A warehouse management system (“WMS”) is the software program a business uses to manage and track products as they are received, stored, and shipped from the warehouse. A WMS is a robust tool that aids in effective and efficient warehouse configuration. It takes into account slow- and fast-moving items, products with expiry dates, kitted items, and other specific product considerations. Most notably, a WMS supports the processes of receiving, picking, packing, and shipping, with automated directions, specific locations, and preconfigured options. All WMS functionality contributes to eliminating human error.
Some common keywords and features that you’ll see in a WMS include:
A WMS can be a manual in-house solution, which may include self-made warehouse maps, manually-developed putaways and pick lists, printed documentation, and spreadsheets to keep track of incoming, stored, and outgoing inventory. However, manual warehouse management has minimal capabilities, leaves room for human error, and limits access to only one or a few employees.
A Warehouse Director or Director of Operations clearly needs access to a WMS to properly configure the warehouse layout, direct putaways, manage inventory locations, create picks, and establish control procedures (e.g. cycle counts). What may be less obvious are the additional employees in an organization that require access to a WMS:
A standalone WMS can increase efficiency in completing everyday warehouse operations. However, inputting information is still a manual task, and sharing information between multiple warehouses is difficult.
Having a comprehensive WMS ensures smooth operations without a second thought. A WMS that integrates with your e-commerce platform, other warehouses, and other enterprise management systems (e.g. order, inventory, and shipping) allows all systems to communicate with each other and gives you a birds-eye view of operations.
With the right WMS, backend operations can be optimized to eliminate human error, identify cost-saving opportunities, and provide real-time information to ecommerce platforms and your employees.
A WMS that automates processes has many benefits:
Accurate inventory information
Accurate inventory information is critical to staying on top of your warehouse operations. A 2020 survey by Kenco found that 47% of companies rank visibility of inventory levels and availability as their top priority. Why does inventory visibility rank higher than other facets of backend operations? Simple; significant cost savings can be found within inventory accuracy.
Greater inventory accuracy drives:
Inventory must be tracked during each step of the fulfillment process. From the moment product enters the warehouse until it is shipped out to the customer. Real-time inventory information is possible with certain WMSs and allows your eCommerce website to stay up-to-date to avoid backorders and stockouts. Notifications can even be set to alert the purchasing team that a certain product needs to be reordered before it sells out.
Order accuracy and customer satisfaction
Order accuracy and customer satisfaction go hand-in-hand. Let’s start with how you measure order accuracy. Take your total orders fulfilled accurately divided by total orders filled, then multiply that number by 100. With better backend operations, you will attain a higher order accuracy rate and spend less money on returns. The result is a better customer experience and a higher rate of customer satisfaction.
59% of customers that had a bad experience with a retail company decreased or completely stopped purchasing from them. As a retailer in a competitive environment, it’s critical to retain customers through order accuracy, preserving revenue, and minimizing new customer acquisition costs.
Order throughput is just as important as order accuracy. As the saying goes, “time is money”. Poor inventory organization, team members waiting for directives, lack of sufficient packing space, or several other factors can all lead to time wasted fulfilling orders. There are a number of KPIs that can be calculated to measure order throughput, including internal order cycle time, order picking accuracy, and dock-to-stock time.
Tracking these KPIs over time can assist in finding where/how the fulfillment process can be improved.
Having a WMS that can optimize your inventory organization with customizable criteria, uses barcode scanning, creates automated putaways and pick lists, and has unlimited users and roles can greatly maximize your order throughput.
Every business wants to keep costs as low as possible. With a homegrown warehouse management solution, it can be hard to identify areas that can be better optimized in order to lower your costs.
Cost savings in warehouse management start at the beginning with warehouse layout and organization. Some questions to ask yourself are:
The faster your employees can find the items they need, the less time they will waste in the fulfillment process. This in turn moves products faster, leading to less storage time and overhead costs. The end result - saving your company money.
Another area where companies can realize significant savings is in shipping. Researching information on countless shipping carriers for various products is time-consuming. Plus, how do you really know if you’re getting the best rate? Having a WMS that instantly rate-shops across multiple shipping carriers can save you time, money, and sanity. Having shipping functions further integrated with your eCommerce platform, allows your customers to receive tracking information on their package, increasing customer satisfaction even further. 70% of consumers said that the ability to track orders was one of their top three considerations when purchasing online. Who can blame them? We all want to see when our orders will arrive!
Knowing the countless benefits of a WMS and the tools it provides, the next step in the decision-making process is asking yourself how much you are willing to spend to improve warehouse operations and if the ROI is acceptable to your company.
Warehouse management systems have various pricing structures, as each system is unique.
Open Source vs SaaS
One of the first things to consider when choosing a warehouse management system is the needs of your company in the short- and long-term.
Software-as-a-Service (“SaaS”) is defined as a licensing software model, where access is provided on a subscription basis. SaaS systems generally have lower recurring monthly charges, are faster to implement, and offer community-based tools and training (given all customers are using the same functionality). However, SaaS software tends to have severe limitations for unique workflows, difficulty integrating with new software, and capacity issues when a company continues to grow. Many SaaS WMSs may have robust functionality in narrowly defined areas or workflows, such as tracking stock, but lack customization or the ability to go deeper in a functional area (e.g. tracking stock by batch, lot, or expiration date). Finding the right SaaS WMS provider that meets your needs in the short-term is possible. However, if you have a business that has unique workflows, disruptive characteristics, or a general long-term perspective, this may require customization of a WMS. In this case, you should research WMSs that offer access to the source code.
An open source solution is defined as a software that is distributed with its source code, making it available for use, modification, and distribution with its original rights. Purchasing an open source software will allow a development team to go in and make customizations to the program's modules, integrations, and capabilities if needed. Typically, open source software is a one-time charge, unless any additional work needs to be completed by the provider’s development team. Open source software is much more flexible than SaaS and better suited to unique companies with a long-term roadmap on how to build out the software or those with high growth ambitions.
For companies with short-term time and resource constraints, but long-term ambitions, SkuNexus is the perfect blend of SaaS and open source. SkuNexus customers can get up and running immediately on a SaaS plan, but then switch to open source whenever they need. The SkuNexus team serves as a constant advisor on solution design and development, no matter which plan you choose.
Now, let’s take a look at other cost factors associated with SaaS warehouse management systems.
When looking at the pricing structures of potential WMSs, pay attention to whether or not each software has a separate fee for implementation. Some providers charge an additional implementation fee, which is variable depending on your company's requirements for configuration, integrations, and training. This is important to understand upfront, as effectively all eCommerce companies will require integration with other systems, including one or multiple eCommerce platforms and other backend management systems. Other providers, like SkuNexus, absorb the cost of implementation into their overheads and create the necessary integrations and configuration without an additional fee, so long as no custom development is involved.
Licensing fees may be charged monthly, quarterly, semi-annually, annually, or in other increments. Some companies may break down the licensing cost by user but allow for unlimited warehouse locations. Others may charge by the number of warehouses but allow for unlimited users. If you need unlimited warehouses and users, SkuNexus has a solution for that, too.
Aside from the number of warehouses and the number of users, other factors that can determine licensing fees are:
Having a WMS that satisfies your current needs and allows your business to grow is imperative to the overall success of your company. Given that it’s an area for substantial cost savings and optimization, warehouse management is not the place to cut corners.
The Return on Investment
How do you calculate the ROI for a WMS? The return on investment is seen over time in terms of increased revenue and order throughput due to:
Calculating the net benefit of all of these factors divided by the amount spent for your WMS will give you the WMS’ return on investment. Beyond the ROI, a good WMS can give you peace of mind that your backend operations are running not only efficiently, but also consistently, guaranteeing continued benefit.
Any and every company that has products in a warehouse or smaller space (such as an office, garage, or spare room) can benefit from a warehouse management system. No matter which industry you may be in, a WMS can provide accurate inventory information, increase order accuracy and customer satisfaction, decrease order throughput time, and identify where to cut costs and save money.
Take a look at just a few of the industries that benefit greatly from having a robust WMS:
With the apparel industry booming, and global revenue increasing 10.59% over 2021, staying competitive in the market is imperative to having a successful business. Having an eye-catching storefront and to-die-for products is only a portion of what it takes to keep your customers coming back.
A WMS provides a multitude of benefits for companies in the apparel industry including, but not limited to:
Food and Beverage
According to a Research and Markets report, the global food and beverage market is expected to grow at a compound annual growth rate ("CAGR") of 6.1% and will reach $7.5B in 2023 and $11.9B by 2030. With the industry and revenue growing at this rapid rate, the costs of acquiring, storing, and shipping food and beverage items will continue to increase accordingly. This makes it critical to leverage a warehouse management system to save money wherever possible.
Many factors need to be considered when warehousing perishable items, including:
A comprehensive WMS, such as SkuNexus, gives you the ability to manage these factors and provide value to your business through:
Pharmaceuticals and Medical Supplies
Pharmaceuticals and medical supplies will always be in demand, and are more important now than ever, as we have seen in the last couple of years. Similar to food and beverage retailers, medical suppliers need to be mindful of items with expiration dates to ensure on-time delivery of quality products. Though not all medical supplies have an expiration date, moving inventory in an efficient manner through your warehouse increases profitability and can be achieved through:
To build a PC, you need a minimum of seven main components, and that’s just for the basics. The electronics industry is one of the most innovative and deserves robust backend software to fulfill its specific complexities. To keep track of all of the high-value inventory circulating through the warehouse, a WMS needs to have these capabilities:
No two WMSs have the same functionality, user interface (“UI”), integrations, and customizability. However, as you research potential WMSs for your business, there are baseline features that you should confirm are included.
Warehouse Configuration and Layout
Successful backend operations start with warehouse configuration and a warehouse layout that makes sense. If the warehouse is disorganized, with a layout that’s not optimal for picking and packing, time and money are wasted during the fulfillment process.
Make sure your WMS can allow for warehouse configuration through the use of:
Once a warehouse is properly configured, you can optimize warehouse layout by putting like items and kitted items close together, fast-moving inventory in an efficient location for picking, and bulky items in areas with easy access.
The process of receiving inventory is made significantly easier with a warehouse management system like SkuNexus, as opposed to a manual solution of tracking incoming inventory via spreadsheets. With a WMS, processes can be automated and eliminate human error.
At a minimum, a WMS should:
As inventory is a large portion of business costs, having accurate inventory information is paramount to business success. When businesses upgrade to an inventory system from a homegrown solution, they see an average of a 25% increase in overall productivity, a 10-20% gain in space use, and 15-30% more efficient use of stock.
Robust inventory management features within a warehouse management system include:
Customizable inventory attributes, such as expiration dates, which dictate fulfillment workflows (e.g.first in, first out (FIFO) method). When dealing with pharmaceuticals or perishable items, warehouse configuration can be set so the warehouse team picks those items nearing expiration first. Additionally, in some systems custom notifications can be set so you’re alerted to inventory that needs to be disposed of and added to inventory waste.
Pick, Pack, Ship
Getting orders out the door in a timely manner with 100% accuracy is key to keeping your customers satisfied with their complete and correct orders for each delivery. The average picking error rate is about 1-3%, which doesn’t seem too intimidating, but when you factor in the cost of each error, you’ll realize this is one area of improvement that can significantly impact profits. When choosing a WMS, make sure the system optimizes picking, packing, and shipping with:
Cycle counts are a way to confirm that the inventory in stock matches the inventory level in the WMS. These are important to run at least once per quarter, to ensure stock is up-to-date and allows for reporting of any stolen or damaged goods. WMSs should not only include cycle count functionality, but also:
If you’re deciding on a new warehouse management system, or evaluating the use of your current WMS, you’re going to want to make sure you’re getting the most bang for your buck. Follow these three tips to get the most out of your WMS:
1. Let the automation take care of business
Each WMS is different and can automate different facets of warehouse management. Automation improves operations by eliminating human error. Having decisions made for employees automatically streamlines processes, which saves you time and money by lowering overhead and error costs.
Having automatic order decision rules in place is a must, especially if you have multiple warehouses. This allows you to automatically route incoming orders to the nearest warehouse, the warehouse with the highest stock, the warehouse with the closest expiry dates, etc. This eliminates the need to manually select the warehouse for each order and closely aligns fulfillment methods with business limitations and goals.
If your WMS has waves functionality, creating these automated pick lists can up your fulfillment game. Waves allow you to assign particular team members to pick a set of orders that include products with similar attributes, such as those including the same SKU, being sent to the same destination, or being shipped via the same method. Waves can be set to be created on any day of the week, at any time of day, and for any length of time, to guarantee orders are picked and packed to be sent out exactly when they need to be. Truly a set-it-and-forget-it functionality.
Relying on your WMS to take some of the load off your plate not only saves you time and sanity, but also streamlines and leads to error-free operations. Kick your feet up, set up the automations, and watch the positive impact happen.
2. Identify areas for improvement and cost savings
There’s a wealth of information that you can learn from a WMS like SkuNexus, including areas that need improvement and areas where you can be saving overhead costs. Knowing the following pieces of information can greatly increase your warehouse's success:
3. Take advantage of customer service
This one may seem like a no-brainer, but take advantage of the customer service that your provider offers! You’ll never know the answer until you ask. Some common questions to ask a WMS provider revolve around: