Warehouse Management: Definition, Significance, and Best Practices

“Trade isn’t about goods. Trade is about information. Goods sit in the warehouse until information moves them.” ~ Caroline Janice Cherryh, an Amercian writer.

This quote highlights the importance of leveraging information to ensure the timely and efficient movement of goods to, from, and within your warehouse. 

This information can be about the number and volume of incoming goods, current inventory levels, or the total orders and returns you process every day. 

Now the question is – How can you utilize this information to streamline your flow of goods or materials?

Your answer lies in creating an effective warehouse management framework. 

Warehouse management forms a critical component of modern supply chain logistics as it controls and coordinates everything right from when you receive an order till when you ship it.

Therefore, regardless of how small or large your inventory is, effective warehouse management is indispensable for your business to succeed. 

This blog explores how warehouse management is significant for your business, the challenges involved, and strategies to overcome them. Let’s have a look.

What is Warehouse Management?

Warehouse management refers to the process of planning, organizing, and controlling all the activities and operations in your warehouse.

These warehouse operations and processes can include: 

• Arranging your warehouse and the physical goods stored in it
• Managing inbound, outbound, and reverse logistics
• Monitoring key performance indicators like inventory accuracy, picking accuracy, and order lead time to assess your overall warehousing efficiency.

The primary aim of warehouse management is optimizing the utilization of space, labor, and resources in your warehouse.

Importance of Effective Warehouse Management

Warehouse management forms a critical aspect of supply chain management that optimizes your inventory storage and movement of goods within or in and out of your warehouse. 

Here’s the list of the benefits it provides:

1. Cost efficiency

Effective warehouse management helps monitor and optimize your inventory to avoid instances of overstocking and prevent unwanted storage costs and wastage. Further, appropriate warehouse organization practices can help you maximize the utilization of your available space, reducing the need for additional storage and associated costs. 

2. Improved customer satisfaction

Aligning the supply of your products with their demand is crucial to meeting customer demands promptly. Warehouse management helps track the inventory levels accurately and maintain them at optimal levels to avoid stockouts. It paves the way to fulfilling your orders timely to avoid delivery delays, elating your customers and enhancing their satisfaction and loyalty.

3. Minimal errors and maximum productivity

Smart warehouse management practices can help minimize errors like inaccurate counting of items or missed updates in stock levels. It, thus, can boost your overall inventory accuracy. Besides, automating warehouse management helps cut down the time and labor required for tasks like warehouse slotting, order picking, and inventory replenishment, increasing overall productivity.

4. High adaptability to market changes 

Agile warehouse management enables you to adapt quickly to fluctuations in market demands, product trends, or supply chain disruptions. It helps make sure that your warehouse stays responsive and agile in the face of a highly dynamic business environment.

Now that the advantages of warehouse management are understood let’s understand what a warehouse management system means. 

What is a Warehouse Management System?

A warehouse management system is software that helps streamline all the day-to-day operations in handling goods right from when you receive them in your warehouse till you finally ship them. It helps manage different warehousing facets, including inventory control, order fulfillment, labor management, space optimization, and safety & compliance.  
In the next section, let’s understand the popular types of warehouse management systems.

4 Popular Types of Warehouse Management Systems

The warehouse management system you choose can vary depending on your business size, budget constraints, and specific business requirements. 

Here are the four main types of warehouse management software.

1. On-premise WMS

This is the software that you can install on your servers and hardware. This type of WMS provides more control over data and infrastructure but requires high upfront and maintenance costs. It is usually suitable if you are a large enterprise owner who prioritizes autonomy over your data and can afford update or maintenance costs.

2. Cloud-based WMS

This software operates on a cloud infrastructure that you can install fast without incurring high upfront costs. It runs on the software-as-a-service model that you can access from anywhere using the internet. It is ideal for you if you want greater flexibility, scalability, and ease of access. 

3. Integrated WMS

These warehouse management systems provide modules or application programming interfaces (APIs) that enable integration with ERP or CRM software. They are generally a good fit if you have a medium or large business looking for procurement, financing, and sales services besides warehousing.

4. Mobile WMS

This software is designed for mobile devices like smartphones or tablets. It fits your business if you want real-time access to warehouse data and perform operations from anywhere outside your company premises using mobile devices. 

Moving ahead, let’s find out how warehouse management software is integral to warehouse management.

Role of Warehouse Management Software in Enhancing End-to-End Warehouse Processes

As already clear, warehouse management systems are key to ensuring every step involved in warehouse management is seamless. 

Below is the list of 8 critical warehouse management processes and how WMS can help make them efficient. 

1. Reception of products + quality inspection

This step involves the acceptance and verification of the goods that your vendor or supplier sends. You can check the items you receive against your purchase orders to ensure their quantity and quality are as requested. Following that, you label and document each product in your inventory. Relying on a manual approach like using pen and paper for all this may be time-consuming and error-prone. 

However, a WMS solution can help you define business rules and warehouse flow to receive, process, and transport goods to your designated storage area. It provides the Radio Frequency Identification Technology (RFID) and allows for integration with billing software. This helps automate the reception, validation, and reconciliation of received goods against digital purchase orders using barcode scanning. It also helps auto-generate labels for easy storage and retrieval of your products.

2. Order picking and packing

Picking is the process of selecting and gathering items from your warehouse inventory to fulfill orders. It can be of various types as follows:

• Piece picking: Also known as single-order picking, this method involves picking items to fulfill a single customer order at a time. It is suitable if your warehouse is small and order volume is low so that pickers can navigate your entire warehouse easily to pick desired items. 
• Batch picking: Using this method, you can select items to fulfill multiple orders simultaneously. You can then sort the picked items into individual orders. 
• Cluster picking: This method lets you pick items for multiple orders at the same time but sort them into individual orders at their pick location instead of a central sorting facility, unlike in batch picking.
• Zone picking: It involves dividing your warehouse into multiple zones and assigning a specific zone to each picker to select items from. It is generally suitable if your warehouse is large with a vast range of items. 
• Discrete order picking: It involves assigning particular orders to individual pickers, who then pick the items to fulfill those orders accordingly. Once the picking is complete, you can consolidate items for packing. 
• Wave packing: It involves grouping multiple orders into waves. Each wave represents a set of orders that you can pick simultaneously, often at specific times of the day and in short intervals. 

Once you pick your order, packing follows. It refers to placing items in appropriate packaging, including bins, containers, or polybags, based on their type to prepare them for shipping. 

WMS can help you store, retrieve, and pack products efficiently. In addition to enabling standard picking methods discussed above, it supports advanced picking technologies. These can include Radio Frequency (RF) with or without scanning verification, pick-to-voice or pick-to-light technology, robotics, automation, and algorithms to optimize picking paths.

3. Shipping 

Shipping means loading packaged goods onto vehicles to transport them to your customers. During shipping orders, your packaging must be secure to prevent any in-transit breakage or damage. It is also crucial to optimize your package volume to reduce delivery costs. 

Warehouse management solutions can integrate with your logistics and delivery management software to expedite your fulfillment process. For instance, it can help automate the generation of bills of lading (BOL), packaging lists, invoices, and shipment notifications to your customers.

4. Labor management

Labor management entails planning, organizing, and optimizing your workforce involved in the day-to-day warehouse tasks like picking or packing. It can include estimating the right number of workers for each shift and creating schedules that align with their operational demands. 

Training and skill development, along with regular labor performance evaluation, are also an important part of it. 

A WMS can deliver valuable and actionable insights into different aspects of your labor. For example, it provides real-time visibility into your warehouse workers’ working hours, their costs, response times, and adherence to safety protocols. Moreover, WMS software enables you to combine different tasks like the movement of goods to storage areas and picking in a single trip. It reduces the time to execute them individually, increasing your overall warehouse efficiency.

5. Yard and Dock Management 

Yard and dock management is the process of managing and optimizing all the activities that occur in your yard or dock. It helps achieve a continuous outflow of goods in and out of your warehouse.

An advanced warehouse management solution provides yard and dock management features. It helps schedule appointments and assign a particular loading dock for your incoming and outgoing carriers or delivery drives based on priorities, product types, or vehicle weight. This helps cut down waiting time to access a dock, prevent congestion, and handle high-priority shipments promptly.

6. Inventory cycle counting 

Inventory cycle counting is an ongoing and systematic way of inventory management. It involves counting a subset of inventory items periodically to spot any gap between the actual physical count and recorded numbers. This identification of discrepancies contributes to their timely investigation and resolution before they disrupt warehouse operations drastically. 

Using warehouse management software, you can track your inventory items to know whether they are in your warehouse, store, or transit. WMS leverages Automatic Identification and Data Capture (AIDC) technology like barcodes or RFID to collect and enter data about items electronically and use it to track them. Some sophisticated software also facilitates cycle counting and generates reports on your product and vendor performance to forecast demand accurately. 

7. Reverse logistics management (returns, exchanges, repairs, recycling, replacements)

Reverse logistics constitutes all the activities involved in managing the flow of goods or materials from your customers to your warehouse. It can involve managing returns, replacements, exchanges, or disposition of obsolete inventory. 

Warehouse management software helps track the location and condition of returned items to facilitate informed decisions on how to handle them. For instance, it helps define rules and workflows to categorize returns for restocking, refurbishing, or recycling. It can also generate exhaustive reports on return reasons and trends. These insights facilitate data-driven decisions on how to improve your product quality and lower your return rates. 

8. Warehouse organization and performance reporting 

Warehouse organization (sometimes referred to as warehouse slotting) is the strategic organization and management of inventory goods in your warehouse. Warehouse performance analysis is defined as evaluating the efficiency, effectiveness, and overall productivity of your warehouse operations. It involves tracking key performance indicators (KPIs) like order fulfillment rate, average lead time, or return rate. Insights into these performance indicators help you know how well your warehouse is functioning and identify improvement areas.

WMS helps reduce manual efforts to track metrics like on-time shipping, inventory accuracy, distribution costs, order fill rate, or cycle time. Besides, a warehouse management tracking system can generate reports on people-related aspects, including staffing needs, certifications, and licenses required. It analyzes factors like stock-keeping-unit (SKU) velocity, size, and demand patterns to determine optimal storage locations, enhancing space utilization and hence, warehousing efficiency.

So, it is evident that every warehouse management process holds its own importance and contributes to efficient warehouse management.

Let’s elaborate on the present-day challenges in warehouse management and how to surmount them in the section that follows.

7 Major Warehouse Management Challenges and Ways to Overcome Them

The warehouse management industry today is faced with several pressing challenges. A few of them are as below.

1. Labor shortage

The shortage of a skilled workforce is one of the prominent challenges in not only warehousing but also the entire logistics industry. It is due to multiple factors like an aging population, demographic shifts, high turnover rates, and lack of diversity and inclusion. It disrupts the warehouse operations and hinders the overall productivity. 

Solution: Formulate comprehensive training and cross-skilling programs to train your employees on evolving warehousing technologies and develop secondary and tertiary skills. It can help them stay relevant, efficient, and versatile to handle a wide range of tasks. Make sure you assign tasks to your workers based on their skills and expertise to tap into their maximum potential. You can also explore automation solutions to manage different warehouse tasks and reduce your dependence on manual labor.

2. Rapid e-commerce growth

The global e-commerce market is projected to reach $5.5 trillion by 2027.

This exponential boom has led to a massive surge in frequent online orders. If you have a small or traditional warehouse relying on conventional storage and picking processes, you may find it hard to fulfill large order volumes. It can result in potential congestion, longer processing times, and escalating operational costs.

Solution: Optimizing your warehouse layout to enable quick access to your in-demand items is a strategy to fulfill your orders rapidly. Automation of picking procedures can also facilitate the quick selection and sorting of goods required to complete orders. Setting up macro-fulfillment centers in proximity to your customers can also help you reduce your turnaround times. 

3. Supply chain disruptions

Warehousing is prone to supply chain disruptions triggered by geopolitical crises, natural disasters, or pandemics. These issues can delay the procurement of goods or materials, lead to shortages, and cause an inability to fulfill orders, hampering your operational continuity.

Solution: Diversify your suppliers to reduce dependence on a single supplier and invest in real-time monitoring tools for better supply chain visibility. A detailed risk assessment can also help you stay aware of your most vulnerable warehouse facets and plan proactively to mitigate the impact of supply chain disruptions on them. Increasing your safety stock of the products you anticipate will be highly demanded can also help circumvent supply chain shortages. 

4. Inventory management and complexity

Managing a diverse inventory, including multiple products, varying sizes, and fluctuating demand patterns, can be complex. If you do it manually, it can lead to issues like overstocking, increased lead times, and sub-optimal warehouse storage space utilization.

Solution: Implementing warehouse management software that provides advanced features, such as automated inventory tracking, fast picking, demand forecasting, and RFID identification, can help enhance your inventory control. 

5. Last-mile delivery challenges

Ensuring expedited last-mile delivery becomes difficult as your business grows and customers increase. Relying on a manual approach or traditional navigation apps like Google Maps or Waze to optimize routes for multiple stops may be error-prone and infeasible. This is because these apps allow for planning only up to a fixed number of waypoints in one go. They also lack advanced multi-stop-route-planning functionalities to create optimal routes.  

Solution: If you manage your last-mile delivery operations yourself, investing in advanced route optimization software can help you plan the most optimal routes. Software like Upper leverages advanced routing algorithms to create optimal routes based on constraints like traffic, drivers’ availability, customers’ preferred time windows, and distances of destinations. 
You can also consider partnering with 3PL delivery service providers if required, especially if you are new to warehousing and logistics and have budget constraints.

6. Data security concerns

Modern warehouses depend on digital records of customers’ sensitive data, including names and addresses. It makes them susceptible to cyberattacks. So, safeguarding your warehouse against potential security breaches can be a struggle, especially if you have a large business with warehouses spread across a country or beyond. 

Solution: Implementing robust cybersecurity measures is vital to protect your warehouse against data breaches and cyberattacks. Conducting regular security audits can also help identify any potential vulnerability and address it to avoid any major issues. Besides, it is important to keep educating yourself and your team on evolving cybersecurity threats and ways to combat them.

7. Regulatory compliance

Be it labor safety laws or environmental regulations, aligning your warehousing operations with them is an uphill task. It may turn hard for you to achieve complete adherence to all these laws while ensuring timely order fulfillment and maintaining operational efficiency.

Solution: Keeping yourself abreast of the regulatory changes in labor laws is paramount to maintaining compliance with them. Besides, conducting regular compliance audits can also spot and reduce non-adherence issues. To meet environmental sustainability goals, implementing eco-friendly practices like energy-efficient technologies and waste reduction processes can help.

Moving ahead, let’s understand some proven warehouse management practices.

9 Effective Warehouse Management Strategies

The success of warehouse management stands on four pillars: 

• Accuracy in inventory tracking
• Precision in order fulfillment
• Efficiency of warehouse operations
• Optimization of space, technology, and resources 

Following are the tips to help you excel at your warehouse management.

1. Conduct ABC Analysis

Using ABC analysis to organize and classify your inventory is crucial for effective warehouse management. This method uses criteria like sales frequency and storage value to categorize items accordingly. Sales frequency is the average number of days it takes to sell a product, while storage value is the cost of storing it in your warehouse. 

You can classify all your goods into three categories, as below:

Category	Storage Value	Sales Frequency
A	High	Low
B	Moderate	Moderate
C	Low	High

For instance, if you are a grocery retailer and sell premium truffle-infused olive oil, it will fall into category A. On the other hand, table salt will fall in category C. 

Once you classify products like this, you can place high-demand products like table salt in easily accessible areas of your warehouse. On the contrary, you can keep olive oil at the back of your warehouse to minimize the impact of external factors and ensure it stays in optimal condition.

2. Keep your warehouse clean

Cleaning your warehouse regularly is essential to ensure hygiene, safety, and easy operations. So, you should plan a cleaning schedule for your warehouse that can be weekly or fortnightly as appropriate. 

Besides, maintaining a checklist of areas that your workers have already cleaned can help track the progress of each cleanliness drive. Using dust-proof materials to lower the accumulation of dust and placing garbage bins strategically for people to throw trash can also contribute to cleanliness.

3. Organize your warehouse aisles

While you may think of filling as much inventory in your warehouse to optimize your space utilization, it may do more harm than good. This is because overcrowded warehouses and aisles may become hard to navigate.

It, thus, slows down the retrieval process of goods required for orders. You should also group similar items and identify unused space to distribute goods equally across your warehouse. You can also identify and label your aisles electronically without making them cluttered. 

4. Use cross-docking 

Cross-docking is a strategy that helps transfer goods from your receiving dock to your shipping dock, bypassing their storage. It expedites the movement of your cargo, reduces turn-around times, and eliminates or minimizes storage costs. 

If you deal in perishable goods like grocery items, this technology can help you fulfill orders swiftly and efficiently.

5. Revisit and redesign your shipping area

Your shipping area is generally where you execute most of your packaging and dispatching activities. So, minimizing the time it takes here to pack and ship your products is important to expedite order fulfillment. Training your employees on the latest packaging and dispatching practices can help infuse efficiency. 

You can also place fast-moving products near the shipping bay to expedite their picking and packaging. Labeling your shelves clearly is also indispensable for your team to identify the right item fast. Besides, you can reserve an area to store packing materials close to your shipping area to reduce the time to arrange packaging. 

6. Emphasize inventory control and accuracy

A well-organized warehouse is undeniably a crucial step to improving warehouse management. However, it is equally important to manage and track your inventory. This is because it helps you get an overview of your actual physical stock levels, and their locations and determine whether they align with digital records or not. 

These insights help you assess your inventory needs at any given point in time. Based on any potential issues like breakage or stock-outs, you can take corrective actions and avoid any potential impact on your routine warehouse operations.

7. Invest in automation and warehouse management software

Implementing automation and warehouse management software can combinedly pave the way to transforming your warehouse management activities. Deploying automation through robotics and conveyors can expedite item picking and processing, leading to swift order fulfillment while minimizing human errors. It can also help reduce manual interference and minimize errors, enabling high precision and labor cost savings.

Warehouse management software provides real-time visibility into different aspects of your warehouse, including inventory levels, out-of-stock items, and damaged or broken SKUs. It enables seamless inventory control and management, enhancing warehousing efficiency.

8. Integrate your warehouse management with last-mile delivery management software 

Even though your warehouse is working optimally, failing to optimize your last-mile delivery operations can hamper your delivery timelines. This can result in your failure to meet customer delivery expectations and affect your brand reputation. Therefore, it is important to consider implementing route optimization software if you are managing last-mile delivery activities yourself.

This software can help you optimize your routes based on traffic, preferred delivery time windows, drivers’ availability, vehicle constraints, and legal regulations like maximum legal speed. It also provides last-mile visibility to track your shipment journey, know their progress, and convey accurate estimated times of arrival to customers through delivery notifications.

9. Outsource your warehouse management

If you are new to warehouse management, managing your warehouse yourself may be overwhelming. Further, if you are a small business owner who’s just started and has budget constraints, implementing warehouse management software and advanced technologies like automation may also require a huge upfront cost. Thus, it may be financially infeasible. 

In this case, outsourcing your warehouse management to a third-party logistics service provider can be a good idea. It won’t only prevent huge upfront investment but also lets you access their advanced technology and infrastructure to enhance your operations. 

Going ahead, the next section discusses the 3 current warehouse management trends you can keep an eye on.

3 Top Warehouse Management Trends to Look for in 2024

The following are the leading warehouse management trends that you can consider.

1. Robotics + automation

The warehousing industry is witnessing a surge in the deployment of robotics and automation to streamline warehouse processes. It includes autonomous mobile robots (AMRs) to move goods, robotic arms for order picking, and automated conveyor belts. 

For instance, DHL has been partnering with LocusRobotics to boost picking efficiency. It has helped this global carrier increase the units picked per hour by up to 180%. 

2. Artificial Intelligence + Machine Learning

AI and ML have been in the warehousing industry and are becoming more advanced with each passing day. Warehouse managers use them to track inventory levels, forecast demand patterns, and manage workforce scheduling. 

For example, Walmart leverages AI/ML models to determine the quantity and timing of inventory flow, identify the areas of delivery, and identify customers’ demands by region. It also enables using historical data to generate demand estimates that align with reality.

3. Sustainable practices

Since environmental sustainability has gained impetus across the globe, companies have no option but to take eco-friendly initiatives. Eco-friendly buildings that use sustainable materials, have an optimized layout to maximize natural lighting, and energy-efficient insulation are becoming popular. Waste reduction techniques like using recyclable packaging and proper waste disposal processes are also become a norm.

Apple, for example, focuses on sourcing eco-friendly materials and substances and reducing waste in the manufacturing process. It also provides product recycling programs for global customers.