What is Warehouse Management? How to Run Things Like a Pro

It’s time to turn your warehouse into a warehome.

Offering a good product means nothing if the fulfillment process isn’t efficient. A company’s warehouse sees the creation of goods and services and handles the distribution of finished products. The process usually begins and ends in this space where operations are being managed methodically. Warehouse management is necessary to guarantee that everything in between goes according to plan. 

Warehouse management streamlines day-to-day activities to make inventory processes more efficient. A company that prioritizes warehouse management will utilize inventory space effectively, source and train staff to understand how stock is organized, communicate with external vendors, and ensure all warehouse spaces have the proper equipment. 

Managing a warehouse can be incredibly tedious when there are so many moving parts. Some companies utilize warehouse management software to automate the process. Warehouse management solutions can help a company control its operations and monitor movements on an updated interface between all warehouse inventory locations.

The five types of warehouses

Before the warehouse management process begins, it is important to identify the available warehouse types. There are five major warehouse types that companies use to house their inventory materials. Each type fulfills different needs, so what works for your company may not work for another. 

1. Public warehouse

A public warehouse is owned by a third party and provides inventory space and storage capabilities to companies. They can be leased by multiple companies at a time and are sometimes open to the general public. A lot of companies find public warehouses favorable because it lessens their responsibilities when managing a warehouse. Public warehouses take on costs associated with hiring staff, security, and upkeep. Companies that don’t require constant inventory space also have the option to operate in a public warehouse for the specific period of time that it is needed.

2. Private warehouse

A private warehouse is usually owned by a large corporation to house and ship their own items. Unlike a public warehouse, a private warehouse is not limited to storing inventory materials. With a private warehouse, companies can utilize that space however they choose. That means the entire product life cycle, from brainstorming sessions to distribution center abilities, can occur in one location. 

All resources are purchased internally, and decisions regarding how space is used and how the warehouse operates are entirely up to the owning company’s discretion. While expenses are much higher with a private warehouse, the customization capabilities can outweigh the costs. 

3. Contract warehouse

Like a public warehouse, a contract warehouse is also owned by a third-party company that offers inventory space for a specific period agreed upon in a contract. What makes contract warehouses unique is that the entire space is dedicated to just one company. 

Leasing a contract warehouse offers all the benefits of a private warehouse without actually owning the space. A contract is signed with a sole organization, and the warehouse owner takes on the major responsibilities of managing it. Companies can either use their own internal resources in the warehouse or even contract warehouse staff. 

4. Smart warehouse

A smart warehouse uses warehouse automation to streamline processes. As the production industry is introduced to more innovations, we see robots and complex machinery making their way into warehouses. Some warehouses have even utilized machines to read orders, pull items from inventory, and pack them in preparation for shipping. 

Smart warehouses are favorable for companies that can invest in inventory tracking technology and hope to reduce the risk of human error. A smart warehouse comes with hefty costs in installation, maintenance, and staff training.

5. Climate-controlled warehouse

Climate-controlled warehouses are the best fit for companies selling products that can be negatively affected by temperature. This includes perishables like frozen foods and items that need to be kept at a specific temperature to stay fresh, such as wine. It can even include raw materials like wood, that could be damaged in exceptionally humid environments. Climate-controlled warehousing works to create an atmosphere that helps items thrive using dehumidifiers, heaters, and more.

Benefits of warehouse management

After identifying what type of warehouse works best for you, you may be wondering what a good warehouse management strategy can do to help optimize it. The importance of warehouse management is outlined by the long- and short-term benefits it can offer to your company. 

Increase visibility

Warehouse management helps you know exactly what you have in your inventory at any given moment. Inventory visibility helps companies maintain accurate counts of all items and reorder supplies accordingly. This includes the benefit of avoiding potential surpluses or shortages caused by inconsistent numbers. 

Using warehouse management software also helps to increase visibility by keeping counts as updated as possible and available to all company personnel anywhere at any time. 

Enhance organization

Once you increase visibility, it is much easier to decide how to organize the materials in stock, including where things are placed and in what fashion they’re used. For example, you may utilize a first-in-first-out (FIFO) method if you are selling perishable products. If you’re selling nonperishables, you may opt for the last-in-first-out (LIFO) method. 

Companies who prefer to use items in order of priority may use the ABC analysis method, where materials are organized in groups from A to C and the group A materials are used first. Increased warehouse visibility makes the overall organization of products much easier to implement and track.

Improve employee productivity

When an environment is efficient, those in the environment thrive. Ensuring that warehouse workers are well-versed in company activities and are happy with their roles in production is essential for successful daily warehouse operations. This includes investing in appropriate training programs, balancing labor costs, ensuring clear management methods, encouraging feedback, and promoting open communication. 

You must consider the opinions of those who make your warehouse run smoothly every day and what they think you could do to make warehouse operations more efficient.

Track accurately

Warehouse management doesn’t end when an item leaves the warehouse. Gaining visibility into the movement of materials helps to keep numbers as accurate as possible. 

Counting inventory once or twice is not nearly enough. A warehouse can only be accurate when everything is accounted for, wherever it is. This includes taking stock continuously, especially while items are in transit and moving between different warehouse locations. 

Create customer loyalty

A company that fails to ship and deliver its products effectively will not retain clientele. No matter how good your product is, your customers don’t want to wait too long for it. And with the right warehouse management system, they won’t need to.

When a product quickly shows up at someone’s door in excellent condition, you create the perfect situation for a returning customer. A company that prioritizes warehouse management balances its supply and demand, knows precisely how many products they can manufacture, and can estimate how quickly they can distribute them. Creating transparency will create customer satisfaction and make buyers trust you and your product more. 

Challenges of warehouse management

With all the benefits of warehouse management come some major challenges that companies face as they attempt to optimize their warehouse operations. These challenges are essential to keep in mind as you make decisions regarding daily warehouse activities.

• Space utilization: Perfecting the layout and how space is utilized is essential for a successful warehouse. This includes picking a warehouse location that can accommodate inventory and distribution, creating an accessible setup for picking and packing, and prioritizing warehouse security and employee safety. 
• Inaccurate inventory numbers: It is more challenging to run warehouse processes efficiently when stock numbers are wrong. Inaccurate counts can cause repurchase orders to be ineffective, employees to face issues when picking items from inventory, and potential loss of profit when trying to fulfill customer orders without the correct materials.  
• Surplus and shortage: When inventory numbers are inaccurate, you can face the potential of a surplus or shortage. A surplus happens when companies are left with more products than they know what to do with. A shortage occurs when a company doesn’t have the materials necessary to meet customer demands. Both face their own costs if experienced and should be avoided. 
• Labor costs: The cost of staff is important to consider as it needs to help a warehouse stay more efficient while keeping employees happy. When balancing labor costs, companies should consider which warehouse processes can be automated using technology or machinery and which would be most effective when done with human hands.
• Time management: Ensuring that warehouse time is being spent productively is critical. This includes scheduling out processes with enough time to finish them successfully and making sure tasks are allocated fairly to avoid employee burnout. 
• Quality control: The overarching priority should always be the quality of the product. The warehouse management process oversees product development, production, and distribution. With such a prominent role in the creation of a product, warehouse personnel should be equipped with the training and tools to ensure that every product they pack and ship is meeting company standards in quality.

The warehouse management process

There are six main elements included in the warehouse management process. These are done in a specific order, with each step relying on the last step to be successful.

1. Receiving: The receiving process begins before any product is actually received. Proper documentation is needed in advance before items can enter the warehouse and be organized appropriately. This documentation should include a detailed description of the incoming shipment, the quantity expected, size and weight, and where it will be categorized in the existing warehouse layout. After the item arrives, the shipment should be unloaded and counted.
2. Put-away: The put-away process is when the shipment is moved from the shipping dock into the warehouse space. This process needs to be done with extra care and attention to ensure that all items are accounted for as they are moved. 
3. Storage: The storage process can start when the product has been properly identified and allocated within the warehouse management organization system in place. The items received should be arranged according to the current inventory priority standards and available storage space, like the LIFO and FIFO methods for example. 
4. Picking: The picking process occurs when an order is received and items must be picked from the warehouse to begin distribution. Once a customer makes an order, the warehouse gets a list of all the “picking” materials and, using the organization method, the allocated pickers find and retrieve those materials so the order can be prepared for packing.
5. Packing: The packing process begins when all the necessary order processing items are picked and collected. This process is fundamental because how the product is packed is how the customer will receive it. Order fulfillment packing should be done with care and accuracy to ensure the buyer gets exactly what they purchased.
6. Shipping: The shipping process is the last step and happens when orders have been packed and are ready to leave the warehouse and make their way to the customer. This process is one that relies on clear communication in the supply chain to guarantee that the packages are loaded on a pallet correctly and on time.

Warehouse management vs. inventory management

Warehouse management and inventory management work very closely together to make the operations process successful. These concepts are so closely related that sometimes the terms are used interchangeably. 

Inventory management is a subsection of warehouse management that oversees the way inventory is organized and regulated. It plays a significant role in ensuring that the entire warehouse runs smoothly from the inside out. Warehouse managers use inventory management systems to track assets, prioritize resources, integrate technology, and collect data. 

There are four different methods that are used to categorize inventory in a warehouse. 

1. Perpetual system: This system takes count of inventory continuously and in real-time. It is favorable among stakeholders and retailers but incurs potential costs in labor and training. 
2. Periodic system: The periodic system takes count of inventory in specified intervals. Although it is usually done manually, the cost is less than other methods because it requires minimal technology setup. 
3. Barcode system: This system updates inventory using barcode tools. It is considered a relatively low-risk method because it decreases the chances of human error, although placing all the barcode scanner SKUs on each item can be very tedious.
4. Radiofrequency identification (RFID) system: The RFID system updates inventory counts using radio signal tags. This method also reduces the risk of human error, but installing and utilizing the system can be especially costly.

Balancing all the different inventory methods and ensuring they align with warehouse inventory management practices can be difficult. Some companies utilize inventory management software to automate the organization process. 

The most significant difference between inventory and warehouse management is how complex their responsibilities are. While warehouse management services specifically take charge of all the different areas in a warehouse, inventory management only optimizes the way stock is held. 

Warehouse management also takes on the more detailed organization of the warehouse. For example, if you were looking for an item, an inventory manager could tell you it is in stock, while a warehouse manager could tell you exactly where it is. 

Inventory management is considered a lot more numbers-based than warehouse management. While warehouse management takes a holistic approach, inventory management relies on data to provide updated stock levels, forecast inventory needs, and collect comprehensive performance analytics.

Despite these differences, inventory management and warehouse management need each other to create a successful production and distribution process. 

What is a warehouse management system?

A warehouse management system (WMS) utilizes software to automate the warehouse management process. It helps companies who may not use warehouse technology jump into an all-encompassing solution to successfully and effortlessly manage their warehouse in the digital space.

A WMS includes all the necessary tools for making a successful warehouse, like inventory control, monitoring movement between warehouses, tracking employee performance, collecting data, and ensuring accurate communication throughout the entire supply chain. 

There are four types of warehouse management systems that a company can use to manage its resources more efficiently. 

1. Standalone: A standalone warehouse management system is considered the most affordable because it focuses only on the warehouse instead of including additional supply chain features. You can cover the most basic warehouse capabilities with a standalone system, like receiving, putaway, picking, packing, and shipping. Because of its simple nature, standalone software is the easiest to combine with other company tools.
2. Enterprise resource planning (ERP): ERP software is used to automate not only warehouse processes but elements of the entire company. This includes accounting, finance, marketing, human resources, sales, and IT. It is considerably more costly compared to standalone, but it’s usually justified by its ability to control so many departments in one enterprise.
3. Supply chain: This system is considered the broadest of them all. Supply chain management (SCM) software gives companies the ability to oversee many different company processes in addition to warehouse management. This includes transportation management, inventory levels, shipping and receiving, quality assurance, order management, and more. What makes supply chain systems the broadest is the optimization capabilities in overseeing processes outside the company, like vendor and customer experience management. 
4. Cloud-based: A cloud-based warehouse management system is the most technically efficient of them all. In this system, all data is digitally stored and updated automatically in the cloud, where information can be seen and obtained instantly from any device. This system would be favorable for companies who would like to avoid purchasing accompanying hardware and implement a WMS as soon as possible.

Warehouse management system features

Because of a warehouse management system’s all-encompassing nature, it includes many processes in the available software. These features are included in most major WMS solutions.

Inventory management

Inventory management usually includes the WMS processes of receiving, putaway, and storing inventory. Warehouse software solutions should allow you to create purchase orders, categorize incoming items, and help warehouse personnel locate materials quickly. Inventory management and warehouse management address such similar concepts that they can sometimes be confused with each other.

Labor management

Labor management focuses on monitoring warehouse performance and meeting company key performance indicators (KPIs). Using labor management, companies can ensure a safe working environment, reduce the chances of overworking employees, and improve overall warehouse performance.

Order management

Order management includes the WMS processes of picking, packing, and shipping. It helps automate how warehouse workers pull items using zone picking, batch picking, and wave picking. It is especially important as it prepares orders that customers will receive. Order management also includes monitoring orders after they leave the warehouse, like creating invoices and processing returns. Some companies utilize order management software to automate this process.

Dock management

Dock management allows companies to automate load docking and ensure the process stays efficient when trucks show up to your warehouse. This includes cross-docking and yard planning.

Financial management

Financial management oversees how the warehouse budget is allocated. This includes collecting sales metrics, analyzing product data, monitoring warehouse costs, and generating reports with summarized information. 

Risk management

Risk management involves predicting the future of the warehouse and what it may need down the line. With risk management, companies should analyze significant production hazards, create forecasting reports using demand planning, identify financial risks, prioritize necessary changes, and be readily prepared for any major warehouse dangers.

Warehouse management software

If manually managing a warehouse system sounds tedious, let warehouse management automation tools be your hero. Warehouse management software allows companies to increase organization in the day-to-day operations of their warehouses with resource storing and sorting capabilities. 

To be included in this category, the software product must be able to:

• Collect data from digital and physical warehouses
• Manage workforce personnel and productivity
• Note major inventory movements between warehouse locations
• Offer monitoring abilities for inbound and outbound inventory
• Track shipping and receiving materials
• Provide packing capabilities in multiple locations
• Include features for manufacturing

*Below are the top 5 leading warehouse management software solutions from G2’s Summer 2021 Grid® Report. Some reviews may be edited for clarity.

1. Odoo Inventory 

Odoo Inventory offers all the necessary tools to manage basic warehouse operations. Use Odoo Inventory to keep counts updated, customize product routes, build reordering reports, trace stock movements, and forecast future inventory quantities.

What users like:

“Odoo Inventory is an inexpensive, easy-to-implement inventory management solution for small to medium businesses. The system is web-based and can be accessed from any device that can browse the web. The interface is very well built, and I have never had an issue figuring out how to do something.There is an app store that allows users to add functionality to the system through extra apps. The ability to manage multiple locations and warehouses, as well as moving inventory within them, is great if you store stock in more than one place.”

- Odoo Inventory Review, Jacqui L.

What users dislike: 

“While the overall interface is very easy to use, sometimes it is difficult to work around the issues. For example, I wanted to make an automation to manufacture products in certain batch sizes, and it took a fair bit of work to make it happen. It may take a bit of a workaround to function perfectly for some situations. But the tools available for creating different automation are extremely robust, and I'm confident they could work for almost any business. It might just take some time to tinker with the system and figure out your exact needs.”

- Odoo Inventory Review, Tanner C. 

2. Magaya Supply Chain

Speed up repetitive tasks using automation tools with Magaya Supply Chain. Magaya Supply Chain allows companies to organize workflows, schedule shipment orders, build custom extensions, and arrange documentation all in a cloud-based interface.

What users like:

“I like that Magaya makes it easy to create files, add documents, and edit information. This makes our jobs a lot easier in logistics, as this used to be done with paper and pen. Magaya is helping move companies to a more digital platform. It is also a great database for all of our invoices and bills. In addition, the few times we have contacted Magaya for help, they were quick to solve the problem.”

- Magaya Supply Chain Review, Mallory S.

What users dislike: 

“It needs a better entity management module for entities that do not have any related accounting transactions. It would be nice to have a dashboard with set metrics to easily monitor performance.”

- Magaya Supply Chain Review, Juan Miguel V. 

3. inFlow Inventory

inFlow Inventory allows companies to track inventory costs across several locations, manage orders from any device, create barcodes for organization, generate invoices, receive digital payments, and ensure items are replenished with reorder reminders. 

What users like:

“inFlow allows us to keep track of our inventory, BOMs, sales orders and quotes, cash flow, and so much more with ease. The reports are easy to run and configure specifically to your needs. The ability to customize the way you process the materials in your inventory and setup was a dream. 

My favorite feature is the ability to change something in the WO section, but not in the BOM, like for a custom setup. It is also great that if you make a change to the BOM, it doesn't change every work order already completed, which is something our old system did. There isn't a huge learning curve as the system is very user-friendly and customer service with Inflow is great if you get stuck.”

- inFlow Inventory Review, Stephanie H.

What users dislike: 

“The only negative thing I have to say about inFlow is that there can be a lag when communicating with the cloud. When updating inventory figures, the system can be tied up for 30-40 seconds. It isn't a terrible inconvenience, except when a customer is standing in front of you waiting for a response.”

- inFlow Inventory Review, Jacob T. 

4. Kintone

Take control of your warehouse workflow with Kintone. Kintone allows your company to create individual management steps, assign tasks, generate and pull reports, create unique notifications, and customize your experience with a library of applications.

What users like:

“I love the versatility. This is a cost-effective platform that really can help small to midsize businesses take themselves from expensive hardware, servers, and upkeep or expensive cloud solutions that fall outside their budgets. We have created app packs for a broad range of clients, which I really am excited about. Small businesses who have not had the opportunity or have not been exposed to the cloud technology “revolution” that we are experiencing currently have access to a tremendous amount of development resources in a fraction of the time.”

- Kintone Review, Christopher M.

What users dislike: 

“Kintone is not always user friendly and sometimes has issues on updating changes to the apps. Sometimes when you make a change, you manually have to edit accounts (instead of just syncing all data) which is time-consuming. It also does not allow searching of names by just a few letters, but instead has to have the name exactly as it is entered into the system in order to find them.”

- Kintone Review, Melanie R. 

5. Agiliron

Agiliron is a POS system that houses all customer and inventory information in one place. Use Agiliron to build an online store, maintain inventory accuracy, track purchase orders, add sales channels, and update data instantly in the cloud. 

What users like:

“I had a really great experience working with Agiliron throughout the entire sales process. They were extremely helpful with all of my questions, and I had a lot of them! There are many reasons why I chose this software, and the excellent service certainly was one of them. This software offers a lot of great functionality for the user, and once you get the hang of it, it’s quite easy to use. We look forward to working with the Agiliron team, as everyone I have spoken to has been very helpful and pleasant.”

- Agiliron Review, Tanya M.

What users dislike: 

“The only thing I don't like is you can't rearrange products or search for products easily in a quote/estimate - it has to be entered phonetically. It can't be any part of the product name and has to be entered the same way it is named, which when you have a database of 1200+ products makes it hard to remember the exact way each product is entered.”

- Agiliron Review, Allie D. 

Warehouse, sweet warehouse

If your company has access to a warehouse, you have everything you need to start managing it. Once you characterize your warehouse, you’ll be able to start optimizing the way you use inventory space, training staff to maintain processes, and enhancing the way products are packed and shipped. Then you can take the whole process to the next level by automating with warehouse management system software. 

Running things like a pro starts with managing like a pro. 

Ready to take charge of your warehouse management system? Check out these warehouse automation statistics to see how WMS solutions are innovating the way warehouses are run!