Warehouse Management Systems (WMS) explained – Understand the Software that Drives Warehouse Efficiency

Transforming Warehouse Operations with Advanced Warehouse Management Systems

Explore how Warehouse Management Systems (WMS) revolutionize warehouse operations, enhancing efficiency, reducing costs, and improving customer satisfaction.

With same-day delivery and a super fast-paced business world, the need for efficient warehouse management cannot be overstated. At the heart of effective warehouse operations is a powerful network of hardware, software and people. At the heart of this management is one system – the Warehouse Management System (WMS). A WMS is a software application that supports and optimizes warehouse functionality and distribution center management. This article covers the intricacies of warehouse management systems and their indispensable role in modern enterprises.

What is a Warehouse Management System?

A Warehouse Management System (WMS) is a software that controls and manages the daily operations in a warehouse. Its main purpose is to optimize warehouse functions, manage warehouse personnel and inventory, and manage the distribution center from order to delivery.

The WMS accomplishes this task by providing key functions that enable product movement monitoring, inventory management, and warehouse tasks. These include tracking inventory levels and storage locations, handling inbound and outbound operations, and managing the picking and packing of orders.

In addition to these core functions, a WMS can also integrate with other systems such as enterprise resource planning (ERP) and transportation management system (TMS) to streamline and automate the entire supply chain management process.

Core Functionalities & Key Components of a WMS

  1. Inventory Management: This involves tracking and managing inventory in a warehouse, including receiving supplies and goods, managing stock levels, and monitoring the location and quantity of goods.
  2. Order picking and packing: A WMS supports order picking, packing and shipping. It streamlines these processes by providing real-time updates and offering the most efficient picking routes.
  3. Inbound and outbound operations: the system helps manage all inbound and outbound processes. For inbound operations, it monitors goods receipt, inspection and placement of goods in the warehouse. For outbound operations, it manages picking, packing and delivery.
  4. Real-time data collection and tracking: the WMS provides real-time updates on all warehouse activities. It collects and processes data quickly to ensure accurate and up-to-date information on inventory levels, orders, and shipping.
  5. Work management: the WMS can optimize work distribution by assessing task requirements and employee skills and making assignments that increase productivity and reduce inefficiencies.
  6. Reporting and analytics: the system offers robust reporting and analytics tools that provide insights into warehouse operations. This can be helpful in identifying trends, bottlenecks and opportunities for improvement.
  7. Yard management: This is about managing the yard area around the warehouse, including tracking and managing vehicles (such as trucks and forklifts) moving goods into and out of the warehouse.
  8. Space optimization: A WMS can optimize the use of warehouse space by determining the best storage locations for goods based on their size, weight and frequency of movement.
  9. Quality assurance: Some WMSs include quality assurance features, such as tracking batches and expiration dates, which can be particularly important in industries such as food or pharmaceuticals.
  10. Integration capabilities: A WMS can integrate with other systems such as enterprise resource planning (ERP) and transportation management systems (TMS) to ensure seamless data flow between systems and improve overall operational efficiency.

How WMS integrates with other systems (ERP, TMS)

A WMS is not a stand-alone system, but works with other systems such as the Enterprise Resource Planning (ERP), Webshops, Suppliers or more specialiced software like Transportation Management System (TMS). Integration with ERP ensures that data about orders, customers, and inventory is consistent and accurate across the enterprise. At the same time, integration with a TMS enables the WMS to efficiently manage transportation operations, coordinate inbound and outbound flows of goods, and ensure on-time delivery. The more integrated the WMS, the more powerful it is and becomes a centralized system that becomes a complete supply chain management solution that greatly expands the functionality of WMS systems.

The Benefits of using Warehouse Management Systems (WMS)

1. Better inventory management

Benefit: accuracy, real-time updates, reduction of overstocks and out-of-stock situations.

Using a WMS significantly improves inventory management. With features such as real-time tracking and automatic updates, it ensures accurate inventory management, minimizing overstocks and out-of-stock situations. This improved inventory visibility and control enables better planning and leads to more efficient order fulfillment and higher customer satisfaction.

2. Improved labor productivity

Benefit: Task optimization, reduction in error rate, reduction in training time.

A WMS plays a significant role in improving labor productivity. By intelligently assigning tasks based on priorities, required skills, and labor availability, it optimizes the use of labor. It also minimizes manual errors through automation and reduces training time through system-guided processes, resulting in a more efficient and flexible workforce.

3. Improved space utilization

Benefit: Optimal use of warehouse space, slotting optimization

Through intelligent slotting algorithms and organized storage systems, a WMS ensures optimal utilization of warehouse space. It allocates the most appropriate storage locations based on factors such as item size, weight, and frequency of movement, resulting in efficient space utilization and faster picking times.

4. Streamlined operations and reduced costs

Benefit: Automation, reduction in costs, optimal inventory levels

By optimizing workflows and automating manual processes, the WMS streamlines warehouse operations and significantly reduces operating costs. In addition, because the system is able to maintain optimal inventory levels, storage costs decrease, and improved picking efficiency reduces labor costs.

Improved supplier and customer relationships

Benefit: Better planning capability, more accurate delivery times, less out-of-stock.

With accurate and timely order fulfillment facilitated by WMS, companies can significantly improve their relationships with suppliers and customers. Suppliers benefit from accurate forecasts and on-time payments, while customers benefit from on-time and accurate deliveries, leading to increased satisfaction and loyalty.

Better decision making

Benefit: Faster decisions, more efficient stock management

With its robust reporting and analytics capabilities, a WMS provides invaluable insights into warehouse operations. Managers can use this data to make informed decisions about resource allocation, inventory management, and process improvements to improve operational performance and profitability.

Improved order fulfillment and customer satisfaction

Benefit: Faster fulfillment, less errors, increased customer satisfaction.

Procurement is another area where WMS can have a significant impact. By automating and streamlining the picking, packing and shipping processes, the time from order submission to delivery is reduced, increasing customer satisfaction. WMS also reduces order fulfillment errors by ensuring customers receive the right items on time, improving the overall customer experience.

Supply chain visibility and traceability

Benefit: Full traceability, real time supply-chain traceability.

One of the key benefits of a WMS is the heightened visibility and traceability it offers across the supply chain. The system allows for real-time tracking of goods, from receipt to dispatch, providing a clear and accurate view of inventory at any given time. This visibility extends to external processes, enabling seamless integration with suppliers, transportation systems, and customers, and ensures traceability of goods across the entire supply chain.

The future of warehouse management systems

The world of warehouse management is constantly evolving, and companies like Amazon push the limits of what is possible in managing extensive warehouses and increasing efficiency.

For some years now simple AI and machine learning algorighms enable advanced predictive analytics that allow for more accurate demand forecasting and optimal resource allocation for dynamic stocking and lowers inventory levels. The rise of Internet of Things (IoT) enabled real-time tracking of goods and equipment and robotics enabled the automation of most of the picking and packaging processes.

All these new trends improved the capability and potential of warehouses, making them more robust, efficient, and cost effective. For example, WMS system with AI capabilities can automate complex tasks and make intelligent insights-driven decisions, reducing manual labor and errors. Machine learning algorithms can analyze past data to predict future trends, enabling proactive management of operations and more.

In the future, we can expect to see greater integration of these technologies into the Warehouse Management Systems (WMS), leading to even more advanced, efficient, and automated warehouse operations. Especially with the increasing demand from customers for faster delivery, same day or same hour deliveries and the rising automation of the last mile, there will be a need for perfect integrations of WMS systems with webshops, ERP systems and trucks, drones or any other kind of systems.

Choosing the right WMS for your business

WMS selection criteria and requirements

There are several factors to consider when deciding on a WMS. These obviously include issues such as the size of your business, the industry in which you operate, and your future growth plans. Other factors include the complexity of your operation, the level of customization you want, your budget and existing IT infrastructure.

Important factors include:

  • Company size
  • Industry
  • Budget
  • Growth plans
  • Supply chain complexity
  • Fluctuations
  • Number of warehouses
  • Existing systems

However, it is also important to understand that even simple WMS systems can be helpful. Especially since larger systems are often much more complex and therefore cost more and require more training, one should carefully consider which are the really important functionalities. Easy integration with ERP systems (ideally the ERP already contains the WMS) as well as functionalities such as live stock management, inventory lists and picking lists. Other functionalities are always dependent on the company.

The process of implementing a WMS in a company

Implementing a WMS involves several steps. It begins with a thorough analysis of your current operations and identification of areas that can be improved. Next, you need to determine your specific needs and goals for the WMS – many fail at this. Only then does it really make sense to select a WMS vendor that meets YOUR requirements.

From experience: Many start to deal with “features” and then want systems that are expensive and extensive although usually only 5% of such systems are really used. Many features sound great but are mostly useless in practice and you pay for things you don’t use.

The following phases are about system configuration, testing, staff training and finally the implementation of the system. After implementation, regular checks and adjustments are necessary to ensure that the WMS is working as intended.

(Overcoming) Common challenges

There can be significant benefits to implementing a WMS, but there are also potential challenges. These include employee resistance to change, especially if operations are still classically run with paper and “I know where something is located.” In addition, there will always be technical disruptions or interruptions to operations during the transition period, which can quickly lead to resentment.

Clear communication about the benefits of the new system, comprehensive training programs, employee involvement in the process, active debate, a well-planned implementation schedule and ongoing support can help overcome these hurdles and ensure a smooth transition to the new system. It should be understood, however, that this process also often takes several months for the new system to be properly deployed and for processes to adapt.


Warehouse management systems have become an integral part of modern businesses who run warehouses in order to serve their clients. The right software can significantly increase productivity, reduce costs, and improve customer satisfaction. WMS can even provide real-time visibility into inventory, optimize labor management, maximize space utilization, and enable automation of many manual tasks and eliminate human errors in this process.

Selecting and implementing the right WMS can be a complex process, especially for companies that still run their operations with pen and paper. But in an era where efficiency and agility are the keys to success, a robust WMS is no longer a luxury, but a necessity for any company looking to optimize warehouse operations and achieve operational excellence and enable services like same-day-delivery or just in time delivery.

Author: Dr. Andreas Maier, CEO at SIX ERP

SIX ERP is a leading enterprise solution with transparent pricing and no hidden costs. Manage your full company with a single solution incl. Modules like CRM, HRM, Project Management, Warehousing, Sales Management, Invoicing, Accounting, and Payroll. What makes SIX ERP unique is the industry-leading speed, easy user interfaces, and a fast and efficient user experience. Every module is fully integrated, so all data is centrally accessible and connected. The best is that SIX is fully scalable, used by SMBs and global corporations, and we build on transparency. There is one price, no hidden costs, unlimited modules, unlimited users, and unparalleled scalability. You own the data, and we manage the servers, maintenance, and updates. Even if you have special requirements, you will not find a better ERP system that can be adapted and expanded to meet all of your specific needs — the right basis for your transformation and growth without the headaches of traditional ERP systems.

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