How A Warehouse Management System Works

When you think of warehouse management systems, what comes to mind? Is it a place where people store boxes full of stuff? Or maybe a place where they store boxes full of stuff that needs to be shipped somewhere?

In today’s modern economy, businesses must adapt to survive. One such adaptation is the rise of eCommerce. As consumers become increasingly comfortable buying goods and services online, companies are forced to find new software solutions to meet customer demand.

One way for them to compete in the market is by using technology to their advantage. This includes adopting an efficient warehouse management system (WMS).

A WMS can help your business streamline operations, increase efficiency, reduce human error, and lower costs. 

What is a Warehouse Management System (WMS) and How Does it Work?

A warehouse management system (WMS) is software designed to help manage inventory levels and order fulfillment reducing human error. WMS solutions typically include barcode scanning, RFID tagging, automated picking, shipping, and reporting.

With the increasing demand for products and services, businesses must adapt to stay competitive. eCommerce is growing rapidly, and it continues to grow every year. According to Statista, global eCommerce sales reached $4 trillion in 2017, up from $3.5 trillion in 2016.

WMS solutions vary widely depending on the industry. Some focus on small businesses and manual processes, while others cater to large corporations and automation.

Many warehouses employ a combination of manual processes and automation, resulting in a hybrid solution.

Where WMS Fits in the Supply Chain

A critical component of supply chain management happens within the four walls of the warehouses. Inventory and labor are often the largest investments of a business. Accurate tracking within the enterprise resource planning (ERP) and warehouse management system (WMS) is critical for success.

Warehouse management systems are software tools designed to help warehouse operations and distribution centers. They automate processes so that employees can focus on higher-level tasks. These tasks include managing inventory, shipping orders, receiving shipments, and billing customers.

A warehouse management system helps reduce costs by automating repetitive tasks, allowing workers to focus more on higher-level tasks. By reducing the number of errors made during manual processing, WMS can save money and improve efficiency.

A warehouse management system (WMS) benefits are well documented: improved accuracy, reduced labor costs, increased productivity, and better customer service. But what if you’re already using an ERP solution? What if your company has multiple locations with different needs? How do you know which WMS is right for your business?

Types of Warehouse Management: On-Premise vs Cloud

A warehouse management system (WMS) is software designed to help manage inventory and shipments within a company’s distribution center. There are different types of WMS available, each with its own set of features. Some are cloud-based, and others are on-premise.

On-premise systems are installed locally on a user’s computer. They tend to cost more upfront but provide better performance and customization options.

Cloud-based systems are typically hosted by third-party vendors who offer a variety of services ranging from hardware hosting to data storage. They’re often cheaper than traditional on-premise solutions because they require less upfront capital expense. However, cloud-based systems may lack certain functionality compared to their on-premise counterparts.

Essential Warehouse Management Processes

The essential warehouse management processes are the core activities that support all other warehousing operations. The purpose of these processes is to ensure that your inventory and materials flow smoothly through your warehouse, from receipt to delivery.

Picking & Shipping

As orders are generated, a warehouse management solution will decide the best way to allocate the current available inventory to each line item with the exact location to pick from.  Once the inventory is locked to order and line, the work is created for the pickers. Some options would be:

  • Order Picking: Picking a single order at a time. Order picking is a basic fulfillment process. 
  • Wave Picking: Combining orders to pick multiple orders in a single pass through the pick path. 
  • Batch Picking: Separating the pick and packing process to improve supply chain operations efficiency. Picking generally happens in the warehouse, packing happens at the loading dock.
  • Voice Picking: Using a voice interface to the WMS to free a picker’s hands to increase safety instead of paper or barcode/RFID scanning.
  • Pick to Light: A pick wall will have a lit button at each location. The picker will press the lit button to confirm each pick.
  • Goods to Person: A robot that retrieves a rack and brings it to a picker to pull the product.
  • Collaborative Robotics:  A robot with a touchscreen that follows a picker and directs through the picking process.

Once the product is picked and packed a packing slip is added prior to shipping. Orders may dictate the shipping method, or rate against various shipping carriers or fulfillment services to find the optimal cost and timing.

Receiving Goods and Raw Materials

Some warehouse management systems may include yard management to schedule and plan trailers as they come to the dock doors of the warehouse. Some may include tools to calculate inventory forecasting or demand forecasting to ensure just-in-time inventory.

Receiving is usually one of the most straightforward processes in a warehouse, but arguably one of the most crucial. As the inventory is entered into the system, accuracy ensures success in every transaction following. 

  • Non-PO Receiving: Receiving product without a specific pre-defined order.
  • PO Receiving: Receiving product against an existing purchase order.
  • ASN Receiving: Receiving against a known shipment from the vendor that could contain multiple partial lines across multiple partial purchase orders

The internal workflows should be considered as well as how the inventory should post to the ERP and be realized financially. 

Inventory Management Systems

An inventory management software helps businesses track what stock is available and where it is located. Inventory tracking allows companies to better plan future orders, so they can avoid running low on certain items and optimize warehouse space.

A warehouse management system (WMS) is software designed specifically for warehouses. WMS systems help companies manage inventory by tracking products from order to delivery. They do so by keeping track of what items are where, when they were ordered, how much stock each item requires, and whether any items are sold out.

Most WMS solutions include features such as barcode scanning, RFID tagging, automated storage and retrieval units, and automatic pallet racking. These features allow businesses to keep track of everything from raw materials to finished goods.

Kitting and Work Order Production

Most warehouses will perform a number of value-added services. This could be as simple as breaking down bulk items into more consumer-friendly sizes, or as complex as leveraging a Manufacturing Resource Planning (MRP) to combine raw materials, machine time, and labor into new items.

White labeling gives a manufacturer or distributor the ability to sell products under multiple brands. Each brand may be a separate company driving demand to a central intellectual property holder to send to customers. 

Kitting and bundling are becoming necessary processes in eCommerce businesses. The ability to sell multiples of a product or bundle multiple products together for a discounted price is a core mechanism to increase the value of each sale. 

Work Orders direct warehouse employees to consume raw materials that create a stocked finished good, and post the decrements and increments to the ERP as a backflush journal entry. 

Warehouse Labor Management

WMS systems let you schedule employees’ shifts and assign tasks to specific workers. This helps ensure that your company runs smoothly during peak times and reduces overtime costs.

Each warehouse management process can be broken down into multiple transactions. Each transaction should have a User ID, start time, and end time. These can be measured against an engineered standard to determine efficiency. 

Real-time visibility to the workforce gives advanced warehouse systems a competitive edge in industries where margins are critical.

Final Thoughts

eCommerce has been snowballing over the past decade. According to Statista, global sales via e-commerce increased by nearly 50% between 2010 and 2017. This trend shows no signs of slowing down.

As the world becomes more connected, people expect their shopping experiences to be seamless. They want to shop anywhere, anytime, and on any device.

That’s where warehouse management systems (WMS) come in. These programs allow you to automate processes, streamline inventory control, and improve efficiency. The Importance Of Having An Effective Warehouse Management System (WMS)

As we enter into the 21st century, technology has changed the face of commerce. Businesses now rely heavily on information systems to keep their operations running smoothly. These systems include warehouse management software (WMS). WMS helps organizations manage inventory, track shipments, and automate processes.

Many small businesses lack the resources to maintain these systems effectively. This means that they often struggle to stay competitive. Fortunately, there are solutions available to help them overcome these challenges.

For instance, cloud-based WMS allows users to access their data remotely. This makes it easier to collaborate across teams and locations. Cloud-based WMS also provides greater flexibility than traditional desktop applications.

Cloud-based WMS also reduces costs by eliminating the need for hardware upgrades. Plus, it eliminates the risk of installing outdated software on employees’ computers.

Another benefit of cloud-based WMS is its ability to integrate with other applications. This enables users to connect their ERP system to their WMS. This gives them access to critical data without having to install additional software.

Cloud-based systems also allow users to customize their interface based on their needs. They can add features that improve efficiency and reduce errors.

About the Author

The world changed for me about two months into my M.B.A. program. While I have always risen quickly to management roles, learning how to truly be a part of a business and its many systems began to really excite me. While I have loved taking out-dated processes and digitizing them for cost savings, I am excited to take my project mangement experience to greater heights and really contribute to a company's growth as the head of a team excited to drive change. -Justin Velthoen

Justin Velthoen

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