What is a Warehouse Management System?
A warehouse management system is a software application that coordinates inventory and warehousing operations throughout distribution centers. Often shortened to WMS, these systems offer various functionalities for greater control over typical warehouse operations.
How a Warehouse Management System Works
Here’s what a WMS does with one shipment and one order, usually through a handheld scanner:
- Receiving. A pallet arrives at your dock. Someone scans it against the purchase order, and a label prints with what it is and when it expires.
- Put-away. Your team scans the item, then the shelf. Depending on the system, the WMS either tells them which shelf to use or records exactly where it went.
- Picking. When an order comes in, the scanner sends a picker straight to that shelf. If you track expiration dates, it has them grab the oldest stock first.
- Counting. If a shelf looks off, someone scans it and enters what’s really there. The record updates, and the correction flows through to your books, so you’re not shutting the whole warehouse down once a year to count everything.
Features and Benefits
| Feature | Description | Benefit |
|---|---|---|
| Inventory Tracking | Enables real-time tracking of stock levels and locations within warehouses using unique identifiers like SKUs, barcodes, or RFID tags. | Helps prevent stockouts and overstocking, maintaining optimal inventory levels. |
| Order Management | Automates the order processing workflow, from order receipt to fulfillment and shipment. | Improves delivery times and customer satisfaction, as orders are fulfilled accurately. |
| Picking Optimization | Leverages various picking methods, such as batch, wave, or zone picking, to efficiently collect items for orders. | Boosts picking efficiency, reduces labor costs, and shortens order cycle times. |
| Barcode and RFID Scanning | Supports RFID and barcode scanning for more accurate tracking of inventory during receiving, picking, and shipping. | Results in more accurate inventory management, reducing human error and improving operational efficiency. |
| Shipping Management | Integrates with shipping carriers to manage activities like label generation, tracking, and cost calculations. | Streamlines shipping processes, which can reduce costs and improve delivery times. |
| Slotting Optimization | Analyzes inventory movement and product demand to determine the best placement of items within the warehouse. | Optimizes product placement and reduces travel time for pickers, enhancing efficiency and speeding up order fulfillment. |
| Return Management | Facilitates the processing of returned items, including logging returns, inspecting items, and restocking as needed. | Streamlines return processes to improve customer satisfaction by enabling quick handling of returns and minimizing disruption to inventory. |
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From Spreadsheet to WMS: The Four Steps
- Spreadsheet. Fine for one room and a couple of people. It breaks when someone grabs stock and forgets to log it, and when the sheet says “warehouse” instead of the rack number.
- Inventory app. Tools like Fishbowl or Zoho Inventory add barcodes and reorder points, and some even track which shelf or bin something is in. But mostly, they record what your team already did. This step breaks when sales and accounting live in different tools, and someone ends up retyping orders.
- ERP. An ERP runs your orders, accounting, and inventory in one place. ERPs range from basic stock tracking all the way up to full warehouse management. NetSuite sells a complete WMS as an add-on, and Microsoft Business Central can be set up to direct put-away and picking. So depending on your ERP, you might already own most of a WMS. If you’re a manufacturer shipping your own products, this may be where you stay.
- A system that directs the work. You get here when products, orders, locations, or clients pile up and your team needs the system to tell them what to do. That might be your ERP’s warehouse add-on or a standalone WMS like ShipHero or Deposco. Distributors tend to get here sooner, and so do third-party logistics (3PL) providers, since they manage inventory for many clients at once.
| Inventory app | ERP | WMS (ERP add-on or standalone) | |
|---|---|---|---|
| Main job | Records stock levels, reorder points, and what your team did | Runs orders, accounting, and inventory in one place | Tells your team what to do next |
| Tracks shelf or bin location | Some do (Zoho Inventory has bin locations on higher plans) | Varies by ERP | Yes |
| Directs put-away and picking | Generally no | Some can be set up to (Business Central); others need an add-on (NetSuite WMS) | Yes |
For a deeper look at the first and last columns, see inventory management vs. warehouse management.
Types of Warehouse Management Systems
WMS products differ in two separate ways: how much of your operation they cover, and where they run.
By scope:
- ERP warehouse modules and add-ons. Warehouse tools built into or sold alongside an ERP, such as NetSuite WMS. The appeal is one system to run your books and your shelves, with no second system to integrate.
- Standalone WMS. Dedicated warehouse software that connects to your ERP, accounting system, or online store. Examples include ShipHero for Shopify brands, Deposco for mid-market operations, and Extensiv 3PL Warehouse Manager for 3PLs.
- Enterprise WMS. Large platforms built for high-volume, multi-site operations, often as part of a wider supply chain suite. Examples include Manhattan Active WMS, Blue Yonder, Infios, and Infor WMS. Expect a partner-led rollout measured in months, not weeks.
By deployment:
- Cloud WMS. Runs on the vendor’s servers and is accessed through a browser or app, usually on a subscription.
- On-premise WMS. Installed on your own servers and maintained by your IT team, usually with a larger upfront license.
Frequently Asked Questions
What's the difference between a WMS and an ERP?
An ERP runs your orders, accounting, and inventory in one place. A WMS manages operations inside the warehouse and tells your team where to put things and what to pick next.
The line between them depends on the ERP: some only track stock levels, while others include or sell full warehouse tools. NetSuite sells a complete WMS as an add-on, and Microsoft Business Central can be set up to direct put-away and picking.
What does a WMS do in the supply chain?
How does a WMS differ from a WES or WCS?
How do warehouse management systems optimize operations?
The first way WMS optimizes warehouse operations is through organizing processes into a centrally controlled system. For instance, digitizing inventory records by scanning barcodes can reduce the amount of paperwork your warehouse would otherwise need to process with every inbound shipment and outgoing delivery.
Additionally, warehouse management organizes and optimizes storage space. An analysis of the existing layout can reveal areas for improvement, such as pairing frequently purchased products together or placing items from the same product line in specific zones for easier retrieval. Pickers can then check the computer-based WMS to determine where any piece of merchandise is located throughout the warehouse in real time, all without having to waste time physically checking storage units themselves.
How does warehouse management improve order picking?
Order picking refers to the selection of merchandise selected from storage to fulfill specific purchase orders. A well-constructed warehouse management system can use multiple picking and fulfillment methods to optimize product distribution. Primary methods include:
- Batch picking
- Cluster picking
- Discrete order picking
- Wave picking
- Zone picking
After using a WMS to organize a warehouse’s layout, order picking can be streamlined as well through more efficient picking paths. Changing up or combining picking methods, such as discrete or batch picking, can further improve operational efficiency. All of these factors make a major difference when it comes to customer satisfaction, as more efficient picking means faster fulfillment and deliveries. There is also warehouse order picking software to help optimize order selection.
How does WMS improve employee productivity and satisfaction?
How does warehouse management differ from control and execution systems?
How is a WMS different from inventory management systems?
As described, warehouse management systems provide an overview of all warehouse operations, including the inventory stored within. Inventory management or control software tracks all information about the items your company builds, buys, stores, transports, or sells, regardless of whether they pass through a warehouse or distribution center. The WMS is more about coordinating logistics from inbound and outbound transportation, employee scheduling, and measuring performance analytics.
Additionally, inventory management in a warehouse setting helps differentiate between product batches. Merchandise can be tracked from pallets down to individual units. This advanced inventory control allows warehouse managers to break up larger units into smaller packs to fulfill individual orders as needed.
How do warehouse management systems work with third-party logistics?
Many warehouses have to work with third-parties at various points along the supply chain. There are integrated management systems for third party warehouses (3PL warehouses) that are not directly controlled by your company but impact your supply chain. For example, a third-party manufacturer may not know a warehouse is at capacity, thus causing overstock with their next delivery. Coordinating 3PL with your WMS can prevent these issues before they happen.
Further reading: Discover the best 3PL software.
