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Overview of 4 types of warehouse management systems

Modern companies need to create efficient warehouses, and understanding which type of warehouse system to choose is key to that. Here's a look at four types and how they can help.

The right warehouse management system will help improve visibility into inventory, boost order fulfillment and automate data collection.

In order to choose the right warehouse management systems (WMSes), it's important to first understand different types. There are four main types of warehouse management systems: standalone, as a module in supply chain management (SCM) software, as a module within an ERP system, and delivered as a cloud-based system.

Here's a look at all four.

Standalone WMS

Standalone warehouse management systems provide features that enable efficient day-to-day warehouse operations. Companies can use these systems to monitor and control supply chain flow from when goods arrive and leave the warehouse, as well as other important functions. Systems vary from vendor to vendor, but these functions may include a variety of inventory and operational features, including the following:

  • Receiving
  • Put-away
  • Replenishment
  • Expiration date tracking
  • Cycle counting
  • Picking
  • Slotting
  • Packing
  • Auditing and shipping
  • Expiration date tracking

Standalone WMSes may also offer advanced features such as cross-docking and advanced analytics.

Standalone WMSes typically do not feature broader supply chain functions but do contain important warehouse operations functions, said Sachin Misra, principal at Kalypso, a consulting company in Beachwood, Ohio. These focus on automating tasks around inventory management and warehouse operations so workers don't have to do manual entry.

Compared with a WMS that's integrated with a supply chain management system or an ERP system, a standalone WMS system may lack some of those integration benefits, Misra said.

Standalone warehouse management systems work particularly well for smaller companies that don't necessarily have full-blown manufacturing -- for example, a third-party logistics provider, Misra said.

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Outdoor gearmaker Sea to Summit North America in Boulder, Colo., the North American headquarters of the Australian company, is one company using a standalone WMS.

"Any company that has experienced an accelerated growth pattern, exponential growth pattern, from a small business to a medium-size business goes through the same growing pains that we went through," said Shaun Frazier, director of operations for North America.

Leaders at Sea to Summit North America decided the company needed a warehouse management system that would enable it to scale quicker and more efficiently, he said.

A standalone WMS has many, many other functions and focuses. They can be very dynamic and very customizable.
Shaun FrazierDirector of operations, Sea to Summit North America

"We were primarily on QuickBooks and we had manual picking, packing and shipping processes that involved a really arduous Excel spreadsheet-style pick list, which made things very challenging with inventory management," Frazier said. "It [didn't] allow us to really communicate back to our customers in a timely manner or give us a lot of trust in our [inventory] availability."

The company wanted a system that allowed it to automate those business functions, Frazier said. Sea to Summit ultimately opted for a standalone WMS from PathGuide because it bolted on to its SAP Business One ERP system and the WMS was also very customizable.

"We liked the standalone option because at that time [2015], at least, WMS was not the priority of most ERPs," he said. "A standalone WMS has many, many other functions and focuses. They can be very dynamic and very customizable."

WMS module in supply chain management software

An integrated supply chain management software system manages all the activities required to create and deliver a product, including inventory management, transportation and logistics. A WMS module focuses on the warehouse operations as part of that larger system.

A warehouse management module in supply chain software is generally not as full-featured as a standalone WMS but is likely to be more robust than a module in an ERP system, said Eric Kimberling, CEO and founder of Third Stage Consulting Group in Denver.

A WMS module in supply chain management software is best suited for companies that have complex supply chains, Kimberling said.

"For example, if you have a global supply chain with hundreds or thousands of vendors throughout the world, and you have to figure out how to get those products to different warehouses and distribution centers, and then you have to figure out manufacturing and get it to customers throughout the world, [this option is a likely choice]," he said.

Misra had a similar take.

Companies that have fairly sophisticated supply chains and are doing some level of manufacturing or some level of assembly or final assembly would want to use a SCM-based warehouse management system module, Misra said.

"They have to carefully manage the inbound materials, whether they're semi-finished goods or raw materials, and they have to orchestrate, based on the work orders that they receive, when they should have how much inventory of those components or ingredients in stock," Misra said. "So they'll typically focus more on managing the supply chain and running the demand forecast and the supply planning."

The integration of warehousing into the wider supply chain system is an important benefit.

For example, a company's order orchestration and fulfillment are directly tied into how its warehouse stocks components, ingredients, semi-finished goods or finished goods, Misra said.

"So you'll typically see these purpose-built supply chain [systems] that will focus on supply and demand forecasting and supply chain orchestration," he said. "And then they will also get into the deeper elements like, 'Hey, how do I actually manage my warehouse to fulfill what I'm executing across the supply chain?'"

WMS module within an ERP system

A WMS module as part of a larger ERP system is another option for warehouse operation automation.

Most ERP systems have some sort of warehouse management capability or module, but those don't provide the same level of functionality as the standalone WMS, such as high-volume distribution and cross-docking, or unloading goods from inbound delivery vehicles and loading them directly onto outbound vehicles, Kimberling said.

"If you have basic or vanilla enough warehouse and distribution processes, then WMS modules can work perfectly fine," he said. "But if you're a more complex distribution company and have more complex needs that go outside the scope of most ERP systems, then maybe a standalone bolt-on system can handle those needs better."

Cloud-based WMS

As with other enterprise systems, warehouse management systems began as on-premises systems. Today cloud-based systems are becoming more common.

On-premises WMSes, whether as part of ERP or a supply chain management system, require more internal resources to support and maintain the entire infrastructure, Misra said. What has emerged are targeted warehouse management systems that only run in the cloud, reducing the expense of managing and maintaining an on-premises system. Some of the ERP providers that have shifted to the cloud are providing that warehouse management functionality in their ERP applications.

"That's the kind of pivot that's happening for both medium and large enterprises," he said. "They're asking, 'Why would I spend the money managing this stuff when I can just get warehouse management as a service? I don't have to worry about all the expensive hardware and data centers and support staff and so on.'"

How to select a WMS

Here are some tips from the experts to help you select the right WMS for your organization:

  • Define your requirements. Look at what's working well in your warehouse operations and what isn't. Then find a system that allows you to preserve the things that are operating efficiently and also addresses the bottlenecks.
  • Look at your strategic plan for the next two to five years to determine how your company will grow over time and what its needs will be.
  • Research vendors and develop a list of potential vendors based on your current and future requirements.
  • Send an RFP to the vendors that includes your most important requirements.
  • After analyzing vendor responses, create a vendor shortlist.
  • Schedule demos of the vendors' systems. Ensure the demos are based on your specific processes, needs and requirements.
  • Reach out to previous customers to get objective feedback on the vendors' systems.
  • Determine how the vendors' systems compare to each other, looking at their strengths and weaknesses and which best meets your requirements.
  • Make a final decision based on functionality and cost.

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