What is a Warehouse Management System (WMS)? [Process + Features + Benefits]

Aug 5, 2024 | E-commerce Industry, Warehouse Management

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In the fast-paced world of business, entrepreneurs need to be on top of their game to stay competitive. One key aspect that cannot be overlooked is efficient warehousing. After all, the success of your supply chain hinges on it. But fear not because the solution is simple – a cutting-edge warehouse management system.

From the sourcing of raw materials to the final delivery of the product, the supply chain is a continuous flow of goods and services. The storage of these items is critical to the process and plays a pivotal role in logistics. This is where a robust ERP warehouse management system (WMS) comes in, eliminating bottlenecks such as volatile supplies and delays.

However, before delving deeper into the intricacies of WMS, let’s establish a foundational understanding of the fundamental aspects of warehousing.

What is Warehouse Management?

Warehouse management refers to the efficient and systematic control of various operations within a warehouse. It starts from stocking your inventory to deciding how your operations will flow in the space. Not only does it determine, it oversees and optimizes the processes related to inventory management, storage, picking, packing, and shipping goods. The primary goal of warehouse management is to ensure that the right products are in the right place at the right time, minimizing costs and maximizing efficiency throughout the supply chain.

Benefits of Warehouse Management

Implementing a Warehouse Management System (WMS) offers numerous benefits that significantly enhance the efficiency, accuracy, and overall performance of warehouse operations. Some of the key benefits include:

Enhanced inventory accuracy with real-time tracking and insights across multiple warehouses.
Increased stock efficiency and productivity through improved visibility and control.
Maximized warehouse space with smart storage strategies.
Accurate order fulfillment and prompt deliveries enhance the customer experience.
Improved TAT (Turnaround Time) rate and minimized returns through precise inventory and order management.
Lowered operational expenses related to labor, inventory, and fulfillment.

Principles of Warehouse Management

Effective warehouse management involves several principles to ensure smooth operations and optimized efficiency. Here are three key principles:

1. Organization and Layout Optimization

Efficiently organizing the warehouse layout is crucial. Design the floor plan to minimize travel time for picking, packing, and storing goods.
Implement logical categorization and labeling systems for inventory items to facilitate easy identification and retrieval.
Utilize space wisely by employing shelving, racking, or automated storage systems to maximize storage capacity.
For example, storing your best-selling product near the packing station can save time and speed up order fulfillment. A wise WMS will help you automatically design this with the data and reports.

2. Inventory Management and Control

Maintain accurate inventory records through the use of a robust inventory management software.
Automated processes using handheld devices ensure accurate inventory checks, regardless of how detailed your SKUs may be.
Conducting regular cycle counts and reconcile inventory to prevent discrepancies and avoid stockouts or overstock situations.
Implement inventory forecasting techniques to anticipate demand and adjust stock levels accordingly.

3. Optimize Operational Processes

Streamline warehouse workflows by establishing efficient receiving, storing, picking, and shipping procedures.
Innovative solutions in the market streamline processes with features like auto-GRN, saving time and enabling smarter inventory management.
Implement lean management techniques to reduce waste, minimize errors, and improve overall operational efficiency.
Use technology such as barcode scanners, RFID (Radio-Frequency Identification), or WMS (Warehouse Management Systems) to automate and optimize processes.

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What is a Warehouse Management System (WMS)?

A Warehouse Management System, or simply e-commerce WMS, is a software application that helps manage and optimize the operations of a warehouse by providing real-time visibility into inventory levels. From the moment a shipment enters the warehouse to the moment it leaves, the WMS tracks every step and keeps everything running smoothly.

But the WMS is more than just a tracking system. It’s a mastermind of efficiency that maximizes labor and space utilization while coordinating and optimizing resource usage and material flows. In short, it’s the secret weapon that allows companies to operate warehouses like a well-oiled machine. With a fully integrated cloud-based WMS, you can easily achieve 100% inventory data accuracy, allowing you to process orders and replenish goods more efficiently.

AI and Warehouse Management

AI is driving technological advancements in the e-commerce industry, with the warehouse serving as the backbone of operations. It plays a crucial role in ana lyzing processes, from data management to quality control and daily efficiency checks.

While automation is a key solution, the question remains: who oversees the automated processes to ensure they are functioning correctly and delivering accurate predictions? This is. where AI comes in. It helps forecast inventory needs and control processes like picking, packing, and sorting.

IoT in Warehouse Management

Think of how your smartwatch connects you to everything you need through your phone. This concept is similar to how the Internet of Things (IoT) operates in a warehouse.

IoT enables quick and accurate data collection, allowing you to strategize your business without manual processing. For example, when storing sensitive products like FMCG or cosmetics, IoT helps monitor and maintain the required temperature for your inventory. With RFID (Radio Frequency Identification), tracking becomes as easy as a single click. You can keep your units, storage, racks, and pallets updated with real-time movement information, ensuring the security of your inventory and the efficiency of your operations.

Inventory Management vs Warehouse Management – Key Differences

Inventory management and warehouse management are interconnected but distinct aspects of e-commerce operations. Let’s understand the difference.

Inventory management involves overseeing the quantity, location, and movement of goods throughout the supply chain to meet customer demand efficiently, minimizing costs, and optimizing stock levels. Whereas, Warehouse management, on the other hand, focuses on the physical storage, organization, and handling of inventory within a warehouse facility, ensuring streamlined operations, efficient picking, packing, and shipping processes, and the utilization of space and resources to facilitate smooth logistics operations.
While inventory management deals with the broader supply chain Warehouse management concentrates explicitly on the activities within the warehouse premises to ensure effective handling and movement of inventory.

Both are integral parts of logistics and supply chain management, working together to ensure timely and accurate delivery of products to customers.

Types of Warehouse Management Systems

Warehouse Management Systems (WMS) come in various types, each catering to specific needs and operational requirements within the warehouse. Here are some common types of Warehouse Management Systems:

Standalone WMS: A standalone WMS operates independently and is not integrated with other systems like ERP (Enterprise Resource Planning). It focuses solely on warehouse operations, offering inventory tracking, order picking, packing, and shipping functionalities. From finances to monitoring, it doesn’t communicate with the other systems and functions solely.

ERP-Integrated WMS: Many WMS are integrated within broader ERP systems. These systems combine WMS functionalities with other business processes like accounting, human resources, and customer relationship management. This integration ensures seamless data flow between different departments within an organization. For example, if you’re using an ERP-integrated WMS, the WMS can handle tasks like generating invoices, while the ERP manages critical operations such as taxation. Together, they work holistically, ensuring smooth data flow and maintaining the health of your operational data.

Cloud-Based WMS: Cloud-based WMS solutions are hosted on remote servers and accessed through the Internet. They offer scalability, flexibility, and accessibility from any location with an internet connection. Cloud-based systems often come with subscription models, reducing the need for upfront infrastructure investments.

Workflow of a Warehouse Management System (WMS) – How WMS Works?

Process of Warehouse Management System are:

Step #1: Receiving
Step #2: Putaway
Step #3: Storage
Step #4: Picking and Packing
Step #5: Shipping and Quality Control
Step #6: Reporting

It’s important to understand the workflow of a warehouse management system (WMS) in order to optimize operations and improve efficiency. The typical workflow of a WMS includes the following core functionalities:

Step #1: Receiving

Receiving Workflow in Warehouse Management System –

Pre-receiving
Receiving & Unloading Stocks
Inspection of received inventory
Putaway

The first step in a warehouse management system is “Receiving.” This step ensures that the right product has been received in the right quantity, quality, and location and at the right time. What if I tell you that all of this can be automated, leaving no possibility of human errors? This is how it works: A powerful warehouse management system allows businesses to input key purchase order details such as delivery and expiry dates and vendor information. Once everything has been received and verified, a Goods Received Note (GRN) is created to confirm that all the goods have been received.

Step #2:Putaway

Putaway Workflow in Warehouse Management System –

Operator to scan barcode
Transfer goods to location
Scan and puts away in location
Putaway confirmed

After the receiving process is complete, the goods need to be moved from the receiving area to their designated storage locations. This process is called putaway, and it is critical to ensure that products are handled correctly during this process to avoid costly damages. There’s a chance of inventory leakage at this stage, but there’s no need to worry—the WMS will accurately track even the smallest details to prevent this.

Fortunately, a well-designed warehouse management system (WMS) can help businesses avoid these issues by facilitating the creation of efficient putaway processes that optimize operational productivity.

Step #3: Storage

Storage is a vital aspect of any business that ensures the proper placement of goods in the warehouse. And the key is to use the space wisely. Hence, the goal of a warehouse management system is to maximize storage efficiency while minimizing errors and damage to goods, wondering how this can be achieved. That’s where Shelf Management comes into play!

It involves the strategic arrangement of goods on shelves to optimize space utilization, minimize errors, and prevent damage to products. By properly executing this process, businesses can maximize their available storage area and increase productivity.

Step #4: Picking and Packing

Picking & Packing Workflow in Warehouse Management System –

Receive
Process
Pick
Pack
Inventory
Ship

Picking and packing are integral components of order fulfillment, and optimizing these processes can significantly reduce costs. When order details are received, they can be passed on to warehouse staff through a picklist generated using WMS. This list provides essential details to the picker, including order information, item details, shelf locations, barcode scanning, and batch/lot numbers.

Suggested reading – What is order picking in a warehouse?

The products are selected from the warehouse using handheld devices that scan each item’s barcode. Once the items have been picked, they are packed in a way that minimizes the risk of damage during transportation. Shipping labels are generated, and an invoice is created to accompany the order.

Step #5: Shipping and Quality Control

Shipping and Quality Control in Warehouse Management System –

Receiving
Shelving Putaway
Picking Kitting
Packing
Shipping

The shipping and quality control (QC) process marks the end of the journey for goods. This step is particularly important, as it has a direct impact on the customer experience. Incorrectly shipping products to the wrong customers can result in negative feedback.

To avoid such scenarios, it is important to have robust QC measures in place, such as order verification, packing inspection, barcode scanning, weighing checks, etc. With automated WMS software, this process also gets automated, simplifying the order routing process.

What are the Benefits of Deploying a Centralized Warehouse Management System?

Let us walk you through the benefits of WMS so that you can understand its significance in streamlining your e-commerce operations! Top Benefits of Deploying a Centralized Warehouse Management System –

Better Inventory Control with Quick Dispatch Time
Reduced Manpower Costs and Errors
Improved Auditing and Security and TAT Rate
Improved Picker Efficiency
Simplified Billing and Taxation Management
Enhanced Customer Experience
Centralized Visibility for Multiple Warehouses
Window to cater to the Business Scalability with Time

1. Better Inventory Control with Quick Dispatch Time

Inventory management is critical to the success of any business, particularly in the retail industry. For this, you need an efficient WMS that can consolidate and sort inventory quickly. This allows for bulk order processing and reduces order preparation time, resulting in quick dispatch of orders.

Implementing a WMS also provides access to detailed information on the location and status of each Stock Keeping Unit (SKU), including which batch it belongs to and its location within the warehouse. Barcoding is a commonly used identification method whereby each item is assigned a unique code that can be scanned or tracked as it moves through the warehouse.

With this information readily available, businesses can make informed decisions about inventory levels and restocking, which can help prevent stockouts and overstocking.

Read: E-commerce Warehouse Management System Case Study – 35% Increase in Order Flow for the Largest E-commerce Footwear Brand in India

2. Reduced Manpower Costs and Errors

A powerful warehouse management system (WMS) can significantly reduce manpower costs and minimize errors in your warehouse operations. This is achieved through the automation of various functions, including inventory tracking, sorting, picking, and order processing.

With a WMS in place, your warehouse can also benefit from systematic inventory placement and quality checks, which can further reduce the risk of manual errors while enhancing overall efficiency. One of the key advantages of using a WMS is that it allows you to optimize both inward and outward warehouse operations.

This ensures that only high-quality, accurate products are delivered to end customers, preventing the delivery of defective products and ultimately reducing customer complaints.

3. Improved Auditing and Security

Auditing and security are crucial components of any warehouse management system. The sheer amount of inventory and transactions taking place on a daily basis can make it difficult to keep track of everything, let alone prevent theft or loss of goods. That’s why most warehouse management systems enable multiple employees to use the software while also linking specific users to specific transactions.

This creates a level of transparency and accountability that is essential for maintaining a secure and efficient warehouse. With each transaction tied to a specific employee, pinpointing any issues that may arise becomes much more accessible. You can easily track where the exact problem is and directly work on its solution.

Tracking everything becomes easier, which improves the turnaround time for your orders. Smooth operations streamline the process, making order fulfillment more efficient.

4. Improved Picker Efficiency

While automation is a great help, it only kicks in once the picker has selected the product. So, what can you do to boost picker efficiency?

First off, think about your warehouse layout. By placing your most frequently picked items closer to packing stations, you can significantly reduce travel time, making order processing faster and easier. Using sorted picklists is another smart move—pickers can follow the most efficient route, reducing the time spent searching for products.

Equipping the pickers with handheld devices is another trick to go! This allows them to accurately identify and confirm products before they pick them, which helps avoid mistakes. Hence, there are no delays due to wrong picking and fewer chances of returns. By bringing all these strategies together, you can enhance your pickers’ efficiency and ensure that your order fulfillment is as smooth as possible.

5. Simplified Billing and Taxation Management

Got everything sorted but still juggling with the lengthy documentation and manual dependency? A warehouse management system (WMS) is more than just a tool for inventory management. With a reliable WMS in place, you can streamline your billing process, which is a critical aspect of any business. Failure to manage your bills correctly can result in significant losses.

Fortunately, most WMS solutions come with pre-integrated third-party apps that can improve your ability to manage bills from a single screen and with the utmost accuracy. In addition to simplifying the billing process, an advanced WMS can help you comply with government taxation standards by streamlining the invoice tax calculation process.

6. Enhanced Customer Experience

Customers are the lifeblood of any business, and a centralized warehouse management system can help you focus on improving your customer’s buying journey and enhance their overall experience.

Businesses can quickly and accurately process customer orders and track the progress of each order from start to finish. This allows for timely and accurate communication with customers regarding order status, shipment tracking, and delivery times, which can greatly enhance the customer experience.

7. Increased Scalability and Flexibility

As your business grows, so will your warehouse management needs. With a centralized WMS in place, you can easily scale your operations to accommodate changes in demand, seasonality, or expansion into new markets.

A WMS can also provide flexibility in managing different types of products and order fulfillment models, such as dropshipping or third-party logistics, allowing businesses to adapt to changing customer demands and preferences.

What are the Features of a Warehouse Management System (WMS)?

A well-organized and structured warehouse with reliable and efficient performance is a huge asset for retail business. Here are the essential WMS features that can help you attain operational capabilities:

Batch Management
Cycle Count
Shelf Management
Bundle Management
Barcode Scanning
Returns Management

1. Batch Management

Batch management is an important feature of a warehouse management system that helps to manage and track inventory based on batches or groups. Batches represent distinct collections of products that share common characteristics such as manufacturing dates, expiration dates, or production lots. This feature is particularly useful in industries where products have a limited shelf life, such as the food, pharmaceutical, and cosmetics industries.

By grouping inventory into batches, businesses can minimize the amount of waste produced from expired or spoiled inventory. Additionally, batch management allows for the implementation of expiry management methods like FIFO (first in, first out) and FEFO (first expiry, first out). These methods enable stock rotation based on manufacturing and expiry dates, which helps to prevent the buildup of old inventory and avoid any potential damage from prolonged storage.

2. Cycle Count

Do you remember the days of the dreaded annual inventory count that would take forever? Well, thanks to the cycle count feature in Warehouse Management Systems (WMS), those days are long gone!

With regular inventory counts on a daily, weekly, or monthly basis, businesses can now maintain accurate records, avoid stockouts, and optimize their warehouse operations. And the best part? Businesses can now have real-time updates on their day-to-day operations, making their supply chain management more efficient than ever before.

3. Shelf Management

Shelf management is an essential component of effective warehouse operations. It refers to the process of organizing and arranging products on shelves in a way that maximizes space and ensures efficient picking and restocking. Proper shelf management can significantly improve the overall productivity of a warehouse.

One way to achieve optimal shelf management is by using a robust Warehouse Management System (WMS). A WMS can assist in identifying the most suitable storage location for each product based on its attributes, such as size, weight, and demand frequency. This helps to ensure that products are arranged in a logical order, minimizing the time taken to locate them during picking and reducing errors.

4. Bundle Management

Product bundling is a popular sales strategy in which multiple SKUs are packaged together and sold as a combo pack to customers. While bundling offers benefits such as increased sales and customer satisfaction, it can be challenging to manage the various processes involved, from monitoring product availability to managing inventory for multiple sales channels.

The Bundle Management feature of a WMS can help to streamline these processes by allowing businesses to define bundle products as a group of individual SKUs, with each SKU being tracked individually. This enables businesses to monitor the availability of each SKU, ensuring that bundles are only created when all the SKUs are in stock.

5. Barcode Scanning

Barcodes are machine-readable representations of numeric and alphanumeric characters, typically consisting of bars and spaces. Barcodes offer several benefits in warehouse management, including improved accuracy, efficiency, and productivity.

The advanced barcoding feature provided by the WMS allows for the capture of accurate and intricate details of inventory at the item, SKU, and batch levels. This ensures that each item is uniquely identifiable and traceable, making it easier for businesses to track inventory movements, identify stock levels, and ensure timely replenishment.

6. Returns Management

With the rise of online shopping, customers have come to expect an easy and hassle-free returns process, which puts pressure on retailers to provide a seamless experience. To meet this demand, businesses require a robust Warehouse Management System (WMS) that can efficiently handle returns by simplifying the entire process, from authorizing returns to processing refunds or replacements.

Furthermore, the WMS returns feature allows businesses to manage e-commerce returns from various channels to multiple warehouses using a single system. For instance, if an order was processed from warehouse A, the return can be directed to warehouse B, which may be closer to the customer. This functionality simplifies the returns process, and minimizes potential errors and delays associated with handling returns across multiple platforms.

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Factors to Consider When Selecting the Right Warehouse Management System for Your Business

Now that you know why a WMS is important, here are the key factors to consider when selecting the right WMS for your business:–

Centralization of Multi Warehouse Inventory Management
Real-Time and Customizable Reporting
Third-party Integrations
Virtual Multiple Warehouse Inventory Management

1. Centralization of Multi Warehouse Inventory Management

As customer demands continue to grow, businesses are exploring new ways to manage their operations in multiple warehouses simultaneously while maintaining a centralized view. Therefore, first and foremost, the WMS of your choice should centralize key tasks, such as automated stock level management, location allocation across multiple warehouse sites, real-time e-commerce inventory management, automated purchase management, shipment routing and tracking, and order management from multiple points of sale.

2. Real-Time and Customizable Reporting

Next, you need real-time information access about what’s going on in your warehouse to manage stock inventory effectively. You require a bird’s eye view of which stock units are in demand and which haven’t moved at all, geographic market-specific demand variations, and seasonal trends.

You should also be able to generate customizable reports to analyze inventory status and strategize warehouse utilization. An online multi-warehouse management system can enable you to achieve this, as the information remains remotely accessible and available in real-time.

3. Third-party Integrations

By integrating the WMS with other third-party applications, businesses can streamline various processes such as logistics, marketplace management, accounting, sales and CRM, and more.

A smart WMS should provide sophisticated tech stack solutions that seamlessly integrate with other software systems used in your business. Not only can this save time and resources, but it can also provide a more complete picture of your business operations.

4. Virtual Multiple Warehouse Inventory Management

Unutilized or under-utilized warehouse space increases your inventory carrying cost and burdens your value chain, even when you have a network of multiple warehouses to match market demand. To address this issue, you need a multi-warehouse management system that gives you a complete virtual view of warehouse space.

A virtual multiple warehouse management system allows you to manage your inventory across multiple warehouses as if they were one. You can view all your warehouses’ inventory levels in real-time and manage them from a centralized location.

Future-Proof your Business with Advance Warehouse Management System (WMS)!

An effective warehouse management system (WMS) enables you to perform plenty of tasks with utmost efficiency and accuracy. It also helps you ensure that your business is equipped to handle the challenges of tomorrow.

From optimizing inventory management to enhancing order fulfillment, a WMS can help you achieve operational excellence and drive growth. So what are you waiting for? Go ahead and deploy a robust WMS technology in your system today and reap the benefits of automation.

See how to improve Inventory Visibility & accuracy with E-commerce focused Warehouse Management System –

Frequently Asked Questions (FAQs) on Warehouse Management System (WMS)

Q1. How long does it take to implement a Warehouse Management System?

Ans: The time it takes to implement a Warehouse Management System can vary depending on the size and complexity of the warehouse, as well as the specific needs of the business. However, implementation can typically take six to eight months.

Q2. Can a Warehouse Management System be customized to meet specific business needs?

Ans: Yes, many Warehouse Management Systems can be customized to meet the specific needs of a business. This can include adding new features, modifying existing workflows, or integrating with other software.

Q3. What types of businesses can benefit from using a Warehouse Management System?

Ans: Any business that has a warehouse or distribution center can benefit from using a Warehouse Management System. This includes businesses in industries such as retail, manufacturing, wholesale distribution, and logistics.

Q4. What is the function of WMS?

Ans. The Warehouse Management System has a critical function as it facilitates the operations in your warehouse. From the space management of the stocks to inventory management, the process of fulfilling orders is simplified.

Q5. What are the different types of WMS?

Ans. The different types of warehouses are standalone WMS, ERP-integrated, and Cloud-based warehouse management systems. All of them vary based on the needs of the brand and their business requirements.

Q6. What is the first step in Warehouse Management?

Ans. The first step in the warehouse management is the process of receiving goods. It involves checking the quality and quantity of the inventory and ensuring the accuracy. Once done, the inventory is sorted for storage, and GRN is created.

Q7. What is the basic Warehouse procedure?

Ans. The primary warehouse procedure includes receiving, putaway, storage, picking and packing, shipping and quality control, and reporting.

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| Barcode Scanning Batch Management Bundle Management Cycle Count Inventory Control Multi Warehouse Packing Picking Putaway Shelf Management WMS

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