What is a Warehouse Management System?

There is sometimes confusion about what is a warehouse management system and what is an inventory management system. They are different but both are needed for the efficient operation of a distribution business. Wholesale distributors purchase goods from suppliers, stock these goods in warehouses and then sell them to customers. The inventory management system keeps track of the quantities of each product stocked by the distributor. What a warehouse management system does is help a distributor track and store goods at specified locations in the warehouse and then, as orders come in, pick the goods from these locations, pack them, and ship them to customers. So, what is a warehouse management system? It is an organizational and control system that facilitates the warehouse operations of PO receiving, PO put away, as well as the picking, packing, and shipping out of customer orders

Why Do Distributors Need Warehouse Management Systems?

Why does a distributor need a warehouse management system? A warehouse management system will organize and control all of the warehousing operations processes that take place in a warehouse. These warehousing operations can get complicated and are also very labor-intensive. They have to deliver high efficiency and work well even at scale, with few errors and quick turnaround. For distributors with high volumes of orders, a warehouse management system is designed to help maximize warehousing operations’ efficiency and throughput to fulfill orders and get goods to customers as quickly as possible. Efficient, low cost warehousing operations can often make the difference between the success or failure of a distribution business.

Warehouse Layout and Design

Let’s take a look at warehouse operations. To enable a warehouse management system to effectively systematize warehouse operations, the warehouse must first be carefully laid out. This involves configuring the warehouse shelving by aisle, row, and bins to maximize the available space and minimize the work needed to get the goods off the shelves and bins. A lot of effort goes into this warehouse layout. Once the warehouse is laid out by locations, products are assigned to specific locations. To reduce passes through the warehouse, high volume products can have multiple locations within a warehouse and users will need to track inventory levels of the products at each location.

Purchase Order Receiving

When purchase orders (POs) come in, the goods need to be first matched against the PO and a merchandise received form generated. This sounds easy, but in practice it is more difficult than it sounds. A Warehouse management system has to deal with suppliers that may deliver a single PO in multiple shipments. For big POs, suppliers will often send PO lines as and when they’re ready, rather than holding all lines until the complete PO is done. In addition, if the goods are coming in packed in a container, lines from several different POs could easily be combined in a single container to solve space and weight constraints. A warehouse management system needs to be able to cope with all such variations, including tracking the multiple landed costs (e.g., ocean freight, insurance, import tariffs, clearing, transport) associated with POs.

Purchase Order Put-Away

When the received goods have been verified against the PO and the supplier documents, they need to be moved to their put-away locations. They could also be moved to staging locations or cross-docked if they are going right out again. Also, depending on the warehouse layout, the two processes of (1) receiving and verifying the goods against the PO and supplier documents and (2) putting the goods away to their assigned locations in the warehouse, may be done serially or together. Larger businesses typically do these two processes separately while for small businesses they are often done together. A warehouse management system typically manages all these types of process variations.

Picking

Once the goods are in their bin locations, the next step is to “pick” them from the shelves to fill customer orders. Customer orders can be picked one at-a-time or in batches. Because warehouses can be large, there could be a lot of wasted effort in picking orders one at a time, as the pickers would have to traverse the whole warehouse for each order. If orders are batched, the picker can traverse the warehouse once and fill several orders. However, a lot of care has to go into how to batch the orders to make sure pickers don’t get in each other’s way or that forklifts, and other machinery are not impeded or hold up picking of specific orders. That is where a warehouse management system can make a major difference.

Packing

Once picked the goods for each order have to be packed and packing slips created for each box. This again is more complicated than it sounds. A Warehouse management system can keep track of the different packing requirements if the goods are to be shipped by common carriers as small parcels, or as part of LTL (Less than Truck Load) or FTL (Full Truck Load) shipments or using the distributor’s own trucks. All this is further complicated if some orders require cold storage or contain hazardous materials such as chemicals that have specific packing and labeling requirements.

Shipping

Even if shipping is done using common carriers, there are meaningful cost differences and delivery times for different carriers and different carrier services. A warehouse management system can facilitate rate shopping against multiple carriers and services. The same is true if the goods are to be shipped by LTL or FTL carriers. If goods are delivered to customers using the distributor’s trucks, then the orders have to be organized in loading sequence and the trucks have to be loaded by delivery route.

Back Orders

For goods that are out-of-stock, back orders (BOs) get created. The warehouse management system has to keep track of these BOs and decide which get filled when POs are received in. This BO filling can be done in strict chronological order, or better systems allow various other types of user prioritizations.

Wireless Warehouse Management Systems

Many warehouse management systems are completely wireless. These allow warehouse workers to carry out the PO Receiving, PO Put-Away, Picking, Packing and Shipping operations using handheld barcode scanners. These types of systems reduce manual errors and can speed up operations considerably. Batches of orders or specific POs to be received can be assigned to specific warehouse personnel from a warehouse management system screen which ensures all orders are fulfilled and minimizes workers getting in each other’s way.

Do 3PL Warehouse Management Systems Make Sense?

3PL warehouse management systems may make sense for some smaller distributors. 3PL is short-hand for 3rd party logistics. Small and mid-sized distributors can outsource their warehouse operations to a 3PL provider which will significantly reduce the complexity of their operations. The ability to pay the 3PL provider per order fulfilled reduces the high fixed cost of maintaining a warehouse. Also, by dealing with multiple 3PLs in different geographies, small and mid-sized distributors may be better able to serve customers nation-wide. In addition, scaling up or down to react to changing economic conditions becomes much easier with a 3PL model.

Against these benefits, a 3PL model takes away a substantial degree of control from a distributor. In addition, a 3PL model pushes risk to the 3PL providers who will charge for this – which may be expensive for the distributor. Also, selecting the right 3PL provider becomes critically important. Your whole relationship with your customers can depend on the performance of the 3PL provider.

Distributors should carefully consider both sides of this question. It will often come down largely to whether the distributor has the size of organization and capability to manage its own warehousing operations or not. For smaller distributors a 3PL model might make sense whereas larger more sophisticated distributors will want their own warehouse management systems.

Summary

What is a warehouse management system, and why do distributors need them? A warehouse management system allows for the management of multiple types of labor-intensive warehouse operations. A warehouse management system is critical to the ability of a wholesale distributor to deliver goods to its customers quickly and without error. Customers that were forced to switch to large eCommerce providers during the pandemic, have now come to expect delivery the next day or within a few days. This kind of order fulfillment becomes very challenging for a distributor without a strong warehouse management system. For most distributors, warehouse operations are a major contributor to overall costs, and this means that the efficiency of warehouse operations that comes with a warehouse management system could be the difference between a profit and a loss. Contact us today to see what Accolent ERP’s Cloud-based ERP and warehouse management system can do for your wholesale distribution business.