Warehouse Management Systems: How WMS Logistics Works
by Jaidyn Farar
Warehouses and fulfillment centers are crucial to supply chains, facilitating the flow of goods from businesses to customers (and sometimes back again). But with so many moving parts, it can be difficult to know if your logistics centers are operating as efficiently as possible. As one frustrated warehouse manager put it, an unorganized warehouse is “like a game of hide and seek, but nobody's having any fun.”
That’s where warehouse management systems come in. With warehouse management technology, businesses can optimize their use of labor, space, and equipment to drastically improve the order fulfillment process.
In this article, you’ll learn how WMS logistics works, what a WMS can help with, and how you can choose the right system for your business.
What is a warehouse management system (WMS)?
A warehouse management system (WMS) is software that businesses use to oversee and manage their daily fulfillment operations. One of its most important functions is providing real-time inventory visibility, which allows companies to see exactly where products are located, both in and out of the warehouse. Additionally, a WMS helps with tasks like receiving and putaway, storage, picking, packing, and shipping.
The main goal of a WMS is to improve the way a business uses its available resources, including human labor, equipment and technology, and storage space. By facilitating the smooth flow of goods into and out of warehouses, warehouse management systems ensure that stock doesn’t get lost and orders are fulfilled accurately.
Warehouse management and the supply chain
Whether you’re storing backup inventory or distributing products to customers, the way your warehouses are run plays a major role in supply chain efficiency and customer satisfaction.
To meet supply and demand, you need to have products in the right place at the right time. This requires carefully coordinating the transportation and storage of inventory. If you have high sales volumes, a WMS is crucial for streamlining warehouse processes and getting products into your customers’ hands.
One of the most valuable features of a WMS is its ability to integrate with other business and supply chain technology, including enterprise resource planning (ERP) systems, customer relationship management (CRM) systems, shipping systems, and yard management systems.
Main features and functionalities of a WMS
The main purpose of a WMS in logistics is to help you move products into and out of warehouses quickly and cost-effectively. Warehouse management systems have a variety of features that help with warehousing and fulfillment processes.
Warehouse design
Using warehouse space more efficiently is a major business priority for 91% of supply chain leaders. Warehouse management systems come with features to help with warehouse layout and design, ensuring that no floor space is wasted. This can cut down on warehousing costs such as rent and utilities.
In addition to making the best use of available storage space, effective warehouse design has another advantage: when SKUs are properly organized, pickers spend less time traveling through the warehouse to find products. This leads to fewer bottlenecks and faster picking. A WMS can help you create the optimal warehouse layout, distributing inventory amongst shelves, racks, and bins so that frequently picked products are easiest to access.
A WMS also comes in handy when you sell goods that may require specific storage requirements. For example, a WMS might suggest storing perishables, fragile products, or large products in specific zones of the warehouse.
Receiving and putaway
When a warehouse receives an inbound shipment, a WMS provides instructions for where to store the new goods. After workers perform quality checks, they’ll be guided to the appropriate racks, shelves, and bins to store the new stock. These storage locations could be fixed—the same item always goes in the same place—or dynamic, with storage locations changing based on demand. To speed up the receiving and putaway process and reduce errors, a WMS can integrate with technology such as handheld barcode scanners and RFID systems.
Inventory management
A WMS provides real-time visibility into inventory levels, locations, and movements within the warehouse. The WMS stores the location of every product in the warehouse, making it easy to know exactly how much you have and where everything is located.
Warehouse management systems support inventory management in several ways. They reduce the risk of overstocking or stockouts by showing which products are most popular. They also decrease the chances that products will get lost. Finally, a WMS can help prevent waste due to products expiring by alerting you when stock is nearing its expiration date, allowing you to prioritize selling those items.
Picking
As you already know, one of the biggest benefits of warehouse management systems is knowing where every product in the warehouse is stored. This is essential when it comes to picking. A WMS can integrate with technology that helps workers identify the location of products, including barcode scanners, RFID tags, pick-to-light systems, or voice-picking systems. When a new order comes in, the WMS will create a pick list and suggest the fastest route through the warehouse, helping minimize travel time. You can also set your WMS to support zone, batch, and wave picking, as well as other picking methods.
Labor management
Although we might wish that every warehouse and fulfillment center ran like clockwork, that’s simply not the case. Things change from day to day and week to week as demand fluctuates up and down. A WMS makes it possible to scale up or down with these changes, especially when it comes to your staff.
Taking into account shift preferences and labor laws, the system can create schedules that align with the busiest and least busy times in the warehouse. It can even help with recruiting by identifying when you’ll need more staff, allowing you to hire or cross-train workers.
Warehouse management systems also track worker performance. They can show how many orders a worker picks or packs, or how long they travel within the warehouse. This keeps employees accountable and gives managers the information they need to improve productivity.
Reporting
Reporting allows you to measure warehouse performance and understand how stock is moving. By evaluating historical data, you can better plan for the future, including high-demand periods like peak season.
Without a WMS, you’re stuck with manual reports and spreadsheets, which quickly become cumbersome. On the other hand, when you have a warehouse management system, it’s easy to monitor things like the following:
- Stock level of each SKU by warehouse location
- Inventory accuracy
- Status of shipments
- History of purchases from suppliers
- Supplier performance
- Expenses, including wages, maintenance, and materials
Just as importantly, warehouse management systems allow you to measure metrics directly related to customer service. The top three recorded warehouse metrics in 2024—order picking accuracy, order lead time, and on-time shipping—all relate to the delivery experience. If you don’t know how you’re performing in these areas, you might struggle to retain customers.
Types of warehouse management systems
Choosing the right WMS company can be tricky. With so many vendors out there, you’ll need to carefully research the pros and cons of each solution, having lots of conversations with both vendor representatives and internal stakeholders.
A good first step is determining whether you need a cloud-based or on-premise solution. Read on for some advantages and disadvantages of both types.
Cloud-based WMS
A cloud-based WMS is hosted on remote servers, accessed via the internet, and paid for with a monthly or annual licensing fee. If you use a cloud-based WMS, you can manage your warehouse operations from anywhere with an internet connection.
The main benefit of a cloud-based WMS is that the vendor manages the infrastructure. This means that your business doesn’t have to invest in specialized hardware, software, and a team of IT specialists to manage the system. Other benefits of a cloud-based system include the following:
- Quick implementation. Cloud-based systems can be up and running within weeks, whereas on-premise systems can take months to implement.
- Vendor-managed upgrades. If the system needs to be upgraded, the WMS provider will handle everything, saving your internal team time and money.
- Scalability. Cloud-based systems are known for being scalable and flexible, allowing your organization to quickly adapt to sudden changes in demand.
One downside of cloud-based systems is that they generally have fewer customization options than on-premise systems. Because of this, large enterprises with complex fulfillment requirements sometimes opt for the on-premise version.
On-premise WMS
An on-premise WMS is installed locally on a company's own servers and hardware. This gives the organization direct control over the system, including customization and data security. However, it usually requires a significant upfront investment, ongoing maintenance, and dedicated IT resources for updates and troubleshooting.
Benefits of using a warehouse management system
Still not convinced of the benefits of using a WMS? Let’s review some of the most important advantages.
- Higher productivity. Using a WMS improves efficiency in picking, packing, and shipping. In addition to providing optimal pick routes and integrating with automation technology, a WMS makes it easy to measure KPIs and discover areas for improvement.
- Lower costs. When you use labor, equipment, and space more efficiently, costs go down. Warehouse management systems help lower costs by minimizing travel time in the warehouse, optimizing inventory levels, allocating labor, preventing product loss or theft, and more.
- Real-time inventory visibility. Warehouse management tools make use of integrations with business software to improve real-time inventory visibility. This boosts end-to-end supply chain performance.
- Reduced waste. A WMS reduces waste in two ways. First, it creates warehouse layouts that avoid wasting floor space. Second, it notifies you when perishable or time-sensitive products need to be sold so they don’t have to be disposed of.
- Better customer service. Warehouse management systems support faster, more accurate fulfillment. This in turn boosts customer satisfaction and loyalty, leading to more repeat business and fewer returns.
- Flexibility and scalability. A WMS can easily scale with the growth of your business, accommodating increased volumes and new warehouse locations. If your company is expanding quickly, a WMS is practically non-negotiable.
“Automating distribution centers is one of the best things we can do for the success of our business. I want to point out, this does not have to mean robots. There are many practical automations, software, and day-to-day hardware tools that can provide significant automation without investing in giant robotic projects.” — Jeremy Bodenhamer, The (Flex) Factor: Mastering Flexibility To Get Ahead in Logistics
Complete your WMS logistics with the right shipping platform
As vital as warehouse management systems are, they’re not the only technology you need to keep your warehouse running smoothly. Shipping software is another crucial component for high-performance shippers looking to improve supply chain efficiency.
EasyPost Enterprise is a suite of solutions that makes shipping easier at every stage of the process.
- Access over 100 carriers (use our discounted rates or keep your own).
- Generate labels and forms at sub-second speeds.
- Collect and analyze shipping data with a powerful analytics dashboard.
- Optimize cartonization, palletization, and loading.
- Bring in experts to consult on your next supply chain project.
Learn which EasyPost Enterprise solutions are right for you.