needed a cloud-based WMS to keep pace with its operation.

FabFitFun’s considerable volume capacity meant it experienced huge growing pains. One of the key success factors of the WMS was customized reporting. It also needed bolt-on applications such as an interface for the load planning software CubeIQ, which forms a key part of its process.

Complementary warehouse technologies

Warehouse management automation is key to creating more resource-efficient, cost-effective and sustainable supply chains.

Warehouse and distribution centers can streamline their operation through RFID technologies to increase the speed and accuracy of picking and packing, how real-time tracking of transportation and shipments leads to satisfied customers, and how data collection and analysis is key to process improvement.

To drive the necessary efficiencies day to day, the following warehouse technologies are needed on the ground:

Order management system (OMS)

An OMS provides complete visibility, from inventory availability and order receiving to fulfillment, tracking and shipping notifications. It has proved hugely beneficial for retailers, wholesalers, manufacturers and 3PL providers.

An advanced order management software tracks fulfillment costs such as picking, packing, shipping, product defect and return rates. The most sophisticated systems provide fulfillment reporting and insights, so that retailers, warehouses and distributors can track key performance indicators.

Voice solutions (VVMs)

Here, staff receive directions through a headset as to the location of an item and the quantity to pick. The picker completes the task, and verbally records any necessary information back into the system – for example, if the quantity is short, or if there is any noticeable damage.

The voice system then directs the picker to the next task. This means they remain eyes free and hands free, with no need for clipboards or handheld devices, enabling them to concentrate on the task at hand.

Autonomous mobile robots (AMRs)

This technology is one of the most emerging and innovative automation breakthroughs. Unlike guided automation, AMRs can move independently around objects and team members, using sensors, cameras and embedded safety mechanisms.

By reducing the need for static rail systems, warehouse operations can increase their usable floor space. They also take repetitive, time-consuming tasks out of team members’ hands, freeing them up to focus on aspects of the job that require more skill. For example, autonomous mobile robots can move to a picking location while carrying products, and the nearest team member can perform the manual handling. It can then move to other areas of the warehouse, and the picker can simply move to the next closest AMR.

Yard management system (YMS)

A YMS automates the planning, management and monitoring of yard processes in one solution. Key functionalities include dock and slot management, assignments and appointment management for incoming and outgoing transport.

It also provides integrated control of yard equipment and peripherals, including display panels, gate technology and transponder systems. This ensures goods move in and out of the warehouse and the yard as efficiently as possible, and vastly improves process efficiency over traditional manual and paper-based yard management.

Transportation management system (TMS)

A TMS can automate most processes in both single- and multi-stage transport networks. This includes key tasks such as order management, planning and scheduling and operational monitoring. It automatically updates route planning in the case of disruptions, and tracks and traces shipments right through to delivery.

By analyzing and sharing related information with internal and external stakeholders – including customers, partners and transport service providers, a transportation management system increases visibility throughout the transportation network.

Warehouse control system (WCS)

It would be impossible to simultaneously operate the different types of automation often found within a warehouse environment without the technology to hold it all together. This is where a WCS comes in.

A warehouse control system creates a single point of communication between the automation equipment and the WMS. It optimizes material flow across the warehouse and provides visibility down to individual units. It can therefore be considered as the engine room for automation within the warehouse.