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What Is A Warehouse Management System?

Written by:

Nat Libby

Related topics:

Inventory Management
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Paying close attention to your warehouse management practices can pay big dividends for your business. Most of the time, smooth and streamlined backend operations set the foundations for a small scale retail brand to grow into a highly successful and scalable business.

As such, investing in a warehouse management system brings many great opportunities.

Not only does it enable you to find new and better ways to lower your costs and save valuable hours of time, but it also enhances the customer experience and in turn helps you to achieve greater profitability for your business.

But what exactly is a warehouse management system? How does it work? And how can such a solution bring about the above benefits for your business?

In this guide, we take a close look at warehouse management systems, the different types available to you and the many advantages that the software can have for your business.

What is a warehouse management system?

A warehouse management system (WMS) is a piece of software that helps you to monitor and manage the day-to-day operations in your warehouse.

In other words, the software enables you to achieve complete control over your processes – from the moment goods or materials enter your warehouse until the minute they move out.

Warehouse management systems exist to maximize your operational efficiency and streamline your processes, revolving primarily around receiving and shipping orders.

Increasingly, the management of resources – such as labor force, storage technology and conveyor technology – is seen as an integral part of effective warehouse management.

In contrast, poorly run warehouses can lead to a host of problems, all of which will result in reduced profitability. Such problems include disjointed teams, processes becoming redundant and restricted layouts that end up undercutting productivity.

Sometimes you may see ‘warehouse management’ and ‘stock control’ being used interchangeably; however, the two terms are actually quite different.

Stock control (or inventory control) aims to maximize profit through maintaining optimal inventory levels, whereas warehouse management focuses on the efficiency and effectiveness of your operations.

Another way to look at this is that stock control tells you how much stock you have and when to reorder more, while warehouse management tells you which bins your items are in and the order in which they need to be picked and packed.

Ultimately, a modern warehouse management system will provide you with full visibility into your inventory at any time and location, whether in a facility or in transit.

Such a solution can also manage supply chain operations from manufacturer or wholesaler to the warehouse, and then to a retailer or distribution center. The software is often used in tandem with an inventory management system or transportation management system.

Types of warehouse management systems.

Warehouse management systems come in a variety of shapes and sizes, which is usually reflective of the size and the nature of the business in question. While these vary in terms of complexity, there are three main types of solutions available:

  • Standalone warehouse management system
  • Cloud-based warehouse management system
  • ERP modules

Standalone WMS.

As you may be able to guess, a standalone WMS is your typical on-premises system which is deployed on the native hardware of your business. Although often the most affordable, standalone systems tend to lack many of the benefits from an integrated WMS solution.

Generally speaking, a standalone WMS is sold without any bells and whistles. Instead, it includes only the most effective and essential features of warehouse management.

Cloud-based WMS.

A cloud-based WMS is a web-based system that brings about better flexibility, scalability, disaster recovery and security for your business. Linnworks falls into this category.

As this system is based in the cloud, it is known for having reduced technical maintenance due to being hosted on a separate or private server. This leads into higher data security protocols, which is especially key for those of you managing high-value inventory.

That’s not all though.

Providing that you’re using vendor-managed software, customizations can be easily made to the software when the WMS is in the cloud – though the extent of which will greatly depend on your chosen software vendor.

With that being said, something worth keeping in mind is that customizing your software is essential, as it allows your business to grow without altering the flow of existing processes.

Cloud-based WMS is best suited for businesses with multi-location needs (i.e. international operations) as they offer a lot in terms of flexibility, complexity and scalability.

ERP modules.

Some ERP companies offer a warehouse management system that is built into their core solution. It provides embedded EDI, accounting, sales, MRP and shipping management.

Benefits of warehouse management systems.

Sooner or later, investing in a warehouse management system becomes essential in order to ensure the continued growth and longevity of your business. After all, fast and accurate order fulfillment helps to foster customer loyalty and drives repeat purchasing.

There are a multitude of benefits associated with warehouse management systems:

Faster order fulfillment.

As we touched on a moment ago, implementing a warehouse management system can make your order fulfillment process much faster and more efficient.

In fact, a WMS that works alongside barcode scanners brings much greater productivity to your operations, in turn minimizing your order fulfillment latency and processing times.

And with your workforce likely making up one of your biggest operational costs, how much do you think you would save if you improved productivity by just 5% or even 10%?

Improved order accuracy.

Order picking errors can be costly at any stage of the process.

If the order mistake spotted before dispatch, then there are the labor costs of repicking to consider, but if caught after, then you have an unhappy customer on your hands – not to mention that it’s expensive to process the return.

A warehouse management system improves the organisation of your warehouse and helps maximize the efficiency of your employees. As such, less errors are likely to be made and the risk of human error is minimized.

Combined with a barcoded inventory management system, a WMS reduces the time spent on admin, which again minimizes errors. The barcode scanners alert staff when the wrong item is picked and communicate inventory changes across your sales channels in real-time.

Not only will this help to eliminate errors and reduce business costs, but you’ll also increase the likelihood of highly satisfied customers, positive reviews and repeat purchases thanks to the excellent customer experience you’re creating.

Complete visibility into your inventory.

Warehouse management software can provide you with total visibility into your inventory at any time and any location, whether it’s in a facility or in transit. Such a system tracks goods and inventory as they move around your warehouses.

You can also say goodbye to regular inventory counts.

With a WMS in place, your team can maintain count frequency at the click of a button and carry out this time-consuming task less often, without sacrificing accuracy or quality.

Better customer experience.

A warehouse management system eliminates the need for paperwork. That means pick tickets, move tickets, packing lists and reports can all be maintained electronically.

As a result, this enables both the warehouse and customer service departments the ability to track orders, fulfillment times, shipping procedures and previous customer feedback through the exact same system and in real-time.

Customer orders and product availability can then be more accurately determined, cutting down on confusion and reducing the risk of customer complaints, all while strengthening the overall customer experience.

More informed data-driven decisions.

Your warehouse management system will be connected to your sales channels and inventory levels, operating and updating in real-time to reflect changes to stock availability.

As such, you’ll be able to identify any issues with high risk or high value items. This can be especially useful in the instances of warehouse theft or if your products seem to be damaged in transit on a regular basis.

What’s more, reporting on the productivity of your warehouse team is much easier with an automated system in place. You’ll know where your employees spend most of their time and therefore the processes that need to be improved.

Reduced operational costs.

One of the biggest selling points of a WMS is that it can save you countless hours of time. And if it takes less time to pick and pack orders or receive deliveries, then it’s inevitable that your operational costs will also be reduced.

You may want to calculate your current processing cost per order prior to implementation, and then you’ll see just how much return on investment you’ll receive with a WMS in place.

Continuous improvement.

An advanced and scalable cloud-based warehouse management system will provide you with regular software updates in order to continually reflect industry best practices.

As such, it becomes incredibly easy to stay on top of the latest developments and enables you to continually improve your processes based on these very innovations.

Related:Find out how lean inventory management also fosters continuous improvement.

Enhanced security and safety.

Most modern warehouse management systems require employees to use individual user log-ins. This results in an audit trail that connects specific workers to specific transactions – improving accountability, reducing risk of theft and other forms of inventory shrinkage.

These user accounts can also be assigned access levels to prevent unauthorized access to financial reports and analysis. Instead, an employee will only see as much information as needed in order to complete his or her daily tasks.

Improved relationships with suppliers.

The more efficiently you run your warehouse, the higher customer satisfaction tends to be. After all, there are fewer order inaccuracies and delivery times are greatly reduced.

But this efficiency also has internal business benefits too.

With a WMS in place, you can strengthen your relationships with suppliers. Thanks to high visibility into your inventory and the ability to schedule the receipt of shipments, supply and demand chains can be much better optimized.

One clear benefit for your suppliers is that the time spent waiting at docks and loading bays is likely to reduce. In turn, this means your partners can move onto their next task or delivery more efficiently – increasing their productivity.

Better employee morale.

When you improve the flow of your operations, employees feel better about their daily tasks and working environment. Not only does productivity and profitability improve, but there’s also less stress in the workplace which can improve employee wellbeing.

Although such a solution won’t fix every problem in your business, it does create a more organised and relaxed working environment. This in turn can lead to a safer and more diligent workforce, with better decision-making skills thanks to the time saved.

Smooth operations set the foundations for scalable success.

Ultimately, warehouse management systems exist because there is a clear business need.

Smooth, streamlined operations enable you to maximize your efficiency, which in turn enhances the overall profitability of your business.

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