When you’re running a 3PL or e-commerce company, software and technology systems help keep your operation running smoothly. One necessary system is a warehouse management system or WMS for short.
Deciding to get one is a no-brainer. Choosing the right one, however, is a little more complicated.
While there are several types on the market, all WMSs share a core purpose - centralizing and controlling a warehouse’s operations. It’s the different variations and features that can make it difficult for warehouse managers to select the right one.
In this article, we’ll break down the categories of warehouse management software and tell you how to pick the right tool for your business.
We’ll explore the three major categories of WMS solutions:
- Standalone warehouse management systems
- Supply chain management software systems
- Enterprise resource planning (ERP) systems
What Is a Standalone Warehouse Management System?
A standalone warehouse management system only manages the core functions of the warehouse and do it very well.
In other words, the focus isn’t on providing the best platform for warehouse management, but rather the best tools for warehouse management.
Core functionalities of a standalone solution include:
- Inventory management
- Recordkeeping of bin and storage locations
- Expiration date tracking
- Inventory analysis for cycle counting
- Putaway, picking, and packing support
This type of WMS focuses heavily on inventory management. It allows warehouse managers to access information about the goods in storage, run data analyses to determine safety stock levels, set reorder points, and more.
Keep in mind that a standalone inventory management system (IMS) is not the same as a warehouse management system. An inventory management system tells you that a product exists somewhere in a warehouse (or multiple warehouses), but it doesn’t tell you exactly where you can find the product.
An IMS great from an accounting and cataloging point of view, but not very helpful from a fulfillment point of view.
Bin and Storage Locations
A WMS tells you where a specific SKU is located in the warehouse--this is one of the key ways a WMS is differentiated from a standalone inventory management system.
This can be especially helpful if you decide to embrace the organized chaos approach made famous by Amazon.
In Amazon warehouses, workers place inventory on any shelf, scanning the shelf barcode when they do. A box of cereal could be next to a book. The item is easily retrieved later by scanning shelf barcodes and inventory barcodes.
Maybe organized chaos isn’t the right approach for you. Either way, a WMS with bin and storage location data will help you efficiently put away and find your goods later.
Expiration Date Tracking
Unfortunately, you can’t always move products before they spoil. Your standalone WMS can alert you to expiry dates, whether they’ve passed or are arriving.
That way, you can quickly remove products with upcoming expiry dates from circulation to avoid recalls or liabilities.
Inventory Analysis for Cycle Counting
Cycle counting is an inventory management activity that helps maintain inventory accuracy. With a good WMS solution, cycle counting can be facilitated efficiently and accurately.
First, warehouse managers conduct an annual physical count. They shut down their operations for a couple of days and workers tally up all of the goods in the warehouse.
Most businesses do this on an annual basis because of the sheer volume of work required - not to mention the inconvenience and lost revenue of closing shop for a few days.
In an ideal world, warehouse managers could frequently check and re-check their inventory and even get real-time data about their stock across multiple facilities. That’s where a WMS with cycle counting capability comes in.
With cycle counting, warehouse operators can check portions of their inventory on a regular basis (monthly, quarterly) and verify their inventory accuracy. Their WMS enables them to easily identify sections of inventory to count (e.g., high value goods, goods with a high turnover rate) and provides data to determine how often to count each section.
Putaway, Picking, and Packing Support
A WMS supports the putaway process by integrating with mobile scanners that enable workers to electronically record the location of products. It supports the picking and packing processes by producing pick lists and helping workers choose the right size box and guiding them on the best fit for multiple items in the same box.
Of course, different types of software systems offer different levels of sophistication. For example, if wave picking is the right approach for your operation, a WMS can output pick lists based on your workers’ schedules.
Should I Purchase a Standalone System?
If you’re a small- or mid-sized business, a standalone warehouse management system is worth considering. It will help you move away from manual processes without the large upfront expense of a supply chain management system or enterprise resource planning system.
Supply Chain Management Software Systems
Today, the supply chain industry is focused on supply chain integration, which refers to the coordination of different supply chain processes, specifically through enhanced information sharing.
In other words, material providers, manufacturers, distribution centers, warehouses, retailers, and transportation providers all work together.
When the supply chain isn’t integrated, a small upstream problem snowballs into an enormous downstream disaster.
On the other hand, if different sections of the supply chain share information (like their projections) other areas of the supply chain can properly plan and coordinate activities, resulting in a more optimized flow of goods and, ultimately, a smoother end user experience.
Increased collaboration and communication can be difficult when the supply chain consists of separate companies. Unless you own your supply chain through vertical integration or you’re a big enough customer to influence supply chain partners, integration can be challenging to accomplish.
One way that companies solve this problem is through a special type of warehouse management system: a supply chain management system.
These types of WMS solutions make it easy for warehouses to integrate with different parties in the supply chain like suppliers, carriers, and retailers.
Specifically, this type of system helps business leaders:
- Manage relationships with multiple vendors
- Streamline the accounts receivable and accounts payable processes using EDI
- Join warehouse and inbound/outbound logistics activities for smoother changeovers
Another important feature of supply chain management systems is forecasting abilities. Since the software incorporates information from across the supply chain, there’s richer data for more accurate forecasts.
Should I Purchase a Supply Chain Management System?
If you’re a 3PL or an e-commerce company managing a large volume of orders with various third parties (suppliers, transportation companies), the integration this type of warehouse management system offers can be beneficial to your business.
In addition to more efficient processes, you’ll benefit from greater data analysis opportunities when your supply chain info is consolidated.
Enterprise Resource Planning (ERP) Software
Enterprise resource planning (ERP) software brings together tools from across a business’s various functions. Therefore, it’s not actually a warehouse management system.
Think about it like this: Your warehouse management system doesn’t exist in isolation. It’s one of the tools your business uses to accomplish a specific part of its operations. It may integrate with your supply chain management system and your inventory management system.
An ERP system enables you to also integrate your warehouse systems with your accounting and finance tools, your point-of-sale system/order managing systems, human resources system, project management system, compliance systems, and more.
It becomes one mega-system that manages everything in your organization. Your warehouse is one of those modules or sub-systems. Which means it may not offer as much functionality as you want to have.
The advantages of an ERP are that it is an all-in-one solution. All of your systems are integrated, making it possible to share information across different business functions, uncover insights, and make data-driven decisions with a holistic view of your operations.
Orders from your order management system or point-of-sale system flow directly into your WMS; the information in your WMS then flows into your transportation management system. At the same time, these order details are sent to your finance team’s module, adding efficiency to their processes as well.
Other benefits of an ERP solution include:
- Your IT team develops expertise and efficiency regarding one system rather than overseeing and managing multiple systems.
- Your company has total visibility over everything happening in your organization. Senior managers don’t need multiple systems to access high-level data about the state of the business. This leads to more comprehensive data analysis, detailed reporting, and more accurate forecasting.
- The ability to provide enhanced customer service. All of a customer’s information is in one centralized location that’s easily accessible to customer support staff taking calls.
Should I Purchase an Enterprise Resource Planning System?
An ERP system is a significant expense, and you risk a nightmarish implementation if you pick the wrong vendor. Given its intended purpose and its capabilities, an ERP is best suited for large organizations with an unwieldy number of systems.
Before embarking on an ERP project, ensure you have the following:
- Budget to hire reputable consultants who can help you navigate the ERP procurement process so you’re sure you’re investing in an appropriate solution
- A large enough IT team to manage and oversee the selection and implementation of the new ERP
- Buy in from senior leaders within the business to ensure a successful implementation
- Time to invest in a careful and diligent procurement process that ensures you can evaluate enough potential ERP vendors
There Are Many Types of Warehouse Management Systems to Choose From
A warehouse management system is a critical part of any 3PL or inventory-based business. With so many solutions on the market, it can feel overwhelming for business leaders to make a smart choice.
Since carrying and managing inventory is an expensive part of doing business, it’s important for managers to streamline processes and eliminate as many manual steps as possible. With that in mind, your business should focus on choosing affordable systems that can generate value soon.
And, if you decide to buy a sophisticated warehouse management system that integrates with other systems, invest in the time and people needed to make it a successful implementation.
Written by Ruthie Bowles
Ruthie is a content marketing consultant for Logiwa. Her specialties include small business development and inventory management.