What is Warehouse Management System?

A warehouse management system can help streamline processes at your facility, making it easier to track inventory, manage and ship orders, and optimize your performance. Learn more about what it does, how it can help, and how to calculate your ROI in this article.

Imagine you’re running a warehouse, and your revenue is at an all-time high. Congrats! That’s no simple feat.

But how do you keep up with all the orders coming in, the employees going out, and the inventory moving in and out? The answer is simple: a warehouse management system (WMS). 

In this post, we’ll explore what a WMS is, its pros and cons, and why it’s worth considering for your warehouse.

What is WMS?

A warehouse management system (WMS) is an inventory management software that provides comprehensive visibility. It’s a software application that helps you track inventory, manage orders, and optimize workforce performance.

Think of a warehouse management system as the big boss who takes care of everything in your warehouse. 

Basically, a WMS does the heavy lifting for you, allowing you to focus on growing your business. 

Why is Warehouse Management Important? 

In today’s competitive market, a WMS can be the key differentiator between a successful warehouse and one that struggles to keep up. By increasing efficiency, accuracy, and productivity, a WMS can help you stay ahead of the competition and meet customer demands. 

Not only that, but a warehouse managing system can help you save time, reduce labor costs, and prevent errors, which can ultimately lead to increased revenue.

What Is an Example of a Warehouse Management System?

The most commonly used WMS globally is the SAP Warehouse Management System. SAP is an enterprise resource planning (ERP) software that provides a comprehensive range of functionalities to help manage the operations of the warehouse. 

SAP WMS provides a complete spectrum of logistics operations management, including inbound and outbound processing, inventory management, transportation, and physical inventory. 

The system uses real-time data to provide accurate information about inventory levels and stock locations, enabling businesses to improve their customer experience and boost their workflows.

Pros and Cons of Warehouse Management System

Lets you manage inventory levels more effectively with real-time data and trackingCan be difficult to integrate with existing systems, leading to downtime 
Optimization of space and reduction of unnecessary stockMay not be necessary for smaller warehouses that don’t require heavy inventory management 
Improved order accuracy and speed
Better workforce management and increased productivity 

What Does WMS Do?

So how does a warehouse management system work? The system plays a crucial role in meeting customer demands, optimizing inventory management, enhancing workflow, and reducing overall operating costs. 

Inventory Management

One of the most crucial functions of WMS is inventory management. Managing inventory accurately is essential in ensuring the smooth flow of products within the warehouse. A WMS efficiently tracks and monitors inventory levels, locations, and movement from the receiving dock to the shipping dock. 

Work Creation and Execution

WMS helps create and execute work for warehouse staff efficiently. It assigns personnel and equipment for each task, ensuring worker safety and efficiency. WMS software systems use intelligent task-optimization algorithms to optimize, queue, and assign tasks based on priority, resource availability, and skill levels. 

This function helps optimize the flow of products throughout the facility and helps warehouse operators move goods faster, more efficiently, and with fewer errors.

Reporting and Analytics

WMS Software helps warehouse operators capture data in real-time and generate detailed reports to help make informed decisions. The software collects valuable data throughout the warehouse, such as stock levels, receiving and shipping patterns, staffing levels, and other critical performance indicators. 

The system then generates detailed reports, enabling management teams to analyze inventory trends, worker productivity, and unfulfilled orders, for example, and make informed decisions that can enhance overall warehouse performance.

Labor and Resource Management

WMS Software helps establish adequate staffing levels and resource allocation, which ensures that the warehouse operates efficiently. The software enables managers to plan and schedule shifts, track workloads, and measure employee productivity. This function enables management to optimize labor, reducing costs while ensuring maximum productivity and efficiency.

What Are The 4 Types of Warehouse Management Systems?

With so many different types of WMS out there, it can be difficult to know which one is right for your business. Though some would make the case for more than four, the most common four types of WMS are as follows:

  • Standalone Warehouse Management System
  • Enterprise Resource Planning (ERP) System
  • Cloud-Based Warehouse Management System
  • Open-Source Warehouse Management System

Standalone Warehouse Management System

A Standalone Warehouse Management System software refers to a software platform that focuses exclusively on managing and optimizing warehouse operations and inventory control. 

It is a software package specifically designed for warehouse operations to address the unique needs and complexities of warehouse management. It typically includes features such as inventory tracking, order management, and employee monitoring. 

This type of WMS is a good option for businesses that are solely focused on managing their warehouse operations, as it tends to be more tailored to those needs than general-purpose business software.


One example of a Standalone WMS is Fishbowl Warehouse, which offers extensive inventory management features, barcode scanning, and real-time data on inventory levels.

Enterprise Resource Planning (ERP) System

Enterprise Resource Planning System, commonly known as an ERP, refers to a comprehensive and integrated software solution. This is a much broader type of business software that typically includes modules for managing various aspects of a business, including finance, HR, marketing, and warehouse management. 

It acts as a centralized platform for the efficient planning, coordination, and control of critical activities across departments, functions, and locations.

While an ERP system may not be as specialized as a standalone WMS, it can be a good option for businesses that are looking for an all-in-one solution to their business needs.


An example of an ERP with a WMS module is SAP Business One, which offers warehouse management and tracking, inventory optimization, and order fulfillment in one platform.

Cloud-Based Warehouse Management System

Another type of WMS that has become increasingly popular in recent years is the cloud-based WMS. This type of software is hosted on remote servers and accessed through the Internet, which means that it can be accessed from anywhere with an Internet connection. 

This can be an attractive option for small businesses that don’t want to invest in expensive hardware or software but still want the benefits of a WMS.


One example of a Cloud-Based WMS is Fishbowl Go, which offers the same features as Fishbowl Warehouse but with the added convenience of cloud access.

Open-Source Warehouse Management System

Finally, there’s the open-source WMS, sometimes referred to by other names as well. This is a type of software that is developed and maintained by a community of developers and made available to anyone who wants to use it. 

While open-source software is often associated with lower quality than proprietary software, there are some very high-quality open-source WMS options out there. Because the software is free and open-source, it can be a good option for small businesses that need to keep their costs low.


One example of an Open-Source WMS is Odoo, which offers Warehouse Management, barcode scanning, and inventory tracking features. It also provides the ability to integrate other business software modules.

How to Calculate the ROI of a WMS

Calculating the ROI of a WMS involves comparing the warehouse management system software cost of implementation and operation – with the benefits it generates. The costs may include software licenses, hardware, IT support, training, and maintenance. 

The benefits may include increased productivity, reduced labor costs, improved accuracy, better inventory control, and higher customer satisfaction. 

To calculate the ROI of your warehouse management software, you’ll need to estimate the costs and benefits over a specific period, usually three to five years, and compare them using the below formula. 

Return on Investment (ROI) = (benefits – costs) / costs x 100%

You can also use an online calculator or consult a vendor or consultant to do the calculations for you.

Future of Warehouse Management

The future of warehouse management tools is bright and exciting. Technological advancements such as automation, robotics, artificial intelligence, and the Internet of Things (IoT) are transforming the way warehouses operate. 

For example, robots can help with picking, packing, and inventory management, reducing the need for human labor. AI can help optimize warehouse processes and improve demand forecasting, reducing waste, and increasing efficiency. 

IoT can help connect warehouse systems with other business processes, enabling real-time data analysis and decision-making. 

As the demand for faster, cheaper, and more accurate warehousing grows, the WMS market is expected to expand and evolve, offering even more advanced features and capabilities.

MORE: Warehouse management tips 

Takeaway Points

Warehouse management systems are a must-have for any warehouse that wants to maximize efficiency and productivity. While there are pros and cons to implementing a WMS, the benefits far outweigh the risks. 

By investing in a WMS, you’re giving your warehouse the tools it needs to succeed in today’s competitive market.
Check out our review on the category page to find the best warehouse management tools.

Frequently Asked Questions (FAQ)

Warehouse management plays a crucial role in the supply chain and acts as a bridge between suppliers and retailers. The primary function of warehouse management is to ensure products are stored, packed, and dispatched in a timely and efficient manner.

3PL involves using outside resources to manage logistics, supply chain operations, and warehousing, letting both eCommerce and retail businesses alike outsource to a third party to handle all of these processes.

The four basic functions of a warehouse are receiving, putaway, storage, and dispatch. Receiving involves receiving goods from a supplier and verifying that the shipment is correct, while putaway is when goods are moved from the receiving dock to a storage location. Storage involves the organization of goods and maintaining an accurate inventory and dispatch is when goods are picked, packed, and shipped to customers. To help with all of these functions and streamline the process, many warehouses use a Warehouse Management System (WMS). A WMS assists with inventory management, tracking, and optimization of the warehouse operations.

The two key types of warehouse management systems are stand-alone and integrated: stand-alone WMS systems are independent of other systems and offer greater flexibility and customization options. Integrated WMS systems are integrated with other systems to provide a more holistic view of the supply chain, such as Enterprise Resource Planning (ERP) systems and Automated Data Collection (ADC) systems.


Adaline Lefe Mary John

Adaline Lefe Mary John

A great researcher and creator, Adaline is responsible for planning and managing content for all our websites. She has over 10 years of experience in creating and managing content.

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