Your Guide to Software Selection

The Key Types of Warehouse Management Systems

For businesses that deal in third-party logistics (3PL), WMS software (Warehouse Management System) plays a key role in their operation. Unfortunately, it’s not always easy to pick the right one. There are several different types of warehouse management systems, and a huge number of options within each of these categories. In order to make an informed decision, you’ve got to understand what the options are, why they differ and which is best suited for your company.

When you break it down, there are basically three types of WMS systems for 3PL businesses. These are standalone warehouse management, supply chain execution modules and integrated ERP (enterprise resource planning) systems. It should be noted that the functions and features of each are largely the same; it’s the package and style of delivery that differs.

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Getting to Grips with the Basics

Warehouse management software offers a huge range of benefits. It helps users reduce their operating expenses by cutting labor and space waste. With WMS software, businesses can take control of inventory. It becomes easier to perform cycle counts, track shipments and monitor expiration dates, among other things. It improves inventory visibility through barcoding, serial numbers and RFID tagging features that keep inventory organized.

WMS helps users optimize their inventory transportation both internally and externally through inventory tracking functionality. There are also tools for optimizing receiving, putaway, slotting, picking, packing and shipping duties.

WMS offers a tool or module to tackle any aspect of warehouse systems, and each come with their own pros and cons.

Types of Warehouse Management System Software

So now let’s dive into the main 3 types of warehousing software:

1. Standalone WMS

Standalone systems are bought for their warehouse management features and nothing else. These types of warehousing systems can be combined with existing or future solutions, but it’s sold as a specialized product without further supply chain functions. Some vendors offer a handful of basic transportation management tools, however, the focus is on best-of-breed WMS.

Best-of-breed can be thought of as selective breeding — it only includes the best, most important features of all the potential warehouse management system modules. For WMS, this typically consists of inventory management and warehouse operations. Users of standalone WMS should expect expiration date tracking, barcode scanning, cycle counting, slotting, putaway, receiving, picking, packing and shipping.

As warehousing management systems go, standalone WMS is the most basic. It’s often included as one of the types of inventory management systems as it can be applied to many industries beyond warehouse management. This makes it an ideal solution for SMBs or businesses that don’t have much budget for software. It doesn’t incorporate any other steps of the logistics chain and may not integrate as well with other kinds of business software as some of the following types of warehouse management systems.

2. Supply Chain Modules

When considering different types of WMS, you might think about it as a subcategory of supply chain management. Supply chain management (SCM) software has a broad scope — it helps users manage everything from vendor relationships to business processes to risk assessment. It focuses on automating tasks like inventory management, material sourcing and product cycles.

Choosing this type of warehouse management system requires investing in supply chain planning applications that also offer warehousing features. It’s a common route, as it gives 3PL businesses the chance to explore the many benefits of SCM. Combining WMS with other applications is a good way to ensure there’s plenty of cohesion between different parts of the business. It supports holistic management of the whole supply chain, while standalone solutions cover warehousing only.

If you’re going to opt for this route, it’s important to minimize overlaps within your existing software. For example, if you already use fleet management, inventory management and warehouse management software solutions, you could potentially combine them all into a single SCM platform. Another way to avoid overlap is to choose an SCM that is easily integrated with other business software like payroll and ERP — which brings us to the next option for WMS.

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3. Integrated with ERP

ERP is a powerful software solution that combines the capabilities of many other systems. It offers most of the core applications that make 3PL processes go smoothly: from supply chain planning, accounting, customer relationship management, human resources and more. ERP is a good option for businesses looking to upgrade their software solutions on a larger scale. This is an excellent move for enterprises looking to get a competitive edge and improve their ROI. They are specialized systems that offer robust supply chain execution and scalability.

Integrated ERP systems can offer warehouse management features, but it’s not a core function of ERP. Keep that in mind when shopping for ERP software. Make sure the solution you choose provides features for warehouse management ahead of time.

This type of warehouse management system also comes with a heftier price tag — think of it as the jack of all trades of software. Because of this broad scope, ERP can replace a host of other software applications and centralize your operations into a single interface. If you’re dissatisfied with other software solutions you currently utilize or want to consolidate them into a single system (and payment!) then ERP may be the best option for you.

WMS as a supply chain module and as an integration with ERP are different from standalone systems because they provide warehouse management as part of a tool with broader capabilities. So the first decision to make is whether you want to invest in a specialized WMS, or whether you’d benefit more from a combined product. The answer depends on the size and goals of your business.

A Note on Inventory Management Systems

It’s common to find warehouse management and inventory management being used interchangeably. However, these are different systems, and understanding the differences is important. Inventory management is a lighter, more basic version of WMS, with a greater focus on stock counting and automated order fulfillment.

While it offers some of the same features as WMS, inventory management isn’t as robust or sophisticated. If you’re running a reasonably complex operation within a mid-sized or enterprise organization, it’s likely warehouse management, SCM or ERP that you need. Smaller businesses can get away with isolated inventory applications, but there’s a good chance an upgrade will be required at some point, particularly as you grow.

Finding the Right Software for 3PL

So now we know the difference between these warehouse management system examples. The next question is: which option is the best choice for your business? To find an answer, you need to examine the specialized functionalities that 3PL companies get from their warehouse management systems. Once you know what you need, you can search for the most suitable version. We recommend identifying your requirements first and shortlisting solutions based on which platforms perform those functions best. It’s also important to consider vendor reputation by reading reviews.

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Value-Added Services

For companies that deal with value-added services (kitting, light assembly, etc.), it’s a good idea to invest in software that tracks progress and payments. The best choice, in this regard, is a standalone WMS built specifically for third-party logistics. The simplicity of the standalone system allows you to focus on what you need — without a significant supply of inventory or the complexities of other SCM activities, keeping it simple can make your life a lot easier.

It’s common for 3PL providers to require precise labeling features. Labeling is a feature of many standalone WMS products, but there’s a lot of variation among vendors. If it’s a major part of the services you provide, it’s a good idea to pay a little more for custom tools. Look for a best-of-breed WMS that has the capacity to handle custom labeling.

Multiple Client/Owner Architectures

The majority of 3PL companies need a WMS that can manage inventory and purchase order processing for multiple clients. This isn’t a concern if you’re handling products for just one client. However, it’s the norm for warehouses (certainly larger ones) to deal with a long list of customers all at the same time. If this is the case for your business, the more robust offerings of an SCM or ERP warehousing management module may be the right fit for you.

One area where some businesses get tripped up is the definition of “multi-client.” It’s important to be aware that, when dealing with cloud-based software, the term can also refer to multiple companies using a single cloud server. When shopping for a WMS, make sure the vendor is actually offering a multi-client architecture, not just a shared server.

Third-Party Logistics Billing

Your WMS must offer specific types of inventory tracking and service contract processing. They’re essential for 3PL companies because they ensure invoices are never lost or skipped over. 3PL billing is the best way to automate putaway, receiving, storage and shipping, so that charges are always punctual and accurate.

You’ll find 3PL billing functions in most standalone WMS. They’re also a common feature of supply chain solutions, particularly when designed with logistics in mind. It’s possible to invest in ERP systems with these features, but they’re less common. You might have to search a little more extensively to find them.

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The Final Word on WMS and Finding the Right Product

There are, of course, other functionalities you can factor into your decision. Parcel carrier shipping, client web portals and inbound quality control auditing are just a few of the processes that might be central to your operation. However, you can use the following scenarios as a starting point for selection.

Standalone, best-of-breed WMS is the ideal choice for 3PL businesses that offer value-added services and require high levels of client visibility. WMS as a feature of supply chain software is best for businesses that want to optimize and enhance the whole supply chain. Finally, ERP-based products are great if you need 3PL billing and want advanced reporting tools. Assess which type of WMS fits your needs and infrastructure the best. This ensures that you choose the best type of WMS for your business, setting you up for plenty of warehousing success.

To choose the right system for your organization, follow these easy steps:

  1. Gather your requirements. We recommend starting by identifying the features of WMS that your organization will use most heavily. This ensures that you only consider solutions that can meet your unique needs. This interactive requirements template will help guide you through this process.
  2. Compare solutions. Once you know which features are key for your organization, you can begin comparing WMS solutions based on how well they meet your requirements. This WMS comparison report breaks down industry leaders and assigns each scores for their performance for key features.
  3. Shortlist and request Information. Choose the top five or six solutions that meet your requirements most thoroughly and reach out to the vendors. You can get a personalized price quote and request demos and trials of each system to gauge how user-friendly it is. To get a general feel for industry pricing, check out this WMS pricing guide.

Do you use any of the types of warehouse management software we mentioned? Do you use something else to manage your warehouses? Let us know your thoughts in the comments!

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  • jyoti sharma - June 12, 2018 reply

    It’s generally agreed that there are three types of WMS for 3PL businesses. These are standalone warehouse management, supply chain execution modules and integrated ERP (enterprise resource planning) systems.

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