What is a Warehouse Management System (WMS)?

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. A warehouse management system can be a standalone application or part of an Enterprise Resource Planning (ERP) system.

What Can a Warehouse Management System Do?

In the beginning, warehouse inventory management systems could only provide simple functions, mostly just storage location information. Nowadays, 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 and yard management.

A warehouse management system can reduce the likelihood of errors that could occur when a product is shipped. The system can also help a company fulfill orders more rapidly and instantaneously trace ordered products within the warehouse.

In the end, the overall goal of warehouse management system software is to achieve a paperless environment that directs your employees automatically on the optimal picking, put-away and shipping of your products.

Warehouse Management Software

Warehouse Management Software

WMS software guides inventory receiving and put-away, optimizes picking and shipping of orders and advises on inventory replenishment.

The breadth of warehouse inventory management software functionality can vary greatly, from basic best practices in pick, pack and ship functionality to sophisticated programs coordinating advanced interactions with material-handling devices and yard management.

Types of Warehouse Management Systems

There are several types of Warehouse Management Systems, each with it’s own pros and cons. Here are the most popular types:

  • Standalone System
  • ERP Modules
  • Cloud Based

Standalone Warehouse Management System

A standalone warehouse management system is your typical on premises type system which is deployed on the native hardware and network of the business.

Most WMS systems are third-party, standalone packages that must be integrated with the rest of your business management software (such as ERP). While integration of external programs can work, the process is often fraught with challenges such as duplicate data entry, information delays and silos, interface issues and customization expenses.

These systems are often the lowest long term cost option, but lack the benefits of a more integrated WMS option.

Cloud Based Warehouse Management System

Cloud Warehouse Management Software

A cloud warehouse management system is a web-based software as a service (SaaS) model utilizing enterprise cloud technology.

The benefits of cloud based WMS software include better flexibility, disaster recovery, scalability, and security. Cloud computing also offers users the ability to receive automatic software updates without additional capital expenditures, providing better technology competitiveness.

ERP Modules

Some ERP vendors, such as IQMS, offer a warehouse management system that is built into their ERP solution. This type of solution provides embedded EDI, accounting, sales orders, MRP and shipping management with no messy non-real-time interfaces.

Benefits of an Integrated WMS and ERP System

Benefits of an Integrated WMS

The benefits of an integrated WMS/ ERP solution are extensive.

With a native WMS program, you gain business-wide traceability, employee accountability and real-time speed and responsiveness.

Through scan guns and barcodes, you can move from pen and paper to a digital WMS environment that eliminates re-keying of data and the unavoidable human entry error that accompanies it.

There many more differences that fully define an ERP hosting model and should be taken into consideration before deciding what deployment option is best for your business.

The benefits of a comprehensive warehouse management system include:

  • Reduced fulfillment time
  • Increased inventory accuracy
  • Improved customer service
  • Greater space utilization
  • Increased warehouse productivity
  • Reduced labor cost

Two important questions to ask yourself are:

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

WMS Software Tiers

WMS Software Tiers

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

At the entry level, a tier three WMS 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. But that is the cap on the level of complexity your system can handle.

Since the WMS only verifies an item’s location, put-away is unguided and seemingly random. Order picking is based on 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 programs at this tier offer directed pick and put away logic to allow you to optimize your warehouse space and employees’ time. For example, instead of simply verifying where material has been placed, tier two warehouse inventory software will use slotting optimization to evaluate a combination of item, location, quantity, unit of measure and order details to tell you where you should be stocking the inventory. Due to their greater depth of functionality, tier two WMS programs are typically implemented by medium to large enterprises.

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, a tier two WMS offers guided put away based on the speed of movement of the inventory to help eliminate expired materials.

Tier two WMS 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.

Tier 1 – Advanced

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

Tier one systems offer robust versions of the tools in a tier two WMS, plus the added benefit of interacting with automated material handling equipment such as conveyor belts, sorting equipment, and automatic storage and retrieval systems. Tier one WMS software support wave picking, allow for queuing subsystems and handle complex yard management.

How to Choose the Right Warehouse Management System (WMS)

How to Choose the Right WMS

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 & redundancy
  • Customization
  • You philosophy on IT and internal IT footprint
  • Software update control
  • Data access and ownership
  • Total cost of ownership


Now that you are armed with knowledge of the different options of warehouse management systems, it is time to take stock of what exactly your 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 that a manufacturer who fulfills an order every four minutes. What exactly are you asking of your warehouse on a daily basis?

Finally, when selecting your WMS software, don’t forget to evaluate future growth.

WMS implementations do not occur often, so select software that will serve your company well in five or ten years (instead of only fitting where your company is now). A good way to start is to look over the specification sheet of an overly robust Tier 1 WMS package and pick out the features that fit your business needs. Then seek out the comprehensive ERP solution that offers that functionality and you will be on the road to success.

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For more than 25 years, IQMS has been designing and developing manufacturing ERP software for the repetitive, process and discrete industries. Today, IQMS provides a comprehensive real-time ERP software and MES solution to the automotive, medical, packaging, consumer goods and other manufacturing markets. The extended single-database enterprise software solution, EnterpriseIQ, offers a scalable system designed to grow with the client and complete business functionality, including accounting, quality control, supply chain, shop floor, CRM and eBusiness. With offices across North America, Europe and Asia, IQMS serves manufacturers around the world. For more information, please visit iqms.com.
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