Businesses that store items in a storage facility know that good management can make the difference between fulfilling orders quickly, accurately, and at a low cost versus receiving complaints about delays or incorrect shipments as well as higher operating costs.
What is warehouse management?
The principles and processes that are involved in the daily operations of a storage facility are called warehouse management. This includes, at a high level, receiving and organizing the warehouse space, scheduling workers, managing inventory, and fulfilling orders. If you zoom in, you will see that warehouse management is about optimizing and integrating all of these processes so they work together to maximize productivity and reduce costs.
Benefits of warehouse management.
The warehouse operations are not visible to the customer, but they are vital in ensuring timely delivery. Good warehouse management will ensure that all warehouse processes are run as accurately and efficiently as possible. Warehouse management, for example, involves optimizing warehouse space in order to maximize storage of inventory; ensuring that staff can easily find inventory; providing adequate staffing; efficiently filling orders; and coordinating communications with suppliers and transport companies to ensure materials arrive on time and orders are shipped.
Good warehouse management can have a positive impact on the entire supply chain. It will improve relationships between suppliers and customers by providing high-quality, fast warehousing and distribution service.
Optimizing warehouse management is a difficult task, given all the factors involved. Many organizations turn to warehouse management software for help.
What is a warehouse management system?
A warehouse management software (WMS) aims to simplify and streamline the complex task of managing a storage facility. A WMS is often included in an ERP suite of applications that integrates all aspects of warehouse management. A WMS, for example, can:
- Use data and automation for demand analysis, sales forecasting, and efficient daily operational plans.
- Real-time visibility into the location and quantities of inventory.
- To increase efficiency, share data with other ERP products or standalone software, such as accounting and transportation management software.
- Monitor and report on productivity to gain a better understanding of your warehouse’s efficiency and to identify areas where improvements can be made to the warehouse layout and space.
- Use predefined rules to create step-by-step instructions that guide users through everyday processes, such as receiving, picking up, and packing orders.
Inventory management vs Warehouse management.
It may be helpful to first understand some common warehouse management terms. Inventory management and warehouse are terms that are used interchangeably but have important differences.
Inventory management
Inventory management is focused on ordering, storing, and moving materials efficiently to create products or fill orders.
Warehouse management
Warehouse management is an umbrella term that covers other aspects of warehouse operations, such as organization, design, and labor. It also includes order fulfillment and monitoring.
Stock management
Stock management is sometimes used to refer to inventory management. However, it’s crucial for businesses that manufacture products to understand the difference. Stock is a finished product that’s ready to be sold or distributed. Stock, on the other hand, is everything that’s in the warehouse, including raw materials, materials in the process of being made into products, and finished products.
Stock management is a subset of inventory management. It focuses on keeping as little stock in order to save space and money while still meeting customer demand.
Warehouse management principles.
You can optimize your warehouse by focusing on the general principles that govern warehouse management. These principles include:
Know what you want. An operation in a warehouse must know its goals first. Do your customers require specific delivery? Does your inventory need specialized storage? All warehouse operations strive to maximize the use of space, equipment, and labor.
Comprehensive control. The coordination of complex processes involves many moving parts, including people, equipment, and orders. To ensure that processes are running smoothly, warehouse managers must be able to track them and identify any problems. To ensure that orders are filled accurately, quality control is essential.
Flexibility and resilience. Warehouse managers must be flexible and resilient to make changes on the spot, for example, when materials arrive damaged or if bad weather delays shipments. You must also be able to adjust workflows in order to maximize efficiency. This may involve rearranging the warehouse or reimagining pick processes.
Customer focus. When it comes to customer satisfaction, on-time delivery with the right product is a key metric. You need to be able to fill orders accurately and quickly to deliver on time.
Data-driven decision making. Even if all warehouse processes seem to be going smoothly, that doesn’t necessarily mean they are running as efficiently as they could. A WMS will help you identify and analyze areas where improvements are needed.
Warehouse management processes.
Six core processes are involved in warehouse management. Every process affects the efficiency of the following, so each step must be optimized to make the warehouse run like an efficient machine.
- Receiving. Log and check in incoming items. Verify you are receiving the correct quantity in the proper condition at the appropriate time.
- Put-away. Place items in their proper storage location.
- Storage. Store and arrange your inventory logically and safely to allow for fast and accurate picking.
- Picking. Picking.
- Packing. Pack the items ready for shipping. The items must be packed safely in the correct packaging and with a packing slip.
- Shipping. Send the finalized orders out, making sure they’re on the right vehicle at the right time with the correct paperwork so that customers get their orders on schedule.
Warehouse optimization
Optimizing your warehouse operation requires fine-tuning these warehouse management processes. When receiving goods, for example, an organization could label the items with mobile barcodes or attach RFID tags to make it easier to pick. A well-managed operation will store items with the least amount of space possible to maximize the storage capacity. For warehouse optimization, it is important to store popular items in areas that are easily accessible and separate items that could be confused with each other.
Warehouse management fulfillment strategies.
Selecting fulfillment strategies to match the size of the business and the type and volume of orders that it receives will help improve customer satisfaction, reduce waste, and speed up the shipping process. Using picking strategies that are matched to the types of orders you receive will help you maintain an effective workflow. You can use the following examples:
- The technique of batch picking allows you to quickly fill multiple orders without having to visit the same location repeatedly.
- Pickers are assigned to zones of SKUs. Pickers are responsible for selecting all SKUs in their zone.
- The FEFO method ensures that perishable items and products reach customers before the specified expiration dates. FEFO ensures that the items set to expire are sent first.
- The first in, first out method (FIFO) ensures that the first items to arrive at the warehouse will be the first ones to be shipped, helping to make sure that older products are shipped before becoming obsolete.
Any warehouse management strategy must also include technology. Mobile devices with packing lists that show serial numbers, lot numbers, and item locations can increase picking accuracy and speed. The software can suggest safe and cost-effective packaging based on the product dimensions, ensuring that each item is shipped securely with as little waste – and wasted space – as possible.
Warehouse monitoring and reporting.
Key performance indicators (KPIs), which are operational statistics that show how efficiently the warehouse operates, can help identify problems and reveal opportunities to improve efficiency. This will allow you to fulfill orders faster and more accurately. You can, for example, set a goal to improve picking and packing accuracy. Then, make changes in your picking process and track whether these changes help you reach your goal.
Warehouse KPIs
Warehouse managers track a variety of KPIs, including:
- Productivity or receiving efficiency: the volume of goods that are received by warehouse operators per hour. Scores higher than 50 indicate a greater receiving efficiency. Scores below 50 indicate problems that need to be investigated.
- Picking Accuracy: Number of correctly picked orders divided by total orders (including incorrect and short orders). The better it is to get as close to 100% accuracy.
- Lead time: is the average time that it takes to deliver an order after it has been placed. The shorter the lead times, the more likely customers will be satisfied.
- Product return rate: Calculated by dividing the number of returned items by the number of sold items. It’s important that you consider the reasons for returns to get a complete picture. A customer ordering the wrong item might not indicate warehouse operations issues, but if they are often receiving incorrect or damaged products, there may be room for improvement.
- Inventory Turnover: The amount of inventory sold and replaced over a period of time. Calculated by dividing total sales by average inventory cost. This KPI shows how well a warehouse manages its inventory to meet customer demand. In general, a higher inventory turnover is preferable. Inventory turnover can be low if a warehouse underestimates demand. Inventory that is slow to sell can be expensive, especially for businesses that deal with products that have a set shelf life.
Warehouse management statistics.
The global ecommerce market has been growing rapidly over the past few years and is expected top $29 billion by 2023. This will increase the need for warehouse space in order to meet consumer demand. The growth of ecommerce is expected to drive up the demand for warehouse space in the U.S. by one billion square feet. One survey by the trade publication Logistics Management found that 79% of warehouse operations are planning to expand.
Given this growth, one challenge that warehouse operations face is their inability to retain and attract a qualified hourly labor force. In order to improve productivity, lower operating costs, and meet customer demands, warehouse operations increasingly use technology to automate their processes. According to a survey by Logistics Management, 85% of warehouse operations are using WMS.
How to choose a warehouse management system (WMS).
The WMS you choose will be based on your warehouse operation and the goals that you have. The right WMS will help you achieve greater efficiency and better fulfill orders so that you can do more for less. The primary goal of any organization is to save money. ROI is, therefore, crucial.
A WMS can also be used as a tool to improve the efficiency of warehouse workers. The right WMS can provide you with real-time insights that will help your staff become more efficient. This includes receiving, shipping, and inventory management, as well as order fulfillment and labor. A WMS must also be scalable to help your business adapt and grow.
A WMS that is the right fit for your warehouse can help you improve the efficiency, speed, and accuracy of orders, thereby increasing your company’s profitability and customer satisfaction while reducing operating costs.
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