Complete Guide to Warehouse Management Systems (WMS): Meaning, Benefits, Functions, and Types

Read about warehouse management systems and how they can transform your business operations.
Complete Guide to Warehouse Management Systems (WMS): Meaning, Benefits, Functions, and Types
4 min read
06 March 2025

Warehouse Management Systems (WMS) are essential for improving and simplifying warehouse operations. They help in tracking inventory, automating order fulfilment, and boosting overall efficiency. WMS reduces mistakes and increases productivity. This guide explains how WMS works, its main benefits, the different types of systems available, and financing options, helping businesses make the right choices to improve their operations.

What is a warehouse management system?

A WMS is software that helps companies manage and control daily warehouse operations – from the moment goods enter a distribution centre until the moment they leave.

WMS software systems are a key component of supply chain management. They offer real-time visibility into the company’s inventory, warehouses and in transit. It also offers tools for picking and packing processes, resource utilisation, analytics, and more.

Picture this: a symphony of organised chaos within a warehouse, each item meticulously placed and tracked. This is possible thanks to warehouse management systems.

At its core, a WMS is the conductor orchestrating the entire warehouse process. It empowers businesses by optimising inventory placement, automating processes, and ensuring real-time tracking. From inventory movement to picking and packing, WMS brings efficiency, accuracy, and visibility to every aspect.

By using innovative technology such as RFID (radio-frequency identification), bar coding, and automation, WMS minimises human error, maximises space utilisation, and expedites order fulfilment. It is the compass guiding businesses toward cost-effectiveness and customer satisfaction.

Functionalities of a Warehouse Management System

Here is a breakdown of the key functionalities of a WMS:

Inventory management: WMS tracks every product within the warehouse. It monitors stock levels, locations, and movements, providing real-time visibility into inventory.

Optimised storage: It enhances storage by assigning locations based on factors like size, weight, demand, and expiration dates. This minimises wasted space and ensures efficient storage utilisation.

Order fulfilment: WMS streamlines order processing: from picking items to packing and shipping, ensuring accuracy and timely deliveries.

Tracking and traceability: With WMS, businesses can trace products throughout the warehouse, from receiving to shipping. This feature is crucial for quality control, recalls, and compliance purposes.

Automation and technology integration: WMS often integrates with technologies like RFID, barcoding, and automation tools to improve accuracy, reduce manual errors and increase productivity.

Scalability: A good WMS adapts to changing business needs and growth, scaling up to manage increased volumes or expanding functionalities.

Reporting and analytics: It provides insights through data analysis, offering reports on inventory levels, operational efficiency, and performance metrics.

Overall, a WMS serves as the nerve centre of warehouse operations, improving processes, reducing costs, and enhancing customer satisfaction.

Benefits of a Warehouse Management System

These offer numerous benefits to businesses across industries. Here are some key features:

Better efficiency: WMS optimises processes and streamlines workflows, reducing the time spent on manual tasks.

Accurate inventory management: Precise inventory management minimises errors such as stockouts or overstock situations. This ensures better control over stock levels and reduces the risk of lost or misplaced items.

Better space utilisation: By optimising storage locations and layouts, WMS helps maximise warehouse space.

Increased productivity: With features like automated picking routes and optimised inventory placement, WMS boosts productivity by enabling faster order fulfilment.

Enhanced order accuracy: Accurate inventory data can help reduce errors and increase customer satisfaction.

Cost savings: Efficiency improvements, reduced errors, and optimised space utilisation contribute to cost savings. Businesses can cut down on labour costs, minimise carrying costs for excess inventory, and avoid unnecessary expenses due to errors.

A WMS brings with it multiple benefits, enhancing efficiency, accuracy, and overall productivity within warehouse operations.

What does WMS do?

A good WMS can help develop all the activities that make up the wider supply chain – from receiving and storing to picking, packing, and shipping. It can effectively help with the following:

  1. Receipt and put-away
    WMS lets you automate inventory management, process it, and put away items in the most efficient way.
  2. Inventory management
    You can easily stack inventory, track it with automatic identification and identify supply excesses or shortages with a WMS.
  3. Order picking and packaging
    WMS can help you lower the costs of order picking and packing and streamline fulfilment.
  4. Shipping
    WMS offers real-time tracking features, can generate invoices, and send out notifications. This means better tracking of deliveries and better utilisation of time.
  5. Analytics and metrics
    WMS also enables real-time data collection and tracks key metrics such as on-time shipping, distribution costs, and more.

Types of warehouse management systems

There are several types of warehouse management systems (WMS) available, including:

  • Standalone
  • Enterprise Resource Planning (ERP)
  • Cloud-Based, Open Source
  • On-Premises
  • Robotic WMS

Standalone systems are stand-alone software programs installed on-site. ERP systems include an integrated module for warehouse management. Cloud-based systems store data in a remote server, allowing for real-time access. Open-source systems are highly customisable and offer source code to modify. On-Premises systems are hosted and managed on-site. Robotic systems use automated technology to maximise efficiency and reduce labor costs. Each type of WMS offers unique functionalities, and selecting the right one depends on an organisation's needs, size, and operations.

Who benefits from warehouse management system technology?

Some WMS setups are tailored to suit the size of an organisation, and many vendors offer WMS products that can be scaled to fit different organisational needs. While some businesses choose to build their own WMS from scratch, it is becoming more common to implement a WMS from a well-established vendor, particularly those offering cloud-based solutions.

A WMS can also be customised or configured to meet an organisation’s specific needs. For example, an e-commerce business may require a WMS with different features compared to a traditional retail store. Similarly, the WMS can be designed to suit the type of products the organisation sells. A sporting goods store, for instance, will have different needs compared to a grocery chain.

WMS systems are crucial in Supply Chain Management (SCM) as they ensure the smooth and cost-effective movement of goods and materials through warehouses. A WMS manages tasks like inventory tracking, picking, receiving, and storage to support these processes.

Features of warehouse management systems

Warehouse Design: This allows organisations to customise the workflow and picking logic, ensuring the warehouse is set up for efficient inventory allocation and movement. The WMS helps with bin slotting to maximise storage space and adjusts for changes in seasonal inventory.

Inventory Tracking: This feature supports advanced tracking and automatic identification and data capture (AIDC) systems like RFID and barcode scanners, ensuring goods can be easily located when they need to be moved.

Receiving and Storage: This enables efficient inventory storage and retrieval, often using pick-to-light or pick-to-voice technology to help warehouse workers find goods quickly.

Picking and Packing Goods: This includes methods like zone picking, wave picking, and batch picking. Warehouse workers can also use functions like lot zoning and task interleaving to perform pick-and-pack tasks in the most efficient way.

Shipping: This allows the WMS to send bills of lading before the shipment, generate packing lists and invoices, and send advance shipment notifications to recipients.

Labour Management: This feature helps warehouse managers monitor workers' performance using key performance indicators (KPIs), showing when workers are performing above or below expectations.

Yard and Dock Management: This assists truck drivers in locating the correct loading docks. A more advanced version of this feature enables cross-docking and other inbound and outbound logistics functions.

Reporting: This helps managers analyse warehouse operations and identify areas for improvement.

Key factors to consider when choosing the right warehouse management system for your business

Here are the key factors to keep in mind when choosing the right WMS for your business:

  • Centralised management of inventory across multiple warehouses
  • Real-time and customisable reporting
  • Integration with third-party systems
  • Virtual management of inventory across multiple warehouses

Finance your WMS with a business loan

Manage the expenses of your warehouse management system with a business loan from Bajaj Finance. Apply in just a few clicks and choose from our three loan variants. Get up to Rs. 80 lakh and repay it over tenures of up to 8 years.

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Frequently asked questions

What is basic warehouse management, and how does it differ from advanced systems?

Basic warehouse management involves the fundamental procedures involved in warehouse operations, such as inventory tracking, stock control, and order management. Advanced systems utilise complex technology such as robotics and automation to increase efficiency.

What are the four types of warehouse management systems?

The four types of warehouse management systems are standalone, cloud-based, on-premise, and open-source.

Which is the best warehouse management system?

The best warehouse management system depends on an organisation's specific needs, operations, and budget.

What is ERP in warehousing?

ERP in warehousing refers to the integration of warehouse management functions into the overall enterprise resource planning system, which includes other business functions such as accounting and human resources.

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