What is a Warehouse Management System? A Detailed Guide

The warehouse management system software is a key component of a supply chain management program because it offers a quick, real-time view of the company’s overall inventory cycle and at warehouse transits. It is an indispensable business tool for companies that depend on their supply chain operations. No matter what industry you belong to, if you have goods running in and out of your business facilities, have a strong consumer target to cater to, and need the numbers of your inventory on your fingertips, this dedicated guide on a warehouse management system software is for you.

What is a Warehouse Management System?

WMS stands for A warehouse management system. WMS is basically a software that helps businesses manage as well as control daily warehouse activities. These are operations that start with materials and products entering a supply chain till they are dropped off at their destination locations like delivery addresses.

How Does A Warehouse Management System Work?

Most WMS software programs offer tools for picking and packing processes, vehicle management for route optimization, inventory analysis and warehouse resource utilization. In simplest terms, a WMS plays an important role in managing overall warehouse operations. It organizes processes, optimizes resource allocation, and makes sure the smooth movement of goods from receipt to shipment.

Here’s a more detailed, step-by-step breakdown of all the key activities a WMS does:

• Receiving Goods

The work of a WMS has already started before this step: it has purchase orders and the forecasted units of sales. When goods arrive, the WMS validates them against purchase orders.

It records product details, like quantity, SKU, and supplier-related information. This way, incoming shipments match inventory records instantly and the WMS makes quick updates to stock levels.

• Storing Goods

Once verified, the system allocates storage locations.

Based on the size, type, and demand of the goods, the WMS assigns storage in a way that maximizes space and ensures easy retrieval later.

Advanced Warehouse Management Systems also use algorithms to recommend the most efficient placement – and inventory-sensitive businesses do select WMS that focus on placements.

• Picking and Packing

For outbound shipments, the WMS generates optimized picking lists. It groups orders strategically to reduce travel time within the warehouse. Workers retrieve items as directed, and the system guides the overall packing process.

• Shipping

After packing, the WMS integrates with shipping carriers to manage dispatch. It generates shipping labels, schedules pickups, and tracks parcels in real time. This helps businesses provide customers with reliable delivery estimates and updates.

• Real-Time Monitoring

A Warehouse Management System software provides a dashboard to team managers – which gives continuous visibility into overall warehouse operations in form of statistics and metrics. More advanced tiers of WMS software will even you graphical representation and filter-wise breakdown of specific warehouse activities.

These dashboards update in real-time, means that they display live data on inventory levels, order statuses, and employee productivity. Managers can therefore, address issues proactively and make data-driven decisions – and most of them relate to procurement, purchase, selling and buying raw material, depending on the nature of the business.

• Integration with Other Systems

A Warehouse Management System handles handsome amount of data at all times – and to make data-driven decisions, and show real-time insights on warehouse activities, it has to have strong integrations with other data platforms a business utilizes.

Most important software programs utilized by businesses today are ERPs, CRMs, analytics tools like PowerBI, and ecommerce platforms like Shopify and WooCommerce. So for a WMS to be complete in its functions, it has to offer integrations with all of these categories of business software. With technically sound integrations, data flows smoothly and operations stay transparent.

Scalability and Customization

Modern WMS platforms, like WareGo, are scalable to adjust to the growing needs of businesses. They support custom workflows, multi-warehouse management, and integration with various third-party tools like e-commerce platforms and shipping providers. So this means businesses and their warehouse stakeholders can enjoy control over data, flexibility with their demands and cost-savings all at once, with the option to scale their warehouse analysis – anytime they want!

Types of Warehouse Management Systems

Most organizations that first adopted Warehouse Management Systems developed these programs with specific features they believed they needed to improve their supply chain cycles. Most of these businesses would either hire teams for in-house development or outsource the production to software development companies. The overall development would be costly and businesses would wait for years to get the ROI. Scaling meant more development, more money!

That’s where the advancements started happening in WMS programs. We now have more than six types of warehouse management system software. Here’s a quick rundown of each:

• Standalone WMS

These are ready-made warehouse solutions that focus exclusively on warehouse operations. With features like inventory tracking, picking, and packing, these are smaller systems, limited functionalities and of course highly affordable plug and play apps. They are ideal for small businesses looking for a cost-effective entry-level solution.

• Integrated WMS with ERP

Integrated WMS is part of a larger ERP system. It offers end-to-end business management by connecting warehouse operations with finance, procurement, and sales. This type suits medium to large enterprises requiring centralized data. Take the example of extended and legacy supply chain solutions from SAP. Expensive to set up, expensive to run but advanced features for larger enterprises.

• Cloud-Based WMS

Cloud-based WMS systems are hosted on external servers and accessed via the internet. These are SaaS web applications that offer flexibility, scalability, and lower upfront costs, which makes them ideal for businesses that prioritze remote access and rapid deployment.

• On-Premises WMS

On-premises WMS systems run on a company’s local servers. They provide greater control and customization but involve higher setup costs and ongoing maintenance. These are suitable for businesses with specific security or regulatory requirements. So when we talked about the earliest forms of WMS – this is what we meant.

• Supply Chain Execution Modules

These systems are part of broader supply chain software suites and focus on coordinating warehouse activities with other supply chain operations, such as transportation and production planning. They are ideal for large businesses with complex supply chains. Standalone inventory management software and a 3pl wms software are examples of module-based WMS.

• Automated WMS

Automated WMS solutions use advanced technologies like IoT, robotics, and AI to automate repetitive tasks such as picking, sorting, and inventory updates.

Modern warehouse management systems fall into one or more of the categories I just discussed. Take the example of WareGo: it is cloud-based, and plug-n-play, gives you on-demand tiers and is automated. It integrates well with your existing ERP and CRM systems and has advanced Supply chain execution modules.

The Benefits of Warehouse Management System in B2C Businesses

With the rise of ecommerce and omnichannel retail, B2C businesses have to balance profitability with smooth operations for superior customer experiences.

In such business cases, warehouse operations are typically complex – and so, a robust Warehouse Management System (WMS) acts as the backbone of B2C logistics and helps small, medium and large-scale businesses meet the expectations for speed, accuracy and convenience.

One of the key differences in the ecommerce-specific supply chain of B2C from B2B is that the former handles small to large volume orders – significantly different order values as well as quantities. WMS software in these businesses manage diverse product SKUs, and facilitate dispatch as well as return and exchange requests accordingly.

During specific sales seasons, these can become challenging for supply chain and ecommerce teams. Sometimes, customers expect same-day or next-day deliveries, and that too can come with frequent or minimal return requests.

WMS helps overcome these challenges by high-speed order processing, often automated order picking, efficient data management between picking, packing and shipping departments. it reduces lead times and ensures prompt fulfilment.

Here are two key WMS benefits that summarize the role of warehouse management system software in B2C businesses:

End-to-End Fulfilment and Customer Transparency

Real-time inventory updates in WMS minimize overselling or stockouts and ensure customers can trust product availability. A WMS manages the cycle by updating inventory efficiently (by netting returns and exchanges), allocating orders to the closest warehouse or store, reducing shipping costs and delivery times.

Growth for Omnichannel Retail

Omnichannel retail combines physical stores, online platforms, and marketplaces into a unified customer experience. In this setting, a WMS provides centralized inventory management by consolidating inventory data from all sales channels and ensuring accurate stock levels and availability across platforms.

Use Case: Seasonal Demands and Flash Sales

Take the example of seasonal demands and flash sales. B2C businesses in diverse niches experience demand hikes during holiday seasons – and their marketing often runs promotional events and flash sales around such times. A WMS helps the retail teams manage sales during these times by:

• Forecasting demand with strong analytics to better handle order surges and prepare ahead
• Assisting with scaling operations and allocating additional resources like temporary labor.
• Batch order processing and timely dispatch during peak period – efficiently and without error.

The Benefits of Warehouse Management System in B2B Businesses

Unlike B2C operations, B2B (business-to-business) operates on a different scale and timeline, involve bulk shipments, long-term contracts, and client-specific requirements. A WMS helps maintain precision, compliance, and efficiency in these specialized workflows.

Bulk shipments, client-specific requirements and long-term contracts are key characteristics of B2B supply chains. A warehouse management system precisely fits into this supply chain by efficiently managing large-volume orders, from picking to palletization with accuracy and speed. A warehouse management system functions with custom packaging, labeling, or delivery schedules, thereby meeting distinct client demands. The overall system ensures consistent service quality over extended contracts by automating repeat processes and maintaining operational efficiency.

Here are two key WMS benefits that summarize the role of warehouse management system software in B2B businesses:

Inventory Visibility

It integrates with partner systems, enabling seamless data sharing across the supply chain. That’s how all stakeholders have access to accurate inventory levels, improving decision-making and reducing delays.

Process Optimization

The system identifies inefficiencies in workflows and suggests improvements, fostering smoother supply chain operations. By aligning with the specialized demands of B2B workflows, a WMS ensures operational consistency, regulatory compliance, and stronger partnerships. This leads to improved customer satisfaction and long-term growth in the competitive B2B market.

Use Case: Supporting Compliance and SLA Adherence

B2B businesses often operate under strict regulations and service-level agreements (SLAs). A WMS helps ensure compliance with strong documentation that is accurate.

• It automates the creation and storage of essential documents, such as bills of lading and compliance certificates.
• The system reduces human errors, ensuring orders are fulfilled according to client specifications.

Real-time data tracking allows businesses to meet delivery timelines, order accuracy, and other SLA metrics.

Key Features of a Warehouse Management System

Here is a module-wise breakdown of the features of a WMS:

1. Inbound Operations Module

Inbound and outbound operations management are two major modules in any basic or advanced WMS. These features manage the processes that occur when goods enter the warehouse to the time when they leave for delivery drop-offs.

Inbound supply chain features mainly focus on ensuring accuracy of order fulfilment, speed, and optimal use of resources. Let’s explore the key inbound features in detail:

• Purchase Order Management

This feature allows businesses to handle incoming goods systematically by verifying them against purchase orders. When a shipment arrives, the WMS matches it with the corresponding purchase order to confirm the details, such as product type, quantity, and supplier information.

• A WMS automates purchase order tracking and documentation, reduces manual errors and improves accuracy.
• The system facilitates better communication with suppliers, ensures smooth coordination and minimizes delays in receiving goods.
• If an order is delivered in parts, the WMS keeps track of pending quantities and thus helps businesses stay on top of their inventory needs.

• Receiving and Putaway

Once the purchase order is verified, the next step, as discussed earlier as well, is receiving and putaway. These two processes ensure the incoming goods are efficiently checked, categorized, and stored in the appropriate warehouse locations.

• Receiving

The WMS scans and validates incoming shipments, ensuring that the right products are received in the right quantities.

The system flags discrepancies, such as damaged items or incorrect quantities, and updates inventory records accordingly. This ensures transparency and accuracy in inbound operations, preventing future stock discrepancies.

• Putaway

Putaway is all the activities between moving goods from the receiving area to their designated storage locations.

The WMS suggests optimal storage spaces based on item attributes like size, weight, and demand frequency. It does so by prioritizing logical placement to reduce travel time during retrieval and improve overall warehouse efficiency.

• License Plate Numbers (LPNs)

LPNs are a unique feature in modern WMS platforms that facilitate tracking and traceability within the warehouse.

An LPN is a unique identifier assigned to a pallet, container, or any other unit of goods.

During receiving, the WMS generates an LPN for each unit of incoming goods. This identifier carries all relevant details, including the SKU, supplier, and quantity. As goods move through the warehouse, their LPNs allow the system to track their location, status, and condition in real time. By consolidating data under LPNs, businesses can manage inventory more efficiently and effectively.

• Direct Container Transfer

Direct container transfer, what you may also call cross-docking, is a feature in which goods bypass the traditional storage process. So, instead of being stored in the warehouse, incoming items transfer directly to outbound vehicles for immediate shipment.

Direct Container Transfer is particularly useful for fast-moving or pre-allocated goods so warehouse personnel have to spend lesser time handling the goods and storing them. This feature in WMS also guides personnel about accelerating order fulfillment, in a way helping the customer satisfaction in B2B and B2C operations.

So when unnecessary handling is eliminated, your warehouse workforce can also increase productivity.

Bonus Feature: Shipment Correction

Mistakes in warehousing operations, especially incoming and outgoing shipments cam create serious discrepancies in overall business numbers – and growth. But on a warehouse-level, these mistakes do happen and impact downstream operations because of human error. Advanced warehouse management system software has a feature for shipment correction which allows businesses to identify as well as address and correct these mistakes immediately.

Here’s how the shipment correction feature functions in an WMS:

• Firstly, the WMS flags discrepancies such as damaged goods, incorrect SKUs, or miscounted items during the receiving process.
• The staff can choose to update inventory records and reconcile errors in real time
• The WMS documents these discrepancies and the corrective measures and businesses can choose to communicate these with suppliers to resolve issues and prevent recurrence.

Note that most warehouse management system software have role-based access management – so only certain warehouse employees, as per their assigned roles, will be able to edit and correct specific back-dated data entries.

2. Outbound Operations Module

Order fulfilment and corresponding customer satisfaction are both tied to efficient outbound activities – accurate, in time and in place. That’s why, another important module of any warehouse management system software is its outbound section which typically has features for dispatch, picking, shipping and connected features with vehicle management.

Let’s look at a detailed breakdown of outbound module features of WMS:

• Dispatch Orders

So, order dispatch is the first step in the outbound process of the supply chain – and so these features come first in any WMS. This feature manages the entire lifecycle of a customer’s order, starting from order creation to its departure from the warehouse towards the dropoff.

Firstly, the WMS organizes orders based on factors like delivery deadlines, shipping method, or customer preferences. WareGo lets you mark high priority orders so they can automatically push to the top of the dispatch queue.

A WMS also gives you real-time tracking so as a warehouse manager, you can monitor the progress of each order – and then make its smooth execution possible. Now for this progress, a WMS typically has two interfaces, one as the graphical or listicle view in the dashboard, second in the dispatch orders dedicated feature screen.

As a manager, you can also enable automated validation to ensure the accuracy of order details – and definitely minimize errors that may have occurred during second or counting.

• Quick Orders

The Quick Orders feature helps warehouse managers to process urgent orders without impacting the overall workflow. Orders marked as ‘QO’ bypass standard queues and get directly into faster picking, packing and shipping.

There are different use cases, business reasons or circumstances where warehouse managers and stakeholders have to process quick orders – so, it is ideal to add notes with QO to refer to next time – during reporting and auditing to understand the qualitative impact of QOs.

• Picking Execution

Picking is one of the most labor-intensive processes in warehouse operations and a WMS optimizes this picking step by providing detailed instructions to warehouse staff. Here’s how it works:

The system supports multiple picking methods, such as single-order picking, batch picking, or wave picking. This depends on your warehouse layout and order requirements. The WMS uses algorithms to create the most efficient picking routes. This helps reduce travel time and increase productivity.

Warehouse staff receives digital instructions on handheld devices, to specify the exact location and quantity of items to pick. If your warehouse has barcode scanning and validation protocols, you can follow so during the picking to ensure that the correct items are selected.

• Shipping Execution

The final step in outbound operations is shipping execution – during which orders are packed, labeled, and handed over to the appropriate carriers for delivery. Here’s a step-by-step breakdown of shipping execution feature of WMS:

The WMS generates shipping labels with all necessary details, mainly customer address, shipping method, and tracking information. These WMS programs have integrations with carriers like FedEx, DHL, and UPS so they can schedule pickups, print shipping documents, and update tracking information automatically.

Then the system optimizes how orders are loaded onto vehicles to maximize space and minimize handling during transit. Throughout this process, real-time updates inform customers and stakeholders about the shipping progress.

3. Vehicle Management Module

The third important module available in best warehouse management systems is vehicle management. The features present in this module are indispensable for medium to large-scale supply-based businesses that also maintain fleet facilities, or, have to coordinate with carriers. Take the example of cold storage WMS that helps with niche-specific cold chain monitoring. 

In WareGo, we are offering advanced vehicle and fleet management features like gate entries that helps log and monitor vehicles and your warehouse managers can optimize their supply chain routes based on the operations and data.

• Gate Entries

Gate entry management allows warehouses to track vehicles entering and exiting the premises. This means good are secure and fleet is efficient.

The WMS captures details such as vehicle registration, driver credentials, and purpose of entry. This creates a comprehensive log of all vehicles on site.

By pre-scheduling arrivals and departures, the system minimizes congestion at the gates and arranges operations. Gate entry logs update in real time, vehicle movement becomes visible and unauthorized access is stopped.

• Vehicle Operation Log

The vehicle operation log tracks the activities and performance of each vehicle registered in warehouse operations. The log records details such as loading and unloading times, routes taken, and fuel consumption. This helps in evaluating vehicle performance and identifying inefficiencies.

The system in real-time flags vehicles that require maintenance so they remain operational and don’t break down. By analyzing data from the operation log, managers can identify trends and make informed decisions to optimize vehicle usage.

4. Inventory Management and Allocation

The forth major module of the WMS is the inventory management module. It handles the distribution and allocation of stock – also what we commonly say inventory. The main fulfilment activities happen in this module and so, we have features like bacth order processing, order history, progress and automatic assignments as part of this module.

• Batch Order Processing

With batch order processing feature, warehouses can handle multiple orders simultaneously. For B2B businesses and supply chains, this means they can significantly improve operational efficiency.

So different from processing orders individually, the WMS groups similar orders based on parameters like product type, destination, or order priority. By consolidating orders into batches, the system minimizes repetitive tasks and reduces handling time.

Warehouse managers can then better utilize resources such as manpower and equipment, reduce idle time and minimize Errors with batch order validation.

• Check Batch Order Progress

This is the real-time progress tracking feature for batch orders which ensures visibility into every stage of fulfillment.

In this feature, managers can view the completion percentage of each batch and identify bottlenecks. They can also analyze the time taken for each stage of batch processing. And when the WMS highlights areas for improvement, they can send out real-time alerts to notify teams of delays or issues, so they can take quick corrective action.

• Manual and Automatic Stock Assignment to Orders

Best warehouse Management systems support both, manual and automatic approaches based on operational needs.

For specialized or priority orders, warehouse managers can manually allocate inventory, so high-value customers receive their shipments on time. This is also connected to quick orders we discussed in the outbound module.

The WMS uses predefined rules, such as FIFO (First-In-First-Out) or LIFO (Last-In-First-Out), to automate stock allocation. This reduces human intervention and speeds up order processing. With automatic assignment, older stock comes into supply chain first so there is lesser risk of obsolescence and spoilage.

• View Batch Order History

A robust history log provides a complete record of batch orders. This feature mainly helps with performance analysis and often supports cost managers in calculating variances.

In the order history feature, managers can access information like items processed, quantities fulfilled, and any deviations. The history log also acts as a compliance tool and records every action taken during batch processing. With this historical data, warehouse managers can identify patterns, refine processes, and forecast future needs.

WMS Integrations with Business Tools and Platforms

A warehouse management system software facilitates efficient supply chain operations, and it does so with its strong integrations with other business programs like ecommerce platforms, delivery providers, and data analytics programs. When integrated with other business tools and platforms, responsible teams can realize its full potential with critical functions like inventory management, shipping, and e-commerce fulfilment.

But why do warehouse management systems integrate with other software?

These integrations with popular platforms like Shopify and UPS enable a WMS to go beyond managing warehouse operations. For a business relying on a strong WMS, this software acts as the central hub that connects every aspect of the supply chain cycle.

Here’s why exactly we have provided ___+ integration options with WareGo:

• Integrations ensure smooth data exchange across systems and so, reduce manual data entry and errors.
• Businesses gain real-time visibility into inventory levels, shipment statuses, and operational performance.
• Accurate order tracking, faster deliveries, and transparent communication lead to higher customer satisfaction.
• With integrations in place, businesses can adapt to growing operational demands without overhauling existing systems.
• By connecting a WMS to analytics platforms, businesses utilize actionable insights to optimize inventory, forecast demand, and reduce costs.

Essential WMS Integrations

This is one of the factors you should consider when choosing a warehouse management software for your business: what integrations it offers and to what extent for specific supply chain activities.

For reference, WareGo WMS provides integrations in five main categories:

• ERP Systems (e.g., Oracle NetSuite)

For most medium to large-scale businesses, Enterprise Resource Planning (ERP) systems act as the backbone of business operations to manage functions like finance, procurement, and HR. When integrated with a WMS:

• Inventory updates, purchase orders, and sales data flow effortlessly between the warehouse and ERP.
• Consolidated data helps in accurate demand forecasting and resource planning.
• Real-time updates ensure alignment between physical inventory and financial records.

• E-commerce Platforms (e.g., Shopify, Amazon, WooCommerce)

Where ecommerce is, there definitely is a warehouse or two, or even more! That’s why, integrations with ecommerce platforms and facilitators is another key characteristic of best warehouse management systems.

When integrated with these platforms, a WMS exponentially boosts overall supply chain efficiency because:

• Stock levels are automatically updated, reducing the risk of overselling or stockouts.
• Orders placed online are routed directly to the WMS for faster processing.
• Integration enables faster picking, packing, and shipping processes.

• Shipping Providers (e.g., FedEx, DHL, UPS)

Shipping is one of the most important components of the supply chain operations. So when integrated with shipping carriers, WMS saves time in generating shipping labels. The WMS itself tracks shipments from dispatch to delivery. The data analysis part compares shipping rates across providers so you can choose the most cost-effective carrier for next shipments.

• Marketplaces

Marketplaces have become essential sales channels for businesses currently targeting a global audience. So when a WMS creates a centralized inventory management hub, it has to have tracking data from marketplaces to unify the sales channels. Most WMS help managers route the marketplace orders directly for faster processing and shipping.

When do you need a WMS?

Here are five signs that you need a warehouse Management System software:

You want to sync multi-channel supply chain

You have a multi-channel business meaning that your business operates across multiple sales channels. Take example of e-commerce brand that has a physical store as a retail outlet, also operates online and deals with B2B white-labeled products.

Business Growth

Rapid growth targets are straining your current processes, leading to delays, errors, and inefficiencies in warehouse operations.

Industry Automation

Your industry requires strict compliance with regulations or client-specific SLAs, so manual tracking and reporting are becoming obsolete. In this case, you need a niche-centric, or let’s say an industry specific program like restaurant inventory management software or food and beverage inventory software.

Complicated Supply Chain

Supply chain complexity—such as reliance on multiple suppliers or international shipping—creates bottlenecks without real-time visibility.

Sensitive Consumer Target

High volumes of returns, seasonal demand surges, or flash sales are overwhelming your existing system, impacting customer satisfaction and revenue.

How much does it cost to implement a Warehouse Management System?

Implementation of a typical Cloud-based warehouse management system costs between 350 to 6000 per month depending on the size of your warehouse operations, inventory levels, automations you require, number of warehouse team managers etc.

As a quick tip, there are now WMS programs available that work as plug-n-play, you can scale on-demand and choose a plan that best fits the nature of your business as well as your growth targets.

Challenges of Implementing a Warehouse Management System

Adopting a warehouse management system software brings significant benefits – but the type of business you run, the industry you belong to, the size of your orders, and even the growth targets you envision – all factors can pose certain challenges before you can actually invest in and implement a WMS. While your business concerns are all valid, specific WMS features can actually solve your problems:

Over to you…

If you are still here and calculating your next step before implementing a Warehouse Management System software, WareGo can help! We are helping ecommerce, retail and 3pl fulfillment companies from around the world revolutionize their supply chain logistics with a one-stop-solution for inventory, inbound, outbound, and vehicle management tool. Book an implementation call and we’ll take it from there!