What Is a WMS?
A warehouse management system optimizes warehouse storage, product distribution, a seller’s supply chain and order fulfillment. From the moment that goods arrive to the warehouse gates, the WMS optimally stows away inventory, prepping it for pick n pack on its way out.
Often a WMS integrate with a technology stack of software, to ensure end-to-end integration of operations. The goal is to silo work and streamline SOPs. A strong WMS will deliver this and more. This guide examines how warehouse management systems work.
How Does a Warehouse Management System Work?
To get started, a WMS has five important components. We list and discuss each stage below.
- Shipping & Receiving
- Inventory Management Systems
- Kitting and Pick Orders
- Warehouse Staff Management
Shipping & Receiving
The core of a warehouses operations – Shipping and Receiving. Receiving small parcels, pallets, or full containers. Alternatively, Shipping SPD, LTL or FTL as well. These build the base of a warehouse’s operations. So it’s important we get them right. It’s important that we ‘systemize’ the process of Shipping & Receiving. A WMS automates the tracking of any inbound and outbound inventory. Here are some data points a WMS captures and organizes for a warehouse manager:
- Date & Time In
- SKU ID
- SKU Quantity
- Units Per Case
- Case L x W x H
- Case Weight
- Location Stored
When scanned and stored, these can easily be plucked for Pick n’ Pack as orders arrive afterwards.
Inventory Management Systems
An inventory management system can be part of a warehouse management system. However a warehouse management system cannot be part of an inventory management system. Got it? So what is an IMS?
In short, an IMS is a system for barcoding and space tracking inventory. It allows staff to barcode and scan every touch point in the warehouse. For example, you scan products when they arrive, scan the dock they were stored in, scan the units plucked for pick n pack and scan any returns that come in that same day. Instead of manually jotting this info down, your staff can dynamically capture all of these info, without error, in real time.
Pick, Kit, & Pack Orders
The client orders it, the warehouse fulfils it. But how is the sausage made in between? Let’s say you have a parent listing of a product with variable items or color options that clients can customize. This is not a ‘one-size’ fits all fulfilment operation. In fact, your product needs to be picked from several spots, bundled into a kit, and packed into a shipping box. We need to track what units, locations, and resources are required to fulfil this. That application of a WMS allows staff to scan, scan, scan. Capture data, update records, and monitor warehouse resources.
Warehouse Staff Management
What is the biggest cost of a warehouse? Payroll. Payroll impacts bottom line costs and front end prices. The more you save here, the more value you can offer clients. As such, one central perk to a WMS is its ability to forcast labor needs. Think about it. It already collects the day’s data on shipping and receiving, lead times on pick n pack orders. It essentially monitors the time needed to complete all the days work, based on the given work that day. Consequently, a warehouse who never under or over staffs will always deliver orders on time and remain profitable with the option to lower rates if needed.
Real time, data driven reports boost productivity. Information is power in this space. By digitalizing business operations via a WMS, new insights can be draw from current SOP’s. Warehouses are able to do more with less, when they know where to apply resources. To illustrate, look at a couple ways reports can impact warehouse operations:
- Re-allocating labor
- Adjusting product prep SOP’s
- Repositioning products in storage
- Forecasting warehouse material acquisition
- Expense Reports
- Empty Bin Reports
- Employee KPI’s
Overall, these five components illustrate the basic in’s and out’s of a generic warehouse management system. They explain how it works. However, most company’s want the Why over the How, when re-inventing their SOP’s and integrating new software.
Why Use Warehouse Management Systems?
This software offers simple and apparent benefits. In summary, these benefits translate into time-savings, labor reduction, error mitigation, and better service to clients.
What Are The Benefits of a WMS?
Again, barcoding and scanning inventory into designated dock locations or bins offers dramatic benefits. From empty bin reports to expense controls here are the no-brainers that first come to mind:
1. Data-Driven Strategies
Data impacts every stage of your warehousing process. From building a staff schedule to understanding reasons for returns – data drives smart strategies. Knowing how to optimally staff and/or knowing what orders got kicked back can shine light on relationships in your business not readily apparent. For example, perhaps your team was understaffed for two weeks. As a result, wrong variances of the product were picked in haste. Data between these two separate areas of the business reveals they might be more closely linked than you think.
2. Speedy Order Fulfillment
A solid WMS reduces Time to Ship as a KPI. This starts by preparing picking lists. Staff benefit from readily printed lists from an intuitive user interface. Pickers plan and execute better. Quicker ship times equal happy clients.
3. Reduced Processing Costs
A good WMS helps management process cost per order KPI. What’s more, a WMS offers ample flexibility for generating picking batches. Whether prioritizing by the number of items contained in the order, or by sales channel, shipping method or any other means, you need the ability. A warehouse can determine what the best value fulfilment SOP is for pickers based on this KPI.
4. Error Elimination
How often has a variance report displayed X amount of inventory, but your warehouse only has Y amount? Variance reports are a barometer for the rate of error occurring on your pick n pack floor. Software that enables you to go digital by putting a barcode scanner in the hands of your pickers, will neutralize all incorrect picks. A barcode driven system will literally only allow pickers to gather the exact items needed.
Ideally a WMS is able to print all required labels or paperwork (e.g. picking lists and packing notes) in one go for a given batch. The operative phrase there – ‘in one go’. That’s to say the system streamlines the prep work, saving time and money for the warehouse. It gets pickers to picking sooner and picking quicker as well. No wasted downtime for staff.
Tips for Barcode Implementation
- Barcodes should face outwards from shelves and upwards within bins
- Place best selling items near the packing station
- Group similar items together in the warehouse
- Designate specific areas for peak season products, on sale items and best sellers
What Types Of Warehouse Management Systems
Integrated Vs. Standalone WMS
There are two industry standards for Warehouse Management System options – Integrated vs Standalone.
You can either choose a standalone product and integrate it with the rest of your back office and operational systems, or choose an integrated solution where the WMS shares the same database and workflows as your order management, inventory and accounting systems.
Let’s look at the pro’s and con’s of each below:
Standalone Warehouse Management System
This software solution focuses on functionality more than integration. High customizable for any fulfilment and storage operation. Where it might plug into some of your software stack, it’s data will need to be manually transferred to other parts of your business. But hey – if your customization opens up resources for staff, then you can afford to have them plug in info into different systems from the WMS.
Integrated Warehouse Management System
Integrated WMS software solution focuses on the big picture of tying systems together. It lacks the level of deep customization afforded in standalone systems. However, it plugs and plays with existing back office software. What’s this translate into? Overall, your WMS shares the same database as all your orders, inventory, accounting and CRM systems. This is a more popular option among warehouses.
On-Premises Vs. Cloud-Based WMS
In basic terms, an on-premises WMS is one in which you are responsible for hosting and maintaining both the hardware and software associated with your system. While this gives you complete control over things like uptime and security, it also comes with a large upfront cost because you are responsible for all of the components. You will also need to keep your WMS regularly maintained.
While very small businesses can be comfortable using on-premises WMS, managing everything yourself can be a headache.
Alternatively, cloud-based WMS systems are typically charged on a subscription basis, but they are hosted on a remote server. Things like bug fixes and software updates are handled by the vendor, and you typically get a guaranteed level of service uptime when you sign up.
Let’s look at the other reasons why a cloud-based system works better:
1. Remote Access
By ensuring you’re working in the cloud, your sales channels, inventory reports, and financials will be updated with every shipment, incoming delivery, manual inventory adjustment, or warehouse transfer. Not to mention having greater ease connecting with external systems, like those of your suppliers or distributors.
2. Data Domination
Quickly identify issues with high risk or high value goods, report on the productivity of your warehouse team and what their time is spent most on.
Cloud-based connectivity, combined with real-time updates mean you can make informed, data-driven business decisions at any time.
3. Less Expensive
Reduced infrastructure, hardware, software and licensing costs mean that cloud-based systems offer a lower total cost of ownership and eliminate the need for large capital outlays compared with on premise solutions.
4. In Pursuit of Perfection
Cloud WMS users receive regular and routine updates as part of a continuous improvement model, and can avoid the dreaded experience on premise solutions bring with their large version upgrades.
This ensures you always benefit from the latest features, with no need to work with developers to help you update your system.
5. Business Integrations
With your warehouse operating from a cloud-based solution, you can ensure your entire business integrates its WMS
For example, think about inventory updates, which should update both your accounting and warehouse records.