What is a Warehouse Management System (WMS)? Benefits and Examples

What is a Warehouse Management System

Today’s manufacturers face unique challenges. Online e-commerce sales are booming, but finding qualified warehouse staff can be difficult. Competition is creating pressure to take omnichannel orders and fulfill them faster than ever. In this fast-paced landscape, there’s one thing that can help you organize it all: a warehouse management system.

What is a Warehouse Management System?

A warehouse management system (WMS) is a software application that helps control and manage the day-to-day operations in a warehouse. WMS software guides inventory receiving and put-away, optimizes picking and shipping of orders, and advises on inventory replenishment. It can be a standalone application or part of an enterprise resource planning (ERP) system.

One of the most important benefits provided by a warehouse management system is that it can reduce the likelihood of errors occurring when a product is shipped. The system can also help a manufacturer to fulfill orders faster and instantaneously trace ordered products within the warehouse.

What Does a Warehouse Management System Do?

In the beginning, the definition of a warehouse inventory management system only covered simple functions, namely inventory location and basic inventory management. Today, the breadth of WMS functionality can vary greatly, from basic best practices in pick, pack, and ship functionality to sophisticated programs coordinating advanced interactions with material-handling devices, supply chain management, and yard management.

Examples of Warehouse Management Systems

There are several types of warehouse management systems, each with its own pros and cons. Here are the most popular examples.

Warehouse Management Software


Standalone Warehouse Management Systems

A standalone WMS is your typical on-premise system which is deployed on the native hardware and network of the business. Its only function is warehouse management, and it may not integrate with your other systems, like accounting or human resources. If it does, the process is often fraught with challenges, such as duplicate data entry, information delays and silos, interface issues, and customization expenses.

Standalone WMS solutions can work well for manufacturers that want an in-depth, customizable tool specific to their business. However, they have limited functionality, and while they’re often the lowest-cost option in the long term, they lack the benefits of more integrated warehouse management systems.

Integrated Warehouse Management Systems

An integrated WMS goes beyond the warehouse to manage inventory, shipping and receiving, invoicing, accounting, and other critical business operations. This type of warehouse management system is often part of a comprehensive ERP solution. It provides embedded, real-time electronic data interchange (EDI), accounting, sales orders, material resource planning (MRP), and shipping management with a streamlined interface.

Because it’s integrated with your other systems, you get a broad view of how your warehousing and logistics processes affect the other areas of your manufacturing business. This helps you optimize your operations more effectively.

Cloud-Based Warehouse Management Systems

Cloud Warehouse Management Software

A cloud warehouse management system utilizes enterprise cloud technology and is delivered via a software-as-a-service (SaaS) model. As technology advances, more and more systems are moving to the cloud, including WMS solutions.

The benefits of cloud-based WMS software include greater flexibility, better disaster recovery, higher scalability, and stronger security. Cloud computing also offers users the ability to receive automatic software updates without making additional capital expenditures, making it easier to compete by leveraging the latest technology advances.

What are the Benefits of Warehouse Management Systems?

Benefits of an Integrated WMS


With a warehouse management system, you gain business-wide traceability, employee accountability, and real-time speed and responsiveness. Using scan guns and barcodes, you can move from pen and paper to a digital WMS environment that eliminates the need to re-key data and the accompanying risk of human entry errors. This enables manufacturers to realize a number of warehouse management system benefits.

Increased Inventory Accuracy

Even the most basic warehouse management systems give you visibility into your inventory using barcodes, sensors, or RFID tags. More advanced WMS software helps you to pick efficiently, forecast demand, build just-in-time processes, and more. When you know exactly what’s in your warehouse, where it is, and how long it’s been there, you can take control of your costs and optimize your picking, packing, and shipping strategies.

Improved Customer Satisfaction

Visibility into your inventory also leads to faster fulfillment times, more accurate delivery estimates, more on-time deliveries, and better customer service. Your team knows exactly what’s needed and where it’s located, and your products get to the right destination faster. That can create a better customer experience, reduce returns, and drive brand loyalty.

Reduced Labor Costs

Staffing and logistics for fulfillment, shipping, and receiving can be tricky. Busier seasons or sales on certain products can spike demand and temporarily increase staffing needs. Receiving large shipments requires precise planning and preparation. Warehouse management systems can help you plan for labor needs, schedule properly, assign the right tasks, and improve your staffing strategies to save on costs.

Increased Productivity and Efficiency

Ultimately, the answer to the question, “What is a WMS?”, is that it’s a solution to help you increase warehouse productivity and streamline your operations. It collects and analyzes data about inventory, staffing, floor plans, equipment, and warehouse performance to help you track your progress, find areas for improvement, and ensure your operations are running smoothly and efficiently.

Warehouse Management System Software

Warehouse information systems used to rely on pen and paper, but today they’re software-based. The overall goal of WMS software is to achieve a paperless, automated warehouse environment. It guides inventory receiving and put-away, optimizes picking and shipping of orders, and advises on inventory replenishment. It can even coordinate advanced interactions with material-handling devices and yard management.

Following is an overview of the three most common warehouse management system tiers, with a specific focus on shipping, receiving and put-away, and inventory replenishment capabilities. Each tier, from basic to advanced, offers a greater level of control.

Below is an overview of the three most common WMS tiers, with a specific focus on shipping, receiving and put-away and inventory replenishment capability:

Tier 3 – Basic WMS Software

At the entry-level, a Tier 3 program’s data collection tools will help you automate your warehouse. By assigning grid numbers to locations and bins in your warehouse, your computer can record where every item is located. However, Tier 3 warehouse management systems don’t have much functionality beyond that.

Since the software only verifies an item’s location, put-away is unguided and seemingly random. Order picking is based on the packing slip and managed without any built-in logic. Inventory record quantities are based on receipts from purchase orders, and inventory replenishment is calculated from simple minimum and maximum order-level algorithms.

Tier 2 – Intermediate WMS Software

WMS software at this tier offers directed pick and put-away logic to help you optimize your warehouse space and employees’ time. For example, instead of simply verifying where material has been placed, Tier 2 software will use slotting optimization to evaluate a combination of item, location, quantity, unit of measure, and order details to indicate where you should be stocking the inventory.

WMS packages at this level offer directed task monitoring to help you determine where to stock materials, where to pick, and even the sequence in which to pick something. When inventory is received, Tier 2 software offers guided put-away based on the speed of the inventory’s movement to help eliminate expired materials.

Tier 2 software also supports more complex picking (task interleaving and milk runs for JIT pick-up), including advice on optimal pallet and carton configurations based on unique customer requirements. Shipping is predetermined by the customer and can be better managed with staging and dock scheduling tools. Due to their greater depth of functionality, Tier 2 warehouse management systems are typically implemented by medium to large enterprises.

Tier 1 – Advanced WMS Software

Tier 1 WMS software offers robust versions of the tools in Tier 2 plus the added benefit of interacting with automated material handling equipment, such as conveyor belts, sorting equipment, and automatic storage and retrieval systems. Tier 1 software supports wave picking, allows for queuing subsystems, and handles complex yard management.

Only the largest and most complex fulfillment centers or warehouses (think Amazon) benefit from Tier 1 warehouse management systems. Unlike the previous two tiers, which are designed more for “captive” warehouses that manufacture on-site and only distribute for themselves, Tier 1 WMS programs are for wholesale distributors and warehouses that store and ship products from multiple companies.

How to Choose the Right Warehouse Management System (WMS)

How to Choose the Right WMS

When deciding to implement a warehouse management system (or upgrade to a more robust one), how do you determine which system is best for your manufacturing facility?

Today, you can choose from a menu of options in order to optimize your deployment and support your company’s growth and business objectives. While there are plenty of options, your comparison should take an in-depth look at:

Your company needs to be empowered to choose from a menu of options in order to optimize your deployment and support your company’s growth and business objectives. Your comparison should take an in-depth look at:

  • Software fit and functionality – above all else!
  • Purchase agreement (perpetual or subscription licensing)
  • Implementation and training
  • Backup and redundancy
  • Customization
  • Your philosophy on IT and internal IT footprint
  • Software update control
  • Data access and ownership
  • Total cost of ownership

Standalone vs. Integrated WMS Software

One of the most important considerations is whether you should adopt a standalone or integrated warehouse management system. Before deciding on the best deployment option for your business, ask yourself two important questions:

  1. Can your bolted-on WMS software automatically alert you to order changes from incoming EDI documents, as well as display on-hand inventory quantities and their locations?
  2. Can it keep you up to date in real-time on the number of parts left to the manufacture before the order is filled and ready for shipment?

If you answered no to either of these questions, you may want to consider implementing an integrated WMS/ERP solution.

Find the Best WMS for Your Warehouse

Now that you’re armed with knowledge of the different warehouse management system options, it’s time to take stock of your exact warehouse needs.

Begin by calculating the frequency of your inbound and outbound products. Warehouses that ship only a few times a day will have different WMS requirements than a manufacturer who fulfills an order every four minutes. What precisely are you asking of your warehouse on a daily basis?

Finally, when selecting WMS software, don’t forget to evaluate its ability to support future growth. You’ll want to choose software that will serve your company well in five or ten years (instead of simply fitting where your business is now). A good way to start is by looking over the specification sheet of a very robust Tier 1 WMS package and

Infographi: Finding Saving in the Warehouse. How Much Could You Save. Download Now!