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What’s the Difference Between a WMS and a TMS?

By Ruthie Bowles logiwa-blog-author | Tags: Warehouse Management 3PL

Successful 3PL businesses rely on a variety of systems to ensure smooth operations. Two important systems are the warehouse management system (WMS) and the transportation management system (TMS).

A good WMS and TMS helps 3PLs achieve their main objectives: Getting the right products to the right customers at the right time and at the lowest possible cost. 

While there are differences between the two, the WMS and TMS both support specific parts of that objective. 

The WMS keeps costs low by giving warehouse operators full visibility over the warehouse’s inventory. It also optimizes the use of people and space through processes like wave picking and cross docking. 

The TMS also helps keep costs low. It does this by helping 3PLs and fulfillment managers quickly select the cheapest route for timely delivery of a product. It also supports other goals like load optimization and carrier selection. 

Together, these two systems generate value that reverberates across the entire supply chain, ensuring satisfied customers and recurrent revenue while keeping operational costs low.

If you’re a 3PL operator or work exclusively in the warehouse business, you may have both, one, or none of these systems, depending on the size of your business. 

If you have none, you’re likely looking for an overview of what these systems provide. 

If you have one, you probably want to know why the other is worth investing in. 

And if you have both, you may be interested in learning how properly integrating these systems can enhance your operational success. 

If any of these scenarios apply to you, this overview will provide the guidance you need. 

What Are the Fundamental Features of a Warehouse Management System?

Warehouse management systems (WMS) are essential tools for running a warehouse business. When you’re running a small store or an e-commerce brand out of your basement, manual methods like notebooks and spreadsheets can work. But, once you get to the warehouse level, you need WMS software to profitably scale your business. 

Order Routing

As your warehouse business grows, automated processes are the difference between being overwhelmed by and being excited by your success. 

With automated order routing, you can set specific rules that determine how an incoming order is processed by your warehouse or larger 3PL operation. You can create custom workflows that automatically consider multiple factors, including:

  • Delivery location
  • Order value
  • Sales channel (e.g., your company website or a third-party marketplace)
  • Current inventory levels 
  • Location of your network of warehouses

Let’s use a simple example. Imagine you have two warehouses on either side of the country: one in Pennsylvania and another in Oregon. An order comes in from your e-commerce website for a customer in Idaho. Your system would automatically route that order to the warehouse in Oregon so it can be processed without manual intervention. 

This may sound like an overly simple example, but it’s worth understanding at the basic level because more complex order routing rules enable more exciting operational possibilities. 

For example, let’s say your business owns two warehouses located in the same city. For the most part, the destination address won’t have a huge impact on which warehouse fulfills an order. On the other hand, the inventory levels of the warehouses will. 

If you want to keep inventory levels balanced between the warehouses, you could set rules to automatically route an order to the warehouse with more of the product. Similarly, if you only store higher-value items in one warehouse, you can set rules that automatically route them to the right warehouse and add them to the day’s pick list. 

Even if you’re only operating one warehouse for now, it’s worth finding a WMS with a sophisticated order routing functionality. 

A Real-Time Inventory Management System

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Every warehouse operator knows that inventory is the lifeblood of their business. A leak or blockage can significantly damage the viability of the company. Consequently, warehouse managers need access to tools that give them real-time visibility over their warehouses. 

An inventory management system can deliver a real-time snapshot by automatically syncing data across multiple warehouses and sales channels like brick-and-mortar points-of-sale (POS) systems and e-commerce websites. It can also receive data in real time from barcode scanners or RFID systems. 

Rule-based inventory replenishment is another important functionality. Good warehouse operators rely on data, not gut feelings, to set reorder points and safety stock levels. Once you calculate these figures, you can set rules for when your inventory management system automatically triggers an order to your supplier. In other words, you can automate the process of keeping your stock replenished, ensuring your inventory never runs dry. 

Support for Wave Picking and Cross-Docking

As your warehouse grows, your warehouse processes must evolve. Two of the most important and labor-intensive processes within a warehouse are putaway and picking. A poor putaway process means items aren’t placed on the shelf fast enough, delaying their availability to customers. Plus, when products aren’t put away in a timely manner, there’s a higher risk of theft, damage, spoilage, or loss. 

The picking process brings similar risks. If the picking process isn’t optimized, warehouses can fail to meet lucrative service levels like two-day or next-day delivery. As a result, they undermine customer trust and lose out on future sales opportunities. 

As warehouses grow and managers look to optimize their processes, two methods are becoming increasingly popular: wave picking and cross-docking. 

With wave picking, picks are completed in scheduled batches. Rather than managing incoming orders in a linear fashion, orders are sorted into pick lists based on their delivery dates and the schedule of outbound shipments. This ensures that if there’s something that needs to be on the last truck of the day, it’s picked earlier in the day before lower priority items. Of course, creating these pick lists manually would be highly inefficient. Sophisticated WMS software can gather the necessary information and even create the pick lists for you. 

Cross-docking supports both the putaway and picking processes - by essentially eliminating both. Rather than putting items away, workers transfer products from inbound trucks directly to outbound trucks. This is especially useful for companies managing fast-moving items that leave the warehouse frequently. 

A WMS is integral to a successful cross-docking operation. It determines the minimum number of dock doors needed to facilitate the day’s exchanges; schedules the appropriate number of workers based on the amount of incoming goods; makes real-time adjustments to changes like late container arrivals; and more. 

BONUS: Before you read further, download our Warehouse Management Software Whitepaper to see how Logiwa uses real-time data to help you get up to 100% inventory accuracy and execute advanced fulfillment strategies like wave planning.

What Are the Fundamental Features of a Transportation Management System?

A transportation management system (TMS) enables warehouses and 3PL operators to optimize the shipment of goods. When shipping goods to customers, there are countless routes to take and several carriers to choose from. A savvy shipper can get their products to customers on time at a low cost by picking the right carrier and the right route. 

Needless to say, shipping is a time-intensive activity - a warehouse manager or 3PL operator doesn’t have all day to find the best route. A TMS optimizes shipping logistics through a number of powerful features.

Optimization Engine

Arguably, this is the most important feature of your TMS. A powerful optimization engine can take various delivery limitations into consideration to produce helpful recommendations. For instance, you may need to find the most cost-effective route and combination of carriers to deliver a product to a neighboring state. 

This optimization engine could also address other elements of shipping by determining the best way to load products and stack pallets. 

Track and Trace

The track and trace capability lets you know in real-time where your products are and where they’ve been. Not only does track and trace give you visibility over all of your shipments, it also gives you the information you need to communicate with your customers. 

Plus, if you have a self-service portal, customers can log in and see the status of their shipment in real time. This limits the number of calls your call center has to handle, allowing your customer service representatives to focus on solving more complex issues.

If you’re working in a 3PL environment, track and trace delivers even more benefit. It allows you to immediately respond to shipping delays and collaborate with other partners across the supply chain to limit the impact of issues. Furthermore, recipients of high-value shipments can make arrangements to personally receive products if they know exactly when they’ll be arriving. 

Carrier Rate / Contract Management System 

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High-volume shippers, like warehouses and 3PLs, have considerable bargaining power with carriers thanks to the amount of business they provide. They can use this to negotiate competitive shipping rates and volume discounts. 

But once they’ve secured a better contract with better rates, the contracts are often stored in a decentralized manner. The company doesn’t have access to its rates in a centralized place to be able to take advantage of them when the need arises. As a result, warehouses and 3PLs often refer to whichever rates they have on hand and lose out on cost savings. 

A TMS alleviates this pain point by providing a centralized repository for different rates. The system makes it easy for contract managers to enter new rates, terms, and conditions into the system. Then, warehouse and 3PL employees can find this info in a user-friendly database. You know what they say when it comes to data: garbage in, garbage out. If your optimization engine doesn’t have all the right information, it won’t be able to generate the recommendations you need.

Which Features Should Your WMS and TMS Include?

Both your WMS and your TMS should provide the following:

  • Business Intelligence: If you want to grow your business, you need to continuously improve. And if you want to continuously improve, you need to develop a data-driven strategy. Your e-commerce business, warehouse, or 3PL produces ample data every day. Your WMS and TMS should be able to generate business intelligence reports based on this data. Ask the providers on your shortlist whether their solutions come with a dashboard, data visualization tools, and other business intelligence features.
  • Ability to Integrate Into ERP: Ensure your chosen system can integrate into your larger enterprise resource tools, including your order management system and sales channels like Shopify, Magento, or Amazon. 
  • Cloud Deployment Options: Traditionally, a WMS and TMS would be deployed on-premise. Today, cloud deployments are becoming more popular. They are more cost-effective, more easily scalable, and don’t incur long-term maintenance costs. Plus, supply chain managers can access a cloud-based solution anywhere and from any device. 

Should You Integrate Your WMS and Your TMS?

Typically, the WMS and TMS operate separately within an enterprise. When these two systems work together, you can collect richer data about your high-level operations and identify potential cost-saving or revenue-generating opportunities. 

For instance, with these two systems connected you can see how trucks are packed and use leftover space to pack more goods on outbound trucks, reducing the amount of warehouse space you use and making the most of your transport resources.

Other benefits of integrating your WMS and your TMS include:

  • Opportunities for iterative improvements thanks to richer data about warehouse and shipping operations 
  • Increased oversight regarding scheduling and workforce planning
  • Optimized use of fleet (e.g., drivers, delivery schedules, fuel costs)

The WMS and TMS Are Different Systems Working Towards the Same Goal

Your WMS and TMS are two distinct systems managing different processes within the supply chain. They work together to accomplish the same goal: Get the right product to the right customer at the right time and at the lowest possible cost. 

Both systems offer incredible functionalities that allow you to make the most of your human resources and technical equipment. They do this by facilitating tasks like route optimization, cross docking, and wave picking, which help boost your organizations efficiency. 

Above all, WMS and TMS solutions allow e-commerce companies, warehouse businesses, and 3PL operators to create and maintain value across the entire supply chain. 

Logiwa is a best-of-breed WMS for B2B and B2C businesses who sell across multiple channels. Schedule your demo today to see how our WMS system can bring your data together.

Ready to see the most powerful warehouse management software in action?

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Ruthie Bowles

Written by Ruthie Bowles

Ruthie is a content marketing consultant for Logiwa. Her specialties include small business development and inventory management.