Table of Contents
More Warehousing Content
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Table of Contents
More Warehousing Content
Get the PDF version via Email
A dedicated storage facility meeting the technical and compliance guidelines for storing goods and materials is widely known as a warehouse. Warehouses are the integrated facilities allowing the supply chain management to control and optimize the difference between incoming goods (inbound shipments like from suppliers, production centers, etc.) and the outgoing goods (outbound shipments including post-production, sales, direct delivery, etc.).
What is Warehouse Management?
Warehouse management is the key to success for any business with a sizable inventory of items to sell. It is essentially the process of organizing and controlling the components within the warehouse to ensure that it runs optimally and comprehensively. Well-organized warehouse management helps a company manage the products and ensure availability and timely delivery to the customers.
Primarily, it encompasses the principles and practices associated with running the day-to-day operations in a warehouse. Effective warehouse management processes optimize and integrate the overall warehouse operations to promote transparency and productivity with absolute low costs.
The Fundamentals of Warehouse Management
Deconstructing a complex process like warehouse management into individual and explicit methods isn’t a simple task. Warehouse management works on some basic fundamental processes to understand and effectively optimize the operations to reduce costs, reduce errors, and achieve a higher perfect order rate.
The fundamentals of effective warehouse management include:
The first and most crucial step in warehouse management. To function correctly, the warehouse management team verifies the receiving product is in the right quantity, in the right condition, and at the right time. This transfers accountability to the warehouse management for further maintenance until their shipments.
Sorting and Putaway
The primary function is to sort and optimize future movements of the goods for storage from the receiving dock to optimal storage locations. Effective warehouse putaway practices lead to faster and efficient storage with ensured safety.
Storage ensures the accurate placement of the received goods into their allocated storage spaces. With the help of proper KPIs, the storage process allows a business to maximize the space while improving warehouse efficiency.
Picking constitutes the first and most crucial step of fulfillment and the process responsible for accurately collecting products in a warehouse to fulfill customers’ orders. However, as picking is the most costly process in a warehouse management system, effective optimization can significantly reduce the overall costs without impacting the overall performance.
The process responsible for the consolidation of the picked items in the proper order to prepare them for shipping is known as packing. This step ensures the safety of the ordered products before leaving the warehouse for shipping.
The final step of warehouse management is responsible for taking the finished products from the warehouse to the customers. The process ensures that the correct order is sorted and loaded, is headed to the correct customer, has the suitable transit mode, and is delivered to the final destination.
Why is Warehouse Management Crucial for Business?
Warehouse management plays a vital role in structuring and ensuring on-time delivery to the customers. Efficient warehouse management allows a business to gain a better insight into the necessary resources and optimize the warehouse operations to provide the best customer service. While it might be an unnecessary expense, better warehouse management can save a lot of extra costs and boost the supply chain’s productivity.
A poorly planned warehouse runs into several problems that affect the overall profitability of a business, including:
- Unplanned and disjointed management teams and employees
- Rigid, restrained structure
- Inaccurate database
- Inaccessible inventory
- Redundant processes
The Challenges of Warehouse Management
Warehouse management is complex, with processes involving organizing, managing, and maintaining the operations in a warehouse. Despite the optimization, every warehouse management gets exposed to specific errors and challenges affecting the entire chain’s overall speed, productivity, and efficiency. But in most cases, the errors go unidentified, leading to significant damage. Some common challenges affecting the management are:
Excess Stock Accumulation
Procuring supplies from multiple sources without a proper system for tracking results in extra accumulation of materials or products. Even in some cases, storing stock from a single source can sometimes exceed the acceptable level, leading to more expenses than revenue.
Performing multiple operations together creates a workflow that can be repetitive, if the process isn’t well organized. The extra redundancies result in excess labor expense along with longer process times. Larger companies are more prone to this challenge than smaller units with little room for error.
Unplanned Warehouse Layout
Unplanned or poorly planned warehouse layout leads to the problem of space surge. The absence of a proper storage facility results in repetitive work accidents, incorrect time management with increased labor costs, and overall performance failure.
Lack of Proper Inventory Management
A poorly maintained warehouse leads to improper inventory control. A study suggests that around 43% of small businesses don’t have adequate processes to track inventory, or rely upon manual management methods, which are prone to manual errors. Lack of proper inventory management leads to increased miscalculations affecting supply chain management.
A manually managed database results in low or no connectivity in the supply chain. This leads to losing control over the goods and creating room for human error.
Poor Database Handling
Demand forecasting is one of the essential aspects of efficient supply chain management. Thus, the absence of a proper database in a warehouse leads to the lack of market forecasting for a business, which in turn makes the supply chain unprepared to meet the market’s demands.
Deplorable and Inaccurate Order Processing Units
Even though order management is the primary operation in a warehouse, it is likely to be the most crucial part of reporting most errors. Improper order management collapses the entire process with a potentially massive waste of time, resources, and money.
Poor Damage Control
Unfortunately, product damage is an inevitable problem in the warehouse management process. Businesses dealing with a large amount of inventory and heavy-duty equipment are likely to be more exposed to higher amounts of damage. The absence of required equipment and safety measures like pallet rack protectors, rack nets, guard rails, anti-slip tape, conveyor systems, etc., increases the probability of accidents.
Benefits of Warehouse Management
Effective warehouse management is imperative to business growth. Warehouse management is beneficial for both staffing and optimizing physical space with optimized work processes at various levels.
Warehouse management benefits a company in these ways:
Better Inventory Management
Optimal warehouse management provides visibility to accurate and real-time inventory operations. This helps the company estimate supplies securely and avoids errors and backorders.
Optimized Storage Space and Lower Operating System
Warehouse management systems help optimize warehouse flow with the best possible analytics based on availability and demand. With a practical warehouse management system in place, the optimized space is determined to provide the best possible ways of reducing waste. This also lessens potential expenses resulting from excessive material movements, time-consuming placements and retrieval, and lowers the overall operating costs.
Skilled Labor Base
A warehouse management system can effectively assign the right task to the right person based on their skill levels. Warehouse optimization is one of the most incredible benefits of improved labor utilization and work efficiency.
Better Visibility of Storage
Warehouse materials can easily be traced with an efficient and effective warehouse management process. Automating the warehouse management system lowers redundancy, enables accurate inventory, and provides accurate data and information for future traceability and maintenance of service.
Optimized Supply Chain
An optimized warehouse management system results in the overall optimization of the supply chain. The warehouse management system streamlines the entire process from inbound shipments to outbound deliveries simultaneously, improving operational efficiencies and lowering expenses. With better optimization leading to improved data, it reduces the risk and raises reliability at every level of the supply chain.
As inbound and outbound logistics are directly linked with a warehouse, effective warehouse management can efficiently manage the logistics with accurate data and lower the chance of error or wrong process.
Ensures Stable Revenue Generation
As the market demand is a variable factor, a warehouse acts as the storage for future usage. Orders for goods vary from time to time, depending upon external factors like the seasons, government policies, employment rates, income, etc. Thus, storing products for later usage according to the demand market helps in price stabilization and reduces revenue loss.
Sustains Risk Management
Better warehouse management lowers the risks to a business. It protects against price fluctuations, as the warehouse also offers safe storage of products, depending upon the market demand. Moreover, goods in warehouses are typically insured, and thus, reduce overall risks from any kind of accident.
Improved Customer Service
Last but not least, effective and efficient warehouse management allows a company to stick to its word of timely delivery and optimized distribution. This helps in increasing labor productivity and improves overall customer satisfaction.
How to Improve Warehouse Management?
An effective warehouse plays a vital role in structuring and enhancing overall supply chain performance.
Some ways to improve warehouse efficiency are:
Optimize Overall Warehouse Spaces
Rather than expanding the existing warehouse, a better optimization strategy like using vertical spaces, adding taller storage units, implementing the right equipment, etc., will provide a better structure to the warehouse.
Adopt Lean Inventory
Adopting lean inventory systems helps reduce possible extra costs with reduced stocks according to need.
Implementing Technology and Automation
A warehouse management system (WMS) or an ERP (enterprise resource planning) system with an effective WMS mode can improve efficiency with an automatic management system. With a lower manual process, the warehouse will be cleaner, more organized, and effective with reduced errors.
Simplifying Warehouse Management
The overall warehouse layout greatly impacts a company’s efficiency and productivity. Facilitating its flow, organization, access, and processes will lead to a smaller workforce with zero errors.
What is Inventory Management?
Inventory management is the part of the supply chain management dealing with internal processes like demand forecasting, supply chain analytics, inventory control, and reverse logistics.
Inventory management is primarily the first step of warehouse management. It involves tools like safety stock, cost of goods, the number of orders, inventory turnover, supply inventory, etc.
Inventory Management vs. Warehouse Management
While there are some notable differences between inventory management and warehouse management, the most crucial difference is their complexity. While inventory management processes are somewhat simple and broad with a single location, warehouse management systems are more complex and divided into multiple sub-processes and compartments.
Apart from complexity, other critical ways of differentiation are
Inventory management is the first step within a warehouse, whereas warehouse management is more streamlined to other related aspects in the entire supply chain management system.
Inventory management will only store information about the products in the stock and their quantity. However, warehouse management allows businesses to detect the specific locations of the supplies, and provides a neat and comprehensive control over the in-house operations.
Optimization and Solutions
As warehouse management is associated with a complex network in the supply chain, it provides opportunities for a business to analyze, improve, and make adjustments to the inventory and storage per its requirements. Inventory management, however, fails to do so.
Principles of Warehouse Management
The basic principles of warehouse management help a business focus on the critical aspects of warehouse operations. The principles include:
Efficient warehouse management must be aware of its purpose of operation for an efficient warehouse function.
Warehouse management is a complex process involving several levels of coordination. Thus, warehouse or business managers need to be able to track each process for better understanding and ensure the spontaneity of the whole process. Quality control provides a smooth operation chain with minimum problem points for accurate order fulfillment.
Decisions Based on Data
Optimized warehouse management systems allow a business to pinpoint and analyze the areas that need improvement. Data-driven decisions provide accurate information for the supply chain to run without a hitch.
Due to ever-changing market patterns, warehouse management systems must be flexible to meet the need. It is equally essential for warehouse managers to adjust to the change of plans and act accordingly.
When it comes to effective customer service and satisfaction, correct fulfillment with on-time delivery emerges as an essential principle in the whole process.
Warehouse optimization refers to integrating the overall process to determine the best way to execute the warehouse performance. Warehouse optimization requires the most cost-effective measures to carry out warehouse operations, including orders received, picking, sorting, packing, and shipping, and customized or optimal customer service.
The Importance of Warehouse Optimization
The warehouse serves as the intermediary between the supply and demand in a business. Inefficient warehouse management adversely impacts every step of the supply chain, from sales to customer service. An optimized warehouse management system allows a company to maximize productivity and profitability with a minimum investment in an organized environment.
Benefits of Warehouse Optimization
Though enforcing warehouse optimization may seem lengthy and costly, some advantages make the expense worth it.
Improved Customer Retention
With effective and efficient warehouse management, order processing time is reduced by a significant time with almost no error. Thus, the occurrences of issues leading to customer dissatisfaction are minimized.
Effective Data Usage
With better automation and accurate data retention, companies now can have the opportunity of precise market forecasting. By having accurate forecasts, it becomes easier for the company to scale the stock up and down as per the requirement with minimum waste.
Improved Logistical Growth
Fast-growing businesses are well aware of the impact of warehouse efficiencies on the logistics process. Optimized warehouse management allows the company to select the right technology, shipping carriers, and delivery options to make its inventory function faster and more efficiently to meet the market’s demands.
Warehouse Management Fulfillment Strategies
Creating and implementing effective fulfillment strategies based on the size, type, and volume of its orders allows a business to optimize its processes faster. This includes shorter processing time, fast shipping, minimized waste, and improved customer satisfaction.
Some strategies to maintain the most effective workflow include:
With this technique, the order processing method is improvised by fulfilling multiple orders for the same product simultaneously, without having to visit the same inventory repeatedly.
Designated zone pickers are responsible for their respective zone maintenance and order picking.
FEFO (First Expired First Out)
This technique ensures that perishable products reach customers before their specified expiration date. With this picking technique, products with the first expiration date are shipped first.
FIFO (First In First Out)
This picking technique ensures that the first products to come into the warehouse are the first ones to be distributed before they are marked obsolete.
Technology is vital in optimizing warehouse management effectively. Using related software or technical devices increases picking accuracy and ensures less wastage with more revenue generation.
Warehouse Monitoring and Reporting
Regular monitoring of the warehouse management system makes room for improvement. Like the other parts of supply chain management, measuring and tracking the Key Performance Indicators (KPIs) of a warehouse provides a comprehensive insight into the overall performance. This helps indicate the problem areas and highlights opportunities to improve warehouse efficiencies and finish the fulfillment process quickly, efficiently, and accurately.
Some of the effective Key Performance Indicators used in warehouse management are:
Receiving Efficiency and Productivity
Calculates the volume of supplies and goods received per warehouse operator per hour.
Calculating the accurate number of orders picked out of the total number of orders.
Order Fulfillment Time
The total time taken for an order to reach the customer once it has been placed.
Rate of Return Orders
The rate at which sold items are being returned by the customers with respect to the number of items sold.
Calculating the exact portion of the inventory sold and replaced over a stipulated time.
Benefits of Outsourcing Warehouse Management
Warehouse management is a highly complicated process requiring high investment and human resources. While some big companies might have the structure of in-house warehouse management, many other organizations outsource their entire supply chain process or parts of it to a third-party logistics (3PL) provider.
3PL providers offer some extremely beneficial strategic benefits for the companies, which include:
Fully Optimized Logistics Management
As 3PL providers work on a large scale with multiple companies simultaneously, they have the structural expertise to maintain massive data for analytics. This constant inflow of data allows them to optimize their facilities with greater efficiency, reduced shipping costs, lower transit times, and a better delivery experience.
Order fulfillment through outsourced partners helps businesses eliminate time-consuming warehouse operations like storage, picking, packing, shipping and tracking. 3PL providers take the heavy workload of in-house warehousing and provide real-time visibility of their inventory and performance. This provides crucial insights for the businesses in their future decisions.
Better Space Utilization
As outsourced partners work with multiple companies at a time, businesses have several warehousing options per the need. 3PL companies only charge for the portion the client business uses in a warehouse, curbing a lot of extra costs for maintaining in-house warehouse and inventory.
What is a Warehouse Management System?
A warehouse management system is a software solution designed to optimize the basic operational processes in a warehouse. An efficient warehouse management system offers transparency into a business’s storage and inventory, and manages supply chain fulfillment processes from manufacturing units to the retail market.
Warehouse management systems enable businesses to maximize their work and utilize the spaces by coordinating and optimizing material usage and resource flows. Warehouse management systems are designed extensively to eliminate manual processes and guesswork, leading to error-induced operations.
Warehouse management systems are structured to support the overall requirements of the global supply chain, and provide the necessary tools to implement strategies to improve supply chain distribution and business services.
How do Warehouse Management System Provide Value to Business?
Warehouse management systems are the central unit of the warehouse software structure. They control and administer warehouse operations like inventory management, sorting, picking, packing, auditing, and data handling.
Below are some ways an efficient warehouse management system provides value to a business:
- Optimize and control the movement and storage of the supplies
- Flexible handling of orders of different sizes
- Improve accuracy and efficiency of the order fulfillment process
- Optimize production control with high productivity
- Reduce expenses
- Strengthen security
- Integrate automation
- Improve labor management
- Visibility in the shipping process
- Improve customer experience
Key Features of Warehouse Management Systems
The features and functionality of a warehouse management system include:
Using locations suitable for more effective workflow, optimized storage and inventory, and better order fulfillment.
Using updated technologies like barcode scanners or RFID readers to easily track inventory.
The performance of the employees is tracked and noted for future reference.
Picking and Packing
Makes sure the accurate product has been sorted and packed before shipping.
Shipping and Logistics Management
Ensures the product has been shipped to the correct customer and assists the logistics team with on-time delivery.
Important information on the overall supply chain process is tracked and saved for improvements and better decision-making in the future.
Types of Warehouse Management Systems
Every business implements a warehouse management system based on its unique necessities and requirements. Thus it is equally important to know the different types of warehouse management systems and implement them based on a business’s size, needs, infrastructure, and budget
The different types of warehouse management systems are:
The most basic system designed only to handle the warehouse without a complex network. This system only deals with functions related to the movement of the products inside the warehouse.
Supply Chain Module
This system encompasses all aspects of the supply chain. It deals with vendor management, business process, risk management, and several warehousing features.
This system requires more internal resources to work, support, and maintain. It is usually installed in the company’s native hardware and network to provide greater control of the overall performance.
This system is the most potent option providing a complete business management solution. It connects to every aspect of a business, streamlines end-to-end processes, and provides insights into growing and increasing competitiveness with a single data source.
The most efficient management system that doesn’t require hardware or server synchronization. This web-based management system is quicker to implement, easily accessible, easier to upgrade, and simple to use. It can be scaled up and down according to the need of the business.
Implementing a warehouse management system can be complicated and expensive. However, it helps businesses cut expenses, optimizes inventory, ensures accurate order fulfillment, fosters flexibility and responsiveness, minimizes errors, and enhances customer service. Effective warehouse management systems work with real-time data to maximize productivity so businesses can justify their costs and complexity.
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A warehouse management system allows businesses to control and administer warehouse operations, from raw materials to finished goods and customer service.
Warehouse management systems play a vital role in the overall supply chain management by managing orders and completing fulfillment processes. A supply chain can only operate as quickly, accurately, and efficiently as the WMS permits.
The features of the warehouse management system include:
- Warehouse Layout
- Inventory Management
- Sorting, Picking, and Packing
- Labor Management
- Yard and Dock Management
Warehouse management generally follows 5 steps including:
- Inventory Tracking
- Picking and Packing
- Receiving and Stowing
There are several prominent WMS vendors. Some of the top names include: