You are running a business that sells physical products, which means that you need a distribution center, fulfillment center, or warehouse to store them. There are various ways to do it – buy some land, build or lease a facility, buy equipment, hire staff, and find customers to buy from you. But things don’t stop there because proper warehouse management is one factor that directly affects your business success. You need a warehouse that operates efficiently – otherwise, you’ll be stuck with high logistics and operating costs, a low-profit margin, ineffective leadership, poor performing staff, and damaged customer relationships.
Implementing a good WMS (Warehouse Management System) software is the right thing to do because it can help boost your warehouse efficiency in many ways. But before embarking on this path, you must be sure that you’ll achieve substantial business benefits by investing in a WMS. If you’re wondering how to choose a warehouse management system, our comprehensive guide is here to provide answers to most of the questions you might have.
What is Warehouse Management?
Warehouse management refers to controlling and optimizing warehouse operations and storing goods from the moment they enter the warehouse until they’re sold, consumed, moved to another location, or become obsolete. The objective of warehouse management is to coordinate all warehouse activities and processes as effectively and efficiently as possible.
What is a WMS (Warehouse Management System)?
WMS software is designed to help optimize warehouse operational processes. By implementing such a system, you’ll gain full visibility into staff productivity, real-time inventory levels, order fulfillment workflows, and demand forecasting within your warehouse. WMS programs are important because they eliminate guesswork and manual processes. At the same time, they streamline processes that save time and provide an accurate picture of what’s happening inside your warehouse (without you having to perform continuous audits). The information warehouse managers get from their WMS helps them track progress and identify areas for improvement to drive optimizations throughout the supply chain.
Each warehouse management solution is unique because they have different functionalities deployed depending on the business they serve – what a brick-and-mortar store chain needs is not the same as what a direct-to-consumer eCommerce seller needs.
When is the Right Moment to Choose a WMS System?
The increasing market demands and availability of new technologies are driving rapid change across industries. The idea of having a business system delivered as a cloud service still feels new to some business owners and can be somewhat daunting. Cloud based WMS software solutions are no exception, but you shouldn’t wait until your warehouse becomes inefficient and no longer competitive to determine whether you need an excellent WMS system. You need to keep pace with emerging technologies and industry trends such as dropping margins, increased competitive pressure, or rising customer expectations. Introducing advanced warehouse automation management technology is an essential step towards increased competitiveness in a challenging market.
Warehouse efficiency is a critical factor in achieving peak performance and effective supply chain management. By installing the right warehouse management system and realigning how the warehouse interacts with your customers, employees, and vendors, you can streamline its operations while achieving a high ROI.
The Most Important Warehouse Management Processes
Warehouse management is a part of your supply chain management strategy that affects order fulfillment, item storage, inventory management, shipping, and distribution. With a comprehensive, all-in-one WMS solution, you can see what’s going on across various functions of your warehouse in real-time. The most important processes you should be able to track with your WMS include:
- Inventory tracking. It refers to monitoring your SKU levels, so you know which SKUs are there in the warehouse, where they’re located, and whether they are in transit from the manufacturers or on their way to a store. Inventory tracking lets you know many goods are ready to be shipped if someone ordered them right now and when you should order more (based on projected volume). Inventory accuracy and tracking become more critical as the business grows (increase in product lines, expansion into new locations, and quicker inventory turns).
- Picking and packing. These are the two core warehouse functions, and a WMS should generate pick lists for each warehouse picker to retrieve goods in the most efficient way. That may include batch picking, wave picking, and zone picking. The picker gets a packing slip of the products ordered and storage locations at the warehouse. Once an order is picked, it finds its way to a packer responsible for placing the items in a poly mailer or box, adding in needed packing materials, and placing a shipping label on the box.
- Receiving and stowing. The receiving process involves the ability to receive freight or inventory from trucks at warehouse loading docks and then stowing them away in appropriate storage locations. A WMS should be able to in each of the new boxes received with their inventory quantities.
- Shipping. Your shipping carriers will pick up orders from your warehouse to ship packages to customers. When an order gets shipped, your WMS will automatically send order tracking information back to your store so your customers and you can track shipments.
- Reporting. A WMS system should provide inventory and operational reports across the warehouse, including orders shipped on time, total orders fulfilled by the hour, fulfilling orders, and more. These reports help improve inventory forecasting and understand staffing needs and labor management. If you run a high-growth eCommerce business, you will experience growing fulfilling orders and need the right warehouse management system to support that growth. With a modern warehouse management system, you will get the necessary tool to support your order volume today as well as projected growth. Proper warehouse management system supports by:
- Enabling logistical growth. Warehouse management should choose the appropriate technology, warehouse space, the right delivery options, and shipping carriers to meet their future growth (without immediately outgrowing the space). Doing this helps you receive inventory efficiently, pack boxes faster, and deliver more orders.
- Better storage allocation. Each SKU should be stored in a separate dedicated location that makes the most sense of the warehouse layout and item in question. Your WMS helps you pinpoint the exact SKU location and keeps tabs on inventory levels, so you don’t run out of stock or space.
- Faster package processing and shipping. The right WMS can make your operations leaner. There are stations designated in each warehouse area for each stage of the fulfillment process. To maximize their output, each fulfillment worker is focused on one task per shift. The faster the work is done, the sooner the goods will head out.
What to Ask Yourself before Choosing a WMS?
To choose the right warehouse management solution, you will need to identify which of your company’s needs, processes, and goals needs improvement. You can do that by answering the following questions.
- How are warehouse inefficiencies negatively affecting my business?
To know which WMS software is right for your business, you need to know the areas of improvement in your warehouse operation. Look for any inefficiencies in your supply chain or in your warehouse building where the staff is forced to take extra steps to complete a task.
- What functionality do I need to pick, pack, and ship orders accurately?
Determine which functionalities you need in order to accurately pick, pack, and ship your orders (as well as which functionalities you don’t need).
- How can I integrate my current system with my eCommerce initiatives?
Even though eCommerce isn’t anything new, not many long-established warehouses were prepared for the evolution that eCommerce expansion brought to the industry. Integration of your warehouse with eCommerce initiatives in one way to bring your warehouse operation up to speed. How well your current system fulfills your eCommerce customers’ needs. Detect gaps in your eCommerce supply chain and fill them with functionalities of your new WMS.
- What data do you need to make the right decisions?
Without data, you cannot make smart strategic decisions. Your new warehouse management system can equip you with more reliable data and better data. However, there’s more to be done than merely adding new technologies to your current operation. You need to understand the problems you aim to solve with the new system and the visibility you want that system to bring.
Steps to Choosing the Right WMS
Once you have decided that a new WMS is what you need, you should know about these essential steps to help you choose which solution is the best fit.
- Calculate ROI
The justification process helps you set the right budget for your WMS project and concentrate on the essential functionalities rather than on ones that are only nice to have. When choosing your WMS vendor and software, you need to calculate the ROI, and the key areas to consider are:
- Improved customer service and greater pick and dispatch accuracy.
- Improved traceability – a warehouse management system should provide two-way traceability.
- The potential for increased cost savings and productivity through improved space utilization, equipment, and labor.
- The potential for a warehouse management solution to reduce errors, enable perpetual inventory counting, and provide real-time information (ultimately improving stock accuracy).
The more daily transactions, the greater the potential for ROI. Make sure that the WMS vendors you approach indicate which prices are variable and which are fixed. Summarize all the costs showing the initial outlay, and then summarize the costs for 1-5 years with accumulated totals. Be sure to factor in infrastructure and hardware costs.
- Understand your current systems and analyze them
If your ERP solution or business system already incorporates a WMS module, you should analyze it first. Typically, any shortfalls in functionality are outweighed by reducing the risk of systems not accurately and reliably interfacing with each other.
- Evaluate WMS vendors and their development capability
Because of the package nature of the WMS market, in-house development is not always viable. It’s viable if the WMS solution’s overall requirements are particularly specialized or require specialized integration with current in-house systems.
- RFI (Request for Information)
Prepare a short RFI document where you should describe your business, warehouse, future business direction, and plans for the warehouse. Also, describe what you want to achieve with the warehouse management system. Provide information such as the number of daily transactions, and indicate any significant peaks across the day/week/month. Within the RFI, ask the WMS vendor for implementation time frames and budget costs. Ask for information such as company history, financial history and status, client list, number of sites using their WMS products, development plans, support coverage, and track record.
At this stage, you should also decide whether to rent the software and operate it on a third-party platform or buy the software and hardware. A cloud based SaaS WMS is an application developed, maintained, and hosted by a third-party software provider. Companies that enter a partnership with third-party logistics (3PL) providers often get access to cloud WMS software provided by the 3PL.
Ultimately, it would help if you ended up with a shortlist of 3-5 WMS suppliers. At this stage, price isn’t the primary criterion, but it can be used to rule out WMS vendors that exceed your budget. Arrange to meet the vendors for an informal meeting. Those meetings will help you get a feel of how professional they are and how carefully they respond to your needs. Ask them to provide a tailored demonstration in which they’ll focus on what’s important for your warehouse operation (it might be kitting and assembly, or pick face replenishment).
Advantages of Warehouse Management with a 3PL
Since warehouse processes can get so expensive and complex, many businesses decide to outsource their fulfillment process to a 3PL provider. These companies run their own fulfillment centers (unlike on-demand warehousing companies that find warehouses with extra space) and have standardized warehouse management across all of them. Some key advantages of working with a professional 3PL company include:
- Time savings
The result of outsourcing eCommerce order fulfillment services from a third-party logistics company is huge time savings. It eliminates the most time-consuming logistics tasks and the stress of managing a warehouse. While the 3PL takes care of inventory storage, shipping, replenishing supplies, returns, etc., you can monitor the warehouse performance and analyze the data to make better business decisions.
- Real-time insights
As we already mentioned, just because you’re not present in the 3PL’s warehouse doesn’t mean you cannot monitor it. Thanks to the technology they provide, you will be able to see your inventory flow along with all the details. You can search orders by the destination country, tracking number, the number of items contained, filter by fulfillment center location, sales channel, and get full transparency into the performance such as orders fulfilled on time, fulfillment speed, and more.
- Larger geographic footprint and multiple warehouses
When companies run their warehouse, it means they’re only shipping from that one location. Third-party logistics companies have several fulfillment centers where businesses can keep items closer to more customers. Having warehouses on both coasts is a must if you ship nationwide. By reducing the distance traveled, you will be able to meet customer expectations around 2-day shipping.
- Better utilize the warehouse space
If your business is about to outgrow its warehouse space, team up with a 3PL, and you won’t have to worry about that issue anymore. Once you outsource fulfillment to 3PL, you can let the lease on your old warehouse end or repurpose it to focus on other aspects of your business (e.g., growing your wholesale or B2B eCommerce fulfillment channels in-house). With a 3PL, you’ll pay only for the warehouse space you need and won’t have to worry about outgrowing the space you are paying for.
- Logistical optimizations
Third-party logistics companies work with dozens of companies, from high growth brands to seasonal brands (and everyone in between). It means they have tons of data and do everything from forecast demand and inventory to analyzing shipping zones. Continuously collecting data and learning from it helps optimize each warehouse for maximum efficiency and reduce transit times and shipping costs. All of these factors can help your business grow.
Make Your Pick
The essential features you should look for in warehouse management software are:
- Scalability to accommodate future business growth.
- Integration with advanced barcoding and radio-frequency technologies.
- Real-time inventory updates.
- Complete back-office integration with Purchase Orders, Inventory Control, and Order Entry modules.
- Browser-based interface.
- Advanced reporting capability.
- Compliance labeling and ASNs.
- Support for multiple picking methods.
- Automated inventory receipt and put-away.
- eCommerce capability (including B2B EDI support and web store integration).
Warehouse management system software needs to accomplish a lot more than just organizing and managing a warehouse. Business leaders and execs expect a WMS to help make workflows transparent, reduce costs, and optimize warehouse processes. International corporations call for a WMS that can control the flow of goods with only one software version in multiple languages and across borders, with each subsidiary or individual site having different sets of requirements.If you need help with your warehouse operation and supply chain management, Red Bird Logistics can step up as your 3PL partner and boost your warehouse efficiency and productivity. Reach out to us today!