What is a WMS (Warehouse Management System)?

This story first appeared on the Supply Chain Vibe blog.

Introduction

A WMS or Warehouse Management System is a software system that is used to manage and optimize warehousing operations. It is a specialized business application that controls the flows of inventory and data related to that inventory within the four walls of the warehouse. It can schedule inbound shipments for offloading, track advanced shipment notices, verify receipts, compute the best location for put-away of inventory, generate and prioritize replenishment tasks, allocate inventory intelligently against sales orders, direct picking of allocated inventory, consolidate picked orders, generate bill of lading and carrier documents, and direct the loading of orders onto trucks or containers. These are the basic operations controlled by a WMS.

However, a WMS hides more functionality under the hood. It allows operators and managers to plan labor, distribute tasks, and track the performance of these tasks against set time and quality standards. It can manage inventory for multiple owners and can generate billing records based on agreed contracts. When it comes to inventory, it can adjust stock quantities based on user input, direct and control cycle counts and stock takes, perform moves, holds, and transfers, all while maintaining accurate inventory records, history of operations on these records (tracking), and provides users with full visibility of their stock at all times in real-time.

Warehouses

Warehouses are crucial components of supply chains. They are used to store goods for a period of time in order to allow the effective and timely distribution to meet customer demands. Warehouses come in different shapes, sizes, and types.

Some common types of warehouses include:

Raw materials:

Goods are stored in these centers close to manufacturing sites and provide the components required for production. Sub-assembly: Goods in different stages of production are stored in these facilities.

Finished goods:

Stores of products ready for sale. Usually, provide sales buffers or safety stock to help companies meet variations in customer demand.

Consolidation:

Typically used for just-in-time manufacturing. Products are consolidated from different sources for delivery to production lines.

Transshipment:

These facilities receive products in large quantities and break them into smaller quantities for delivery to customers or different sites.

Cross-dock:

Goods labeled for end-customers are received, identified, sorted, and consolidated with other deliveries. These goods remain in storage for the least amount of time possible, typically, hours.

Fulfillment:

These facilities are built to handle a large number of small orders. Typically, they service e-commerce and retail operations, including return processing.

Reverse logistics:

These facilities handle returned items and product and packaging recycling.

Third-party logistics (3PL):

These facilities are shared and leased to principals and operated by a third-party company. Typically, they house and handle warehousing operations for a large number of manufacturers, distributors, and retailers under a single roof.

The operations conducted inside the various types of warehouses differ widely, although there are overlaps. Consequently, a WMS has to be capable of handling these different operations, in addition to integrating with other systems, such as ERP (Enterprise Resource Planning), MHE (Material Handling Equipment — Pick to Light, Automated Storage and Retrieval Systems AS/RS, Conveyors, Robots, …), TMS (Transportation Management System), and utilizing data collection devices (RF handhelds, voice picking, dimensioning devices, …).

WMS Functionality Overview

Most WMS providers divide the supported processes into the core or basic functionalities and extended functionalities.

WMS functionality overview (warehouse management system)

WMS vs IMS (inventory management system)

An Inventory Management System, similar to a WMS, is a technology solution used to track and manage stock. It mainly tracks stock by location across sales, purchase, and manufacturing work order stages. Some IMS solutions are integrated with accounting systems and automate cost and profit computation and invoicing. The purpose of an IMS is to give companies visibility of their stock and allows them to replenish it effectively to meet demand.

The main differences between IMS and WMS can be summaries as follows:

Process:

The focus of a WMS is around managing and optimizing warehousing processes from receiving to storage and picking to finish and exit the warehouse by shipping. These operations impact stock quantities by location and bin level and a WMS allows you to track these changes in detail. However, IMS solutions focus on stock quantities by location only and leave the operations to the discretion of the operator. Warehouse management systems direct operators and warehouse personnel during operation execution to increase efficiency.

Complexity:

A WMS is more complex than an IMS. It allows a business to track stock within specific locations within a large facility (a facility itself is a location in an IMS). For example, with a WMS you can track stock by bin location by lot by container. An IMS gives you the quantity in a warehouse or a warehouse location, but not necessarily at the bin or container level. A WMS has multitudes of very complex process rules that users configure to drive increased efficiencies running day-to-day warehousing tasks. These increases in efficiencies are achieved on the basis of real-time information tracking and decision making. A WMS can be classified as an Expert System as it emulates the decision-making ability of a human experts in warehousing.

Storage control:

A WMS manages, directs, and optimizes the storage and retrieval of stock within individual locations within the warehouse. It controls what to store where respecting constraints such as mateability of products and weight restrictions on racks. On the contrary, IMS systems give you only quantity control.

Integration:

A WMS allows companies to integrate with a wide variety of business systems (sales and procurement, transportation, route optimization, carriers, suppliers, etc…), as well as material handling equipment (reach trucks, conveyors, automated pick and pack solutions, voice and vision devices, product measurement devices, etc…).

Some similarities between WMS and IMS:

• Inventory tracking
• Barcode scanning
• Stock notification
• Report generation
• Multi-location management
• Demand forecasting (an extended WMS and IMS function)

Other warehousing software systems (WCS, WES, WMS)

A WMS is not the only software system built to aid with managing and optimizing the operations of warehouses. Since the 2000s, and due to the proliferation of automation inside the warehouse, specialized software that control these automation equipment sprouted.

Warehouse Control System

A Warehouse Control System or WCS is a specialized software that communicates with automation equipment via the PLC (programmable logic controller) for these devices and focuses on speed and execution. It can exchange real-time data and commands to these devices.

Examples of these devices include:

• ASRS (Automated Storage and Retrieval System)
• PTL (Pick To Light)
• RFID (Radio Frequency Identification)
• Conveyor systems
• AGV (Automated Guided Vehicles — Laser-guided, wire-guided, …)
• Sorters
• Carrousels
• Merge and de-casing lines
• Shuttles
• Inline print and apply
• Inline scales and scanners
• A-Frame
• Picking Robots

Typically, when a warehouse has a certain level of automation, a WMS will communicate with a WCS to bridge the gap to automation equipment.

Key features for a WCS:

• Real-time Communication with different automation equipment
• Integration with WMS
• Managing automated picking tasks
• Managing of routing (for goods to man systems, robots, AGV, …)
• Managing of sortation and packing
• Real-time tracking of unit loads (cartons, totes, pallets, …)
• Real-time notification
• System performance charts and statistical information
• Human Machine Interface (HMI) for the automation systems

Warehouse Execution System

WCS companies continued to add features to their software and extended its reach, encroaching more and more on basic WMS functionality, creating Warehouse Execution Systems (WES). A WES is a mini-WMS or a light version of a WMS. For some companies, a WES provides sufficient functionality to replace a WMS while continuing to provide real-time communication to automation equipment.

Key features for a WES:

• WCS features
• Receiving
• Putaway
• Replenishment
• Pick management
• Shipping
• Inventory management
• Integration with automated data capture devices

WMS vs WCS vs WES

Types of WMS systems (Standalone, Cloud, ERP)

WMS providers have systems that are at different maturity levels, use assortments of technology stacks, have varying architectures, and implement particularized features and capabilities. Companies that only sell WMS software are usually specialized and offer best-of-breed WMS capabilities. Many of these companies have, over the years, been acquired and integrated into larger companies that sell supply chain software suites or enterprise resource planning solutions.

A WMS can be deployed as a standalone system, on the Cloud, or as part of an ERP (a module).

Standalone

A standalone WMS is deployed on-premise, typically at the warehouse, and uses a local data network for communication and integration (with WCS, ERP, …).

Cloud

A Cloud WMS is hosted in a data center on the Internet and offered to companies that want a WMS as a service (software-as-a-service or SaaS). The upfront cost of deploying a cloud-based WMS is lower since you won’t need any hardware to set up the software on. However, the ongoing recurring cost might be higher. This all depends on the skills and infrastructure one might have available. A cloud WMS will definitely require sufficient bandwidth and low packet round-trip time (RTT) to be responsive enough to the real-time updates required (low lag).

ERP

A WMS that is built into an Enterprise Resource Planning (ERP) software typically has benefits not achievable by either Standalone or Cloud types. For example, and ERP-based WMS does not require integration with an ERP since it is built-in and has access to the ERP data. Depending on the software provider, license costs might be higher than those of Standalone or Cloud solutions.

Pros and Cons of an ERP-based WMS

Pros

• Single system implementation
• Same User-Interface
• Single database (no need for integration)
• Single vendor (ease of support and management)

Cons

• Typically more limited functions than Standalone or Cloud solution
• Single vendor risk
• More complex upgrades and customizations
• Single source of data (cannot cross-validate)

Benefits of WMS

Inventory Accuracy

Achieved by the tracking, real-time updates, automated control, and detailed visibility of stock. Higher inventory accuracy leads to improved cash flows and lower inventory carrying costs. You can calculate the inventory carrying cost using the following formula.

Inventory Carrying Cost Formula

Inventory carrying cost = Storage cost + Insurance cost + Handling cost + Obsolescence cost + Damage + Administrative cost + Pilferage cost + Opportunity cost of capital + Taxes

Optimized space use

A WMS reduces space waste by locating products dynamically according to set rules and allows managers to co-mingle products in the same location while maintaining accurate stock count and lot identification. With a WMS, there is no need to manage stock by fixed space allocation. Less space used implies less space needed and thus less rental or storage cost, and fewer overheads.

More efficient labour

Labour cost can be reduced with a WMS by utilizing features that direct pickers reducing the time needed traveling, searching for products, or performing counts. A more efficient labour force implies reduced staffing levels. A WMS also facilitates data entry by utilizing digital data capture devices such as RF terminals or guns. This leads to a tangential benefit, increased data accuracy.

Stock traceability

Stock within the warehouse can be tracked by lot, serial number, and location. This leads to accurate inventory planning and reduces returns. Traceability is also helpful in situations where product recall is necessary.

Continuous improvement

The data provided by a WMS can be used in continuous improvement initiatives.

Better equipment utilization

A WMS will direct users to utilize the most appropriate equipment for the job and optimizes travel and routing in the warehouse for these pieces of equipment.

Streamlining billing processes

A WMS with billing features captures the costs of operations conducted in the facility, ancillary costs, and the cost of space utilized. It automatically generates invoices based on a pre-defined cycle and rules.

Facilitates Warehousing Automation

A WMS is an enabler for additional automation technologies within a warehouse through integrating with a WCS.

Better customer service

A WMS provides better customer service through order fulfillment visibility, shipment management, streamlined order processing, and optimized picking, shortening the order fulfillment cycle.

Improved security and safety

A WMS ties transactions to users, leading to accountability. It can force users to perform specific transactions based on their role and profile, reducing damage and pilferage, avoiding hazardous situations.

Other benefits

• Reduced paperwork
• Better margins/sales
• Reduced demurrage
• Reduced errors
• Reduced cycle time
• Higher system availability
• Less labour training
• Electronic Data Interchange
• KPI tracking in real-time
• No misplaced orders
• Lower startup time

Major WMS suppliers

• Manhattan Associates
• Blue Yonder (JDA)
• Körber (HighJump)
• Oracle
• SAP
• Infor
• Softeon
• Tecsys
• Generix Group
• Made4net
• Microlistics
• Mantis
• Synergy Logistics
• Vinculum