What is a Warehouse Management System?
Wholesale distributors purchase goods from suppliers, stock these goods in warehouses and then sell them to customers. A warehouse management system helps distributors track and store goods at specified locations in their warehouses and then, as orders come in, pick the goods from these locations, pack them, and ship them to customers. A warehouse management system works together with inventory management software and purchasing management software to track the stock of products available to fulfill customer orders. Because of the high volume of orders that wholesale distributors deal with, the efficiency of warehousing operations can make the difference between success and failure of a wholesale distribution business.
Why Distributors Need Warehouse Management Systems
Why do distributors need warehouse management systems? Warehouse management systems 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. Warehouse management systems are designed to help maximize warehousing operations’ efficiency and throughput to fulfill orders and get goods to customers as quickly as possible.
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. 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 and Put-Away
When purchase orders (POs) come in, the goods need to be first matched against the PO and a merchandise received form generated. Then the goods need to be moved to their put-away locations or to staging locations or cross-docked if they are going right out again. This is more difficult than it sounds. Warehouse management systems have to deal with suppliers that often deliver a single PO in multiple batches. 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. Warehouse management systems need 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.
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.
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. Warehouse management systems 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.
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.
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.
Warehouse management systems are critical to the ability of wholesale distributors to deliver goods to their 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.