What is a warehouse management system?

What is a warehouse management system (WMS), what does it do?

Warehouse Management Updated April 14th, 2023

For companies that deal with production, inventory and a staff-full of employees with diverse duties and skillsets, a comprehensive warehouse management system (WMS) serves as the foundation for efficient operations. These days, there is a myriad of options to choose from that can be custom-fit to streamline operations of any business, no matter what sector they may occupy.

How a warehouse management system works

For many companies, warehouse management systems are implemented to complement current warehouse procedures and protocols. Depending on the weak areas that you’re looking to shore up, warehouse management software can be tailor-made to fit the needs of your growing business.

Here are some of the processes you can improve by leveraging a warehouse management system:

It streamlines your customer service procedures

What is a warehouse management system?

One of the most common mistakes that managers and planners make is that they often fragment communications between the warehouse and the customer service department. This move usually ends up causing distractions and wasted time as messages have to sometimes filter through several departments or parties before they reach the right person.

With a warehouse management system that includes transparent customer service-related recording capabilities, though, both the warehouse and customer service department are able to track orders, fulfillment times, shipping procedures and customer feedback through a centralized system in real-time. Naturally, real-time, integrated communication immediately cuts down on confusion, human-error and general time-sucks that occur when it comes to meeting customers’ needs.

It provides accurate inventory counts and tracking

Have you ever participated in a warehouse audit that yielded disastrous count discrepancies? If so, then you know how important it is to keep an up-to-date, consistent register — all day, every day. Luckily, the latest warehouse management systems are built with accuracy in mind and often include features that allow workers to maintain the count frequency with the press of a key or a scan of a barcode reader.

This system works well for processes such as order fulfillment, picking and receiving, as well. The warehouse management system tracks goods and inventory as they move around your warehouse, starting at the loading docks if needed. Taking advantage of this technology allows all workers to keep track of every component, whether it is being received, compiled or shipped.

It eliminates the need for regular inventory counts

Part of running an efficient warehouse means conducting regular counts to ensure that all inventory is where it needs to be and in the expected condition. Having said that, implementing a warehouse management system allows you to carry out this time-consuming task less often, without sacrificing accuracy or quality.

Depending on the size and complexity of your warehouse, you might be able to completely trade in your weekly or monthly counts for periodic cycle counts that can be cross-checked against the system. This revelation is a serious game-changer as it frees up valuable time and reduces labor costs.

Benefits of using a warehouse management system Benefits of warehouse management systems

Clearly, warehouse management systems can do a lot for a business in terms of efficiency and accuracy, but many warehouses end up reaping rewards that they might have never saw coming. Here are just a few of the warehouse management system benefits:

Generating automatic reports

Not all warehouse management systems offer this feature, but the best ones do. If your warehouse struggles with compliance, safety or tricky fulfillment protocols, then it’s best to implement a software system that generates these beneficial reports as often as needed.

Scalability to grow with your business

We all have big plans for our businesses, which means that warehouse management systems are a necessity — even if you aren’t taking advantage of every single one of its features from the start. Remember, when selecting a warehouse management system, make sure that you invest in one that will help your company thrive as your procedures shift.

Streamlining billing processes

A fitting system for warehouse management can take the place of your outdated or sluggish billing system by acting as a communication tool, as well as generating invoices with ease. Additionally, it can track values and orders, which helps to simplify accounting challenges, particularly during tax time.

How to choose the right (WMS) warehouse management system

Warehouse efficiency is a key factor in achieving peak performance and effectively managing your supply chain. While implementing warehouse technology can significantly increase employee productivity, streamline warehouse operations and improve customer satisfaction, care must be taken to select the right WMS.

Not all warehouse management systems are created equal.

Whether you’re looking to upgrade your existing WMS (to keep pace with current trends and technologies) or deploy one for the first time, your choice of WMS should be based on your unique business needs and requirements — and not industry hype. To help you choose the right WMS for your operation, let’s take a look at key factors and features to look out for.

Support for multiple picking methods

Picking is an essential part of every order fulfillment process. As such, the right WMS should support various order picking methods and provide warehouse managers with the flexibility to apply any of these methods (or a mix of them) based on product type and warehouse requirements with ease. By supporting your warehouse’s preferred picking method, a WMS increases throughput, improves picking efficiency and streamlines the order fulfillment process.

Back-office integration

Data from your warehouse operations can be used to improve other aspects of your supply chain. By deploying a WMS that integrates with other departments (such as accounting), you can ensure the automatic flow of information between your warehouse floor and the back office. This seamless data exchange provides accurate and up-to-date inventory control, eliminates transcription errors and manual interventions and streamlines processes and operations. With the right WMS, you can interface with financial and other related data and use the resulting information to inform decisions across the enterprise.

Ease of use

A well-designed WMS should be easy to use. Usability reduces the time spent on training existing employees and onboarding new ones, thus enabling warehouses to achieve ROI from their technology investments faster.

Total cost of ownership

Warehouse management systems are designed to save time, money, maximize asset utilization, reduce operational inefficiencies and ultimately improve customer satisfaction, but a high cost of ownership can diminish these gains. When looking for the right WMS, it isn’t enough to consider the upfront costs (purchase and installation).

You’ll also need to factor in running, maintenance and training costs — as well as the costs of downtime and changes to operational strategies and warehouse layout/infrastructure during installation. Deploy a WMS with a high level of responsiveness and seamless onboarding capabilities to cut down on TCO (total cost of ownership) and bring about faster ROI.

Technology platform

The best warehousing systems are built on open-source platforms that encourage interoperability and third-party integration with ERPs and other solutions. Legacy WMS usually are built using proprietary technology and face limitations when it comes to adapting to changing business needs and technological advancements. Overcoming such limitations may require expensive customizations and manual workarounds, resulting in downtime and decreased productivity.

Rising consumer expectations and increased pressure from the competition are forcing companies to reevaluate their business models and technology stance. The right WMS should be flexible enough to adapt to changing business models, satisfy operational requirements and keep pace with industry best practices and regulatory compliance requirements.

Other factors to consider include:

  • Level of technical support from the vendor
  • Automated inventory receipt and put-away
  • Compliance labeling and ASNs
  • Advanced reporting capability
  • E-commerce capability, including B2B EDI support and Web store integration
  • Ease of accessibility (browsers, mobile, etc.)
  • Real-time inventory updates
  • Scalability to accommodate future business growth
  • Complete back-office integration
  • Integration with barcoding and advanced radio-frequency technologies

How much does a warehouse management system cost?

The right warehouse management system should satisfy your business needs and requirements, improve operational efficiency and drive measurable ROI. But if the overall cost of purchase, implementation and maintenance exceeds your budget, your WMS can cut into your bottom line.

Before you start searching for the right WMS, you should weigh your business needs and ROI goals while considering the cost implications of deploying such a system. The core elements that make up the cost of a WMS system include:

  • Purchase costs
  • Licensing fees
  • Implementation costs
  • Hardware/hosting fees
  • Annual maintenance fees

Licensing fees depend on the vendor’s subscription method — either an upfront payment before installation or licensed as Software as a Service (SaaS) on a subscription basis. WMS software licensing fees are calculated based on the total number of modules required for your operation, users per site and total users across your warehouses.

Implementation costs will vary based on the:

  • Number of modules to be deployed
  • Integration of processes and material handling equipment
  • Scale and complexity of your operations
  • Technological systems in place
  • Business requirements

If you choose to deploy the WMS on-premise, you’ll be responsible for the infrastructure (hardware), server and any third-party integrations required to operate the system seamlessly. Alternatively, you’ll need to pay recurring hosting fees and ensure sufficient bandwidth for a cloud-based WMS deployment. With a SaaS-based WMS, the vendor is responsible for the infrastructure, storage and software, and you’ll pay a predictable monthly or annual fee based on the resources you actually use.

According to Software Connect, “Software costs for anything but basic WMS functionality would average between $3,000 and $4,500 per concurrent user for on-premise, with professional services being between 75% to 100% of the software costs, plus between $5,000 to $25,000 for integrations into ERP solutions.”

You can arrive at an estimated baseline cost of deploying a warehouse management system by factoring in the above elements. However, this excludes any ongoing operation and maintenance costs as well as costs for any upgrades, repairs or ongoing training of the user base.

No matter your size or budget, there is a warehouse management system out there to help your business save valuable time and money. Make the necessary comparisons with your current system, and you will see that not having the right software can be holding you and your workers back from achieving your goals.

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