The 4 Types of Warehouse Management Systems

A Warehouse Management System (WMS) is software designed to improve and optimize warehouse operations. An effective WMS can revolutionize customer satisfaction and operational efficiency for your distribution center (DC). There are three main types of warehouse management systems:

  1. Standalone WMS
  2. Enterprise Resource Planning (ERP) Module-Based WMS
  3. Supply Chain Management (SCM) Module-Based WMS

Each type of WMS comes with its own benefits and considerations. After choosing the type of WMS that is right for your business, you will have a choice whether to install the application on-premises or in the cloud, with the key differences being whether the software servers are located and who maintains them.

Benefits of a WMS

  1. Improve operational efficiency the WMS will streamline your DC processes, replacing manual data entry, analysis, and decision-making with automated processes. By selecting the right kind of WMS and adapting it to your business, you can target specific pain points of your operation.
  2. Reduce errors to improve fulfillment performance: the WMS can integrate and automate all processes supporting order fulfillment, reducing the likelihood for human error, and providing real-time visibility into order processing for rapid problem identification and resolution. 
  3. Improve inventory management: common WMS inventory management features include real-time inventory location tracking, historical inventory movement traceability, and features that help maximize space utilization. 

Please keep reading for more details on the three types of WMS, as well as factors to consider when choosing a WMS and whether to install it on-prem or in the cloud.

Standalone Warehouse Management Systems

A standalone warehouse management system is an independent software application that focuses solely on managing distribution center operations. A standalone system is typically highly specialized and includes advanced features not available on ERP or SCM module-based systems.

Benefits of a Standalone WMS

  1. Specialized functionality: standalone systems are designed specifically for DC management and this type of WMS often provides more advanced and specialized features tailored to distribution center operations, such as advanced inventory control and labor management tools.
  2. Flexibility and scalability: the feature set of a standalone system is often quite large, though you do not need to opt for the full set of features. Vendors may offer tiered licensing structures that allow you to select the set of features right for your operation.

Trade-Offs of a Standalone WMS

  1. Integration challenges: a standalone WMS might face complexities when integrating with other existing systems, such as ERP, CRM, or e-commerce platforms. 
  2. Increased cost: implementing a standalone WMS might result in higher upfront costs, especially if integration with other systems is necessary. Additionally, maintaining multiple enterprise software systems can increase overall IT costs, especially if standalone WMS servers are hosted on-premises.

Is a standalone WMS right for my business?

Because of the highly specialized and configurable nature of the standalone WMS, there are typical scenarios where a standalone WMS is an excellent choice:

  1. Complex or high-volume operations such as e-commerce or complex warehousing involving multiple locations and complex processes, with a need for specialized or flexible WMS features to effectively manage the business.
  2. A regulated environment requiring precise inventory traceability and management such as third-party logistics providers (3PL), food, beverage, and pharmaceutical.

ERP Module-Based Warehouse Management System

An ERP module-based warehouse management systems refers to a WMS module within a broader ERP software system. ERPs are comprehensive software systems designed to integrate and manage core processes of an organization, such as finance, HR, and procurement. When a WMS is a module within an ERP, it enables integration of WMS to broader upstream & downstream enterprise applications.

Benefits of an ERP Module-Based Warehouse Management System:

  1. Ease of integration with broader ERP system: by implementing an ERP module-based system, you will likely reduce the need for software interface development between a standalone WMS and the ERP, reducing the complexity of connecting to finance, HR, and procurement data.
  2. Centralized support and maintenance: the organization can lean on a single vendor for support, updates, and maintenance for both the ERP and WMS systems, potentially simplifying issue resolution and system upgrades.

Benefits of an ERP Module-Based Warehouse Management System:

  1. Limited feature set for complex operations: compared to a standalone system, an ERP module-based WMS often lacks more advanced and specialized features tailored to DC operations, such as advanced inventory control and labor management tools. This may present an issue if you have a complex operation or a need for specialized features. 

Is an ERP module-based WMS right for my business?

Businesses with an existing ERP system and a need to add basic WMS capability are good candidates for an ERP module-based WMS. The business will also benefit from the ease of integration with enterprise processes such as finance, HR, procurement, and production. Here are example scenarios where an ERP-integrated system may be the right choice:

  1. Manufacturers firms can leverage an ERP-integrated WMS to streamline raw material stocking, finished product storage, and distribution while linking these processes to production planning and scheduling.
  2. Companies with multi-channel sales can use an ERP WMS to integrate inventory management across these channels, linking it directly to sales, marketing, and financial processes.

Supply Chain Module-Based Warehouse Management System

A supply chain module-based warehouse management systems refers to a WMS module within a broader supply chain management (SCM) system. SCMs are comprehensive software systems that manage the flow of goods, information, and finances as they move throughout the entire supply chain, starting with suppliers and ending with the final consumer. A WMS within a SCM system is likely to emphasize the broader supply chain perspective, enabling a connection of WMS to broader supply chain data and systems from vendors, customers, and manufacturing sites.

Benefits of an ERP Module-Based Warehouse Management System:

  1. Holistic supply chain view: the WMS connects the DC with the broader supply chain, ensuring that warehousing activities coordinate with other supply chain functions like transportation and procurement. Features such as enhanced demand forecasting and supplier integration help to better manage inventory, reduce stockouts, and collaborate with suppliers on replenishment strategies and inbound logistics.
  • Seamless integration with SCM functions: the WMS integrates with the broader SCM system. Data flows smoothly between the WMS and other SCM modules, such as Transportation Management Systems (TMS) or Supplier Relationship (SRM) systems. These integrations can lead to more efficient logistics and reduced lead times.

Trade-Offs of an Supply Chain-Based Warehouse Management System

  1. Limited feature set for complex operations: compared to a standalone system, an ERP module-based WMS lacks the more advanced and specialized features tailored to DC operations, such as advanced inventory control and labor management tools. This may present an issue if you have a complex operation or a need for specialized features. 

Is a supply chain-based WMS right for my business?

Businesses that would benefit from a SCM integrated WMS typically have complex supply chains or operate in environments where warehousing is linked with other supply chain activities. Here are some types of businesses that might find an SCM-integrated WMS especially beneficial:

  1. Businesses that require tight integration between warehousing, transportation, and inventory management to maintain quality, safety, and inventory turn requirements. Examples include high fashion retail with seasonal demand and quick inventory turnover, as well as pharmaceuticals and food with perishable products requiring cold chain storage.
  2. Automotive manufacturers and suppliers who have complex supply chains with just-in-time requirements. Integrating warehousing with the broader supply chain ensures timely parts availability and streamlined production.

Choosing Between Cloud-Based or On-Premises

In the previous sections, we have outlined three main types of WMS. After choosing the right WMS type for your business, you will have the choice whether to install an on-premises or cloud-based WMS application. A cloud-based WMS is loaded on offsite servers at a data center, typically a managed service maintained by an external provider, whereas an on-premises WMS is loaded to servers at your DC and managed by in-house IT resources. It is important to consider the benefits of each type of application when making a choice.

Benefits of a cloud-based warehouse management system:

  1. Accessibility and scalability: cloud-based WMS are likely more accessible offsite and from mobile devices since cloud-based applications are accessible from anywhere with an internet connection. Since WMS servers are located and managed offsite, it is easier to scale system capability without having to purchase and install additional onsite IT equipment.
  2. Reduced upfront costs: there is less of a need for significant capital expenditure on hardware, software licenses, or IT infrastructure. Instead, many cloud-based WMS solutions operate on a subscription model.
  3. Remote management: a cloud-based system often comes with a reduced IT burden for your business. The responsibility for maintenance, updates, backups, and troubleshooting is primarily on the service provider. This reduces the need for a large in-house IT team and can lead to cost savings.

Benefits of an on-premises warehouse management system:

  • Regulatory and compliance considerations: some industries or regions have strict regulations about data storage and handling. An on-premises WMS option may align better to regulatory policies and regulations.
  • Does not require internet connection: an on-premises application will continue to support the operation, even in the event of disruptions or slowdowns in internet service.

Conclusion

There are several types of warehouse management systems available to you, ranging from highly specialized systems to systems that will integrate smoothly with existing enterprise systems to connect DC activities with the broader business or supply chain. In choosing the right WMS for your business, it is important to assess key factors such as company size, industry, budget, and future growth. Maveneer has a team of experts available to help you with WMS selection, implementation, and optimization. Please reach out to Maveneer for personalized guidance and WMS solutions tailored to your unique business needs.

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