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3 Types of Warehouse Management Systems

For businesses that deal in third-party logistics (3PL), warehouse management is everything. Stock movements are the beating heart of this industry, so keeping a close eye on what comes in and what goes out is essential. Software plays a big role, as digital systems are the best way to prevent errors, increase transparency and control spending.

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Unfortunately, it’s not always easy to pick the right warehouse management system. There are several different types of WMS, and a huge amount 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.

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. 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.

WMS as a supply chain module and integrated 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.

Getting to Grips with the Basics

Standalone WMS

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

With WMS software, businesses can take control of inventory. It becomes easier to count cycles, track shipments and monitor expiration dates, among other things. There are also tools for optimizing receiving, putaway, slotting, picking, packing and shipping duties.

Supply Chain Modules

When considering different types of WMS, you might think about warehouse management as part of a supply chain system. This means investing in supply chain planning and execution applications that also offer warehousing features. It’s a common route, as it gives 3PL businesses the chance to get as much value as possible out of SCM software.

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.

Integrated with ERP

In simple terms, ERP represents a kind of “super system.” It covers most of the core applications needed for 3PL processes, including supply chain planning, customer relationship management, accounting, human resources and more. So it’s a great option for businesses looking to upgrade on a larger scale.

Integrated ERP systems can include warehouse management tools, but it’s not a standard offering. Therefore, be careful when shopping for ERP software. Make sure the vendor you pick provides applications for warehouse control. These products are highly specialized, and offer robust supply chain execution functionality, as well as inherent scalability.

A Word on Inventory Management Systems

It’s common to find warehouse management and inventory management being used interchangeably. However, these are different systems, and understanding those 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, it isn’t as robust or sophisticated. If you’re running a reasonably complex operation within a midlevel or larger company, it’s warehouse management 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 the various types of WMS. 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.

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. That said, you could also look for a supply chain management solution that has 3PL functionality.

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.

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.

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.

Get our Warehouse Management Systems Comparison Matrix.