Warehouse management system

Last updated November 07, 2023

A warehouse management system (WMS) is a set of policies and processes intended to organise the work of a warehouse or distribution centre, and ensure that such a facility can operate efficiently and meet its objectives.

In the 20th century the term 'warehouse management information system' was often used to distinguish software that fulfils this function from theoretical systems. Some smaller facilities may use spreadsheets or physical media like pen and paper to document their processes and activities, and this too can be considered a WMS. However, in contemporary usage, the term overwhelmingly refers to computer systems.

The core function of a warehouse management system is to record the arrival and departure of inventory.^[1] From that starting point, features are added like recording the precise location of stock within the warehouse, optimising the use of available space, or coordinating tasks for maximum efficiency.^[2]

There are 5 factors, that make it worth establishing or renewing a company’s WMS. A successful implementation of the new WMS will lead to many benefits, that will consequently help the company grow and gain loyal customers. Number one, helping not only logistics service providers but also their customers to plan the resources and inventory accordingly, is real-time inventory management. Furthermore, when a company screens/scans a product for every movement in the facility, the location of products, inventory control and other activities are clear and the possibility of mishandling any inventories declined greatly. The third factor that emphasizes the importance of WMS systems is faster product delivery, which is very valued in today’s fast-paced world with a highly competitive environment. The benefits of advanced WMS systems are not only seen when a company needs to send products to its customers/partners but when dealing with returns as well. Managing and taking care of customers’ returns becomes much easier and more effective if the company is able to monitor and track the returned inventory. Lastly, a successful WMS implementation will help the company to perform all their operations seamlessly and thus lead to improved overall customer satisfaction.^[3]

Levels of complexity

More complex warehouse management systems tend to include specialised features designed for specific industries or types of facility, while legacy enterprise software vendors aim to offer as many of these features as possible in a ‘one-size-fits-all’ solution, which may be available as modules.

Academic research has made use of an approximate classification system based on 3 levels of complexity:^[4]

Some common features of an advanced WMS
A basic WMS supports inventory management and location control. The performance data that can be produced at this level is generally limited to ‘throughput’, i.e.: how much stock moves through the warehouse in a given period of time. A basic WMS is almost indistinguishable from a basic Inventory Management System.
An advanced WMS can analyse capacity and stock levels, and perhaps track how much time and labour is spent on different activities. This allows it to generate data that measures efficiency and suggest ways to improve it. Outside of East Asia, Most WMS's in use today fall into this category. At this level, the duties of the WMS may begin to overlap with or supersede those of a Warehouse Control System or Warehouse Execution System.
A controlled WMS can exchange data with other systems, in order to take into account information from outside the warehouse (e.g.: manufacturing needs, customer orders, transportation) when planning activities, and vice versa. It may control or obtain feedback from automation or IoT devices, in facilities that have them. It may also continuously simulate or test strategies for improving operations, perhaps using machine learning. The most complex WMS's are almost indistinguishable from the most complex WES's.

Types of installation and licensing

WMS software has historically been offered through a perpetual licence, giving organisations the permanent right to install it on their own on-premise servers, typically alongside a fixed period of updates and technical support which may be renewed at additional cost.

As with many types of enterprise software, this provision model is gradually being replaced by hosted subscription services. Legacy enterprise software vendors typically offer both models, but incentivise their customers to move to the cloud.

A WMS may be a standalone product, or can be a module or category of modules within a larger Enterprise Resource Planning (ERP) system, Shipping or Inventory Management Software, or Supply Chain Management System (SCMS).

Installation type does not affect the level of functionality that may be achieved by a WMS, so long as sufficient computing power is provisioned and data is successfully synchronised with other systems.

Comparison with other software packages

Inventory Management Software is used in many industries, such as manufacturing, retail and hospitality. Like warehouse management systems, its foundational feature is tracking stock levels of different materials. These two types of software begin to differ at more advanced levels. For example, a service business with a relatively simple ‘warehouse’ or storeroom is more likely to require features that analyse the cost of materials it consumes, or the optimal moment to purchase additional stock, rather than complex WMS features that focus on efficient movement of material within the warehouse itself.

Many Enterprise Resource Planning systems include a warehouse management module or set of modules. The core logic of an ERP system is transactional in nature; its purpose is to connect operational and commercial data to accounting and financial decision-making. As a result, its warehouse modules tend to focus on the metrics that are immediately and obviously relevant from a financial point of view, and tend to lack the sophistication of advanced WMS's.

Integrated Supply Chain Management software packages tend to bring together warehouse management with transportation management and additional functionality. Unlike ERP systems, these systems usually focus on operational needs. However, like ERP systems they tend to lack the depth and configurability of a specialised WMS.

The terms Warehouse Control and Warehouse Execution systems are sometimes used interchangeably with each other and with warehouse management systems. However, a WCS traditionally manages motorised equipment such as conveyor belts, as may be found in facilities handling high-volume, low-variety materials. As automation equipment has grown more sophisticated, it has been employed in more complex facilities, giving rise to WES nomenclature for systems that integrate advanced controls and WMS capabilities. As more features are added to each side, the distinction between a high-end WES and WMS blurs.

Yard Management Software is generally aimed at large facilities and organisations that manage their own transport fleet. It can be a standalone system, or a module of a WMS or SCMS. In terms of functionality, a YMS may track an inventory of vehicles, parking spaces and resources, coordinate the movement of full and empty trailers, or manage appointments in order to better predict workload.

Dock Scheduling may be available as a component of a YMS, SCMS or WMS, but usually with a low level of sophistication. Standalone dock scheduling software more frequently includes features that acquire data about incoming loads in advance, or restrict carriers to specific time slots or durations.

Market

According to a report by Grand View Research, “The global warehouse management system market size is expected to grow from US$2.8 billion in 2021 to $6.1 billion by 2026, at a compound annual growth rate of 16.7%.”^[5]

The authors of Warehouse Science note that “there are over 300 WMS vendors in the US alone. The largest companies hold less than 20% of the market.”^[1]

Limitations

Edward Frazelle, the founding director of Georgia Tech Supply Chain and Logistics Institute, argues that while the demands on warehouses are increasing in an increasingly competitive global marketplace, “warehouses today have... less warehouse management system capability (a by-product of Y2K investments in enterprise resource planning systems)”^[6]

Researchers from the Business School at Erasmus University Rotterdam in the Netherlands have pointed out that “a standard WMS remains largely making compromises between the way a warehouse wants to work and the way the system allows the warehouse to work. In certain environments, such compromises might seriously degrade warehouse performance.”^[2]

Many researchers and analysts have pointed out that receiving operations, which account for about 17% of warehouse operating costs, are a particular area where contemporary warehouse management systems tend to fall short, particularly insofar as pre-scheduling and communications with external carriers, customers and suppliers represents a bottleneck.^[7]

Software vendors have suggested that “In cases where moving away from a legacy WMS is not possible, its shortcomings can still be addressed by smart integrations, earning the warehouse breathing room in the medium-term.”^[8]

Related Research Articles

Enterprise resource planning (ERP) is the integrated management of main business processes, often in real-time and mediated by software and technology. ERP is usually referred to as a category of business management software—typically a suite of integrated applications—that an organization can use to collect, store, manage and interpret data from many business activities. ERP systems can be local-based or cloud-based. Cloud-based applications have grown in recent years due to the increased efficiencies arising from information being readily available from any location with Internet access.

In commerce, supply chain management (SCM) deals with a system of procurement, operations management, logistics and marketing channels, through which raw materials can be developed into finished products and delivered to their end customers. A more narrow definition of supply chain management is the "design, planning, execution, control, and monitoring of supply chain activities with the objective of creating net value, building a competitive infrastructure, leveraging worldwide logistics, synchronising supply with demand and measuring performance globally". This can include the movement and storage of raw materials, work-in-process inventory, finished goods, and end to end order fulfilment from the point of origin to the point of consumption. Interconnected, interrelated or interlinked networks, channels and node businesses combine in the provision of products and services required by end customers in a supply chain.

Logistics is a part of supply chain management that deals with the efficient forward and reverse flow of goods, services, and related information from the point of origin to the point of consumption according to the needs of customers. Logistics management is a component that holds the supply chain together. The resources managed in logistics may include tangible goods such as materials, equipment, and supplies, as well as food and other consumable items.

Logistics automation is the application of computer software or automated machinery to improve the efficiency of logistics operations. Typically this refers to operations within a warehouse or distribution center, with broader tasks undertaken by supply chain engineering systems and enterprise resource planning systems.

Enterprise software, also known as enterprise application software (EAS), is computer software used to satisfy the needs of an organization rather than individual users. Such organizations include businesses, schools, interest-based user groups, clubs, charities, and governments. Enterprise software is an integral part of a computer-based information system.

Oracle Applications comprise the applications software or business software of the Oracle Corporation both in the cloud and on-premises. The term refers to the non-database and non-middleware parts. The suite of applications includes enterprise resource planning, enterprise performance management, supply chain & manufacturing, human capital management, and advertising and customer experience.

Safety stock is a term used by logisticians to describe a level of extra stock that is maintained to mitigate risk of stockouts caused by uncertainties in supply and demand. Adequate safety stock levels permit business operations to proceed according to their plans. Safety stock is held when uncertainty exists in demand, supply, or manufacturing yield, and serves as an insurance against stockouts.

Inventory control or stock control can be broadly defined as "the activity of checking a shop's stock". It is the process of ensuring that the right amount of supply is available within a business. However, a more focused definition takes into account the more science-based, methodical practice of not only verifying a business's inventory but also maximising the amount of profit from the least amount of inventory investment without affecting customer satisfaction. Other facets of inventory control include forecasting future demand, supply chain management, production control, financial flexibility, purchasing data, loss prevention and turnover, and customer satisfaction.

Supply-chain optimization (SCO) aims to ensure the optimal operation of a manufacturing and distribution supply chain. This includes the optimal placement of inventory within the supply chain, minimizing operating costs including manufacturing costs, transportation costs, and distribution costs. Optimization often involves the application of mathematical modelling techniques using computer software. It is often considered to be part of supply chain engineering, although the latter is mainly focused on mathematical modelling approaches, whereas supply chain optimization can also be undertaken using qualitative, management based approaches.

Field inventory management, commonly known as inventory management is the function of understanding the stock mix of a company and the different demands on that stock. The demands are influenced by both external and internal factors and are balanced by the creation of purchase order requests to keep supplies at a reasonable or prescribed level. Inventory management is important for every other business enterprise.

Supply-chain-management software (SCMS) is the software tools or modules used in executing supply chain transactions, managing supplier relationships and controlling associated business processes. Supply chain management maximizes the efficiency of business activities that include planning and management of the entire supply chain. It helps businesses in product development, sourcing, production, and logistics by automating operations. In this way, it increases the physical flow of business as well as informative flow. The entire business benefits with higher performance, greater cost-efficiency, and thus increased supply chain efficiency.

A warehouse control system (WCS) is a software application that directs the real-time activities within warehouses and distribution centers (DC). As the “traffic cop” for the warehouse/distribution center, the WCS is responsible for keeping everything running smoothly, maximizing the efficiency of the material handling subsystems and often, the activities of the warehouse associates themselves. It provides a uniform interface to a broad range of material handling equipment such as AS/RS, carousels, conveyor systems, sorters, palletizers, etc. The primary functions of a WCS include:

NetSuite Inc. is an American cloud-based enterprise software company that provides products and services tailored for small and medium-sized businesses (SMBs) including accounting and financial management, customer relationship management, inventory management, human capital management, payroll, procurement, project management and e-commerce software. NetSuite was founded in 1998 with headquarters in Austin, Texas. The company is widely seen as the first cloud computing software company, with its founding pre-dating that of Salesforce.com by about a month. Oracle Corporation acquired NetSuite for approximately US$9.3 billion in November 2016. The Oracle NetSuite Global Business Unit is managed by Executive Vice President Evan Goldberg as "Oracle’s Cloud ERP for Small and Mid-sized Enterprises with the ability to scale to Fortune 500 firms."

PathGuide Technologies is a privately held software company based in Washington State that develops, markets and implements real time warehouse management systems (WMS). It’s largely known as the company that Dr. David Allais, an expert and inventor in the fields of bar coding and automatic identification and data capture (AIDC), founded. PathGuide’s main product, Latitude Warehouse Management System, makes use of bar code scanning and RF data communications. The company integrates its products with Enterprise Resource Planning (ERP) and Automatic Identification and Data Capture companies like Microsoft, Oracle and Intermec. PathGuide primarily markets to wholesale/industrial distributors.

Distribution Center Management System (DCMS) is a user friendly Warehouse Management System (WMS), designed to track the activities performed in a distribution center (DC)/warehouse. It is created and owned by a private company called Eclipse Systems Pvt Ltd. It automates the entire process flow of receiving, managing and shipping goods to customers from the warehouse. DCMS solutions are designed for both large and small scale businesses. In January 2015, the product went open source.

The Digital Firm is a kind of organization that has enabled core business relationships through digital networks In these digital networks are supported by enterprise class technology platforms that have been leveraged within an organization to support critical business functions and services. Some examples of these technology platforms are Customer Relationship Management (CRM), Supply Chain Management (SCM), Enterprise Resource Planning (ERP), Knowledge Management System (KMS), Enterprise Content Management (ECM), and Warehouse Management System (WMS) among others. The purpose of these technology platforms is to digitally enable seamless integration and information exchange within the organization to employees and outside the organization to customers, suppliers, and other business partners.

Advanced Manufacturing Software (AMS) is an enterprise resource planning (ERP) software product based on the Microsoft Dynamics AX platform.

Warehouse execution systems (WES) are computerized systems used in warehouses and distribution centers to manage and orchestrate the physical flow of products from receiving through shipping. Warehouses are storage facilities for raw materials and parts used in manufacturing operations; distribution centers (DCs) are facilities that store and distribute finished goods to retail locations, consumers, and other end customers.

Eclipse ERP is a real-time transaction processing accounting software used for order fulfillment, inventory control, accounting, purchasing, and sales. It was created for wholesale distributors in the Electrical, HVAC, Plumbing, and PVF industries, but is used by a wide range of market sectors. At one point this software was called Intuit Eclipse DMS, and Activant Eclipse, and Eclipse Distribution Management System.

A transportation and warehouse management system (TWMS) is a software application that supports eCommerce, distribution, and third-party logistics (3PL) companies within supply chain management.

References

1 2 Bartholdi, John J; Hackman, Steven Todd (2006). Warehouse & distribution science. Atlanta, GA: The Supply Chain and Logistics Institute, School of Industrial and Systems Engineering, Georgia Institute of Technology. p. 34. OCLC 938330477.
1 2 Faber, Nynke; de Koster, René (Marinus) B.M.; van de Velde, Steef L. (2002-01-01). "Linking warehouse complexity to warehouse planning and control structure: An exploratory study of the use of warehouse management information systems". International Journal of Physical Distribution & Logistics Management. 32 (5): 381–382. doi:10.1108/09600030210434161. ISSN 0960-0035.
↑ Andiyappillai, Natesan (2020). "Factors Influencing the Successful Implementation of the Warehouse Management System (WMS)" (PDF). International Journal of Applied Information Systems (IJAIS). 12 (35). ISSN 2249-0868.
↑ Facilities planning. James A. Tompkins (4th ed.). Hoboken, NJ: John Wiley & Sons. 2010. pp. 385–386. ISBN 978-0-470-44404-7. OCLC 456838083.{{cite book}}: CS1 maint: others (link)
↑ "Warehouse Management Systems Market Report, 2021-2028". www.grandviewresearch.com. Retrieved 2022-03-23.
↑ Frazelle, Edward (2016). World-class warehousing and material handling (2nd ed.). New York. p. 14. ISBN 978-0-07-184283-9. OCLC 951429325.{{cite book}}: CS1 maint: location missing publisher (link)
↑ Ghiani, Gianpaolo (2004). Introduction to logistics systems planning and control. Gilbert Laporte, Roberto Musmanno. Chichester, West Sussex: J. Wiley. p. 159. ISBN 0-470-09165-7. OCLC 54449316.
↑ "How to get around the limitations of your Warehouse Management System". datadocks.com. Retrieved 2022-03-23.