Warehouse management is an essential system for every SME manufacturing business owner to master if they wish to optimize inventory and production operations to their full potential. An effective warehouse management system will help you eliminate redundancies in your workflows and run a tight ship.
An inevitable part of your supply chain, the warehouse, where your goods are stored before dispatch, is a system all in itself. Just like every system, this one too has many moving parts, all of which need to work together to give you a competitive edge.
What Is Warehouse Management
Warehouse management is a system that begins from the time the product has been received at your warehouse, all the way to the time it needs to be shipped to fulfil an order. Warehouse management includes all the control and planning that needs to be done at every step, to ensure your warehouse is operating at optimal capacity. As a manufacturing business, you will produce goods that need to be stored somewhere before being sent to your customers. This is usually done in a large space, one built to accommodate your inventory, known as a warehouse. Warehouse management refers to a birds-eye view of the entire management system used to run your warehouse.
Benefits of Warehouse Management
The goal of every business owner is to create customer delight and build a brand that people will be loyal to. Effective warehouse and inventory management can help you do just that.
If done properly, there are many advantages of warehouse management for SME businesses:
- Increased efficiency: Warehouse management can help you make the most of your space as well as of your human resources.
- Improved productivity: An effective warehouse management system will also help you create processes and workflows that increase productivity at every step. You will be able to remove inefficiencies and save time as you optimize each stage of your operations.
- Saved costs: When you have a robust warehouse management system in place, you will be able to identify parts of your operations that are generating unnecessary expenses and can be rectified quickly.
- Delighted customers and partners: When warehouse management is done right, your entire supply chain stands to benefit. Starting from your suppliers and to the final customer. An efficient warehouse management system will ensure there is never a delay in order fulfilment and thereby build customer trust and loyalty.
Efficient Warehouse Management and Operations
Warehouse management operations are the backbone of any business that relies on storage and distribution. Efficient warehouse management and operations ensure that resources are utilized optimally, leading to timely and accurate order fulfilment. For warehouse managers, having the right resources and tools is crucial to overseeing the myriad tasks involved in warehouse operations.
The primary objectives of efficient warehouse operations include:
- Maximizing the use of available space.
- Ensuring timely and accurate order fulfilment.
- Reducing operational costs.
- Enhancing customer satisfaction through timely deliveries.
A clear warehouse management plan focuses on these objectives, integrating various processes such as receiving, storage, picking, packing, and shipping. The importance of warehouse management is a lot. It not only ensures smooth day-to-day operations but also impacts the broader supply chain, influencing relationships with both suppliers and customers.
What Is a Warehouse Management System
A warehouse management system is a tool that helps business owners get complete control over the day-to-day management of their warehouse. Warehouse management systems are software solutions that are adopted by businesses keen on optimizing their warehouse operations.
These are systems that form a part of an overall enterprise resource planning (ERP) system and can have the following benefits:
- Data-driven: A warehouse management system will be plugged into every step of your procurement and inventory operations and will pull relevant data from each of these processes. This can help you get a better sense of what the anticipated demand is, what your potential supply is, and how your daily operations are set up to match the two.
- Increased integration: Manufacturing businesses of a certain size and scale often implement an ERP solution to digitize their entire business. A warehouse management system that is effective will integrate well with your existing systems and other necessary business applications.
- Enhanced efficiency: A warehouse management system will evaluate every step of your warehouse operation from the receipt of goods to the delivery and order fulfillment. Each step and process has the potential to be improved and a warehouse management system is the best way to help you do this.
Key Features of Warehouse Management System
A warehouse management system that works efficiently will empower you to make use of real-time data to optimize every aspect of the warehouse operation.
If you're in the market for a warehouse management system, here are a few key features you need to look out for:
- The warehouse design: Making the most of your available warehouse space and ensuring inventory is placed strategically, is an essential element of effective warehouse management systems.
- Tracking the inventory: The warehouse management system you choose should be technically capable of sophisticated inventory tracking. This means eliminating human intervention and adopting technology with the use of technology such as barcode scanners.
- Human resource performance tracking: Warehouse management systems also need to take into account the human resources that manage day-to-day operations. Goal setting and performance tracking of your employees should be easy and reliable when using a warehouse management system.
- Quality control: Picking, packing, and shipping are three of the most important processes in warehouse management. A robust warehouse management system will ensure that every order is picked, packed, and shipped accurately.
- Management of the dock: Your warehouse management software should make it easy for your deliveries to be made at the right place, in the right quantity, and at the right time from the manufacturing facility.
- Data, insights, and reporting: A warehouse management software needs to be capable of analyzing all the data generated by your operational processes and making sense of it. Choose a warehouse management system that provides you with in-depth reports and actionable insights.
Inventory Management Vs Warehouse Management
Inventory management has to do with the specific movement of your inventory as a part of your operations. This includes knowing how many products need to be ordered according to the forecasted demand. It also includes the system that is put into place to store these products, move them around within the warehouse for packaging, and pick the right ones to ship out. Inventory management is not limited to finished products. It could also be used when dealing with raw materials that are needed to create finished goods.
Warehouse management, on the other hand, is a term used to describe the set of processes and systems that are in place to run the day-to-day operations of your warehouse. This includes not just the inventory part of it, but also elements such as staff management, warehouse layout, and design, overall monitoring, and reporting.
Warehouse management systems are built to help business owners maximize the productivity and operational efficiency of their entire warehouse, while inventory management is focused only on optimizing the inventory part of it.
Principles of Warehouse Management
Warehouse management is an effective tool only if it is leveraged in the right way. To have a warehouse management system that boosts your business productivity, here are a few principles you must adhere to
- Have clear objectives: When you set out to implement a warehouse management system, you need to be completely clear about your specific objectives. Each part of your system needs to be geared to meet that objective and it needs to be communicated across departments.
- Data-driven decision-making: In the multitude of processes that come into play during your regular warehouse operations, there is a lot of useful data that gets generated. Make sure you dive deep into this and extract insights that can be easily put into action, enabling iterative improvements.
- Control over complexity: Warehouse management is a way for you to extend more control over the complexity of your operations. When you have an effective warehouse management system, you should be able to track all the moving pieces, foresee potential problems and address them before they cause too much damage.
- Customer satisfaction reigns supreme: Ensure your warehouse management system is driven by a customer-first culture and value system, across your teams.
- Mobile and agile: Managing a warehouse can become a logistical nightmare every so often due to unforeseen circumstances. The team you have in place to facilitate warehouse management needs to have the ability to think on their feet and adapt to a dynamic environment.
Warehouse Management Process
While at first glance the warehouse management process may seem complicated, it can be broken down into smaller, more manageable steps. Here's a look at the key steps involved in the warehouse management process:
Step 1: Receiving the products: Once your products have left the manufacturing facility and made their way to your warehouse, they can be officially received. This means making sure the receipt of each product is documented and each product has been received in the correct quantity.
Step 2: The put-away: After the product has been checked into your warehouse, it needs to be sent to the best possible location to be stored. Your warehouse management system should be able to identify this location so you can move your product there immediately after receiving it.
Step 3: The storage system: The storage of a particular product is an essential part of a warehouse management process. The warehouse management system you adopt will ensure your products are stored in a manner that they can be easily located and accessed when needed.
Step 4: The pick-up: As per the shipping commitment that has been made to the customer, the respective products will be identified and picked up from their storage spot.
Step 5: The packaging protocol: Depending on the nature of the product, the right kind of packaging is done. The warehouse managing process is almost complete as your products are now awaiting their final destination.
Step 6: Shipping it off: Once the products are adequately secured with appropriate packaging, they are earmarked for shipping. The final stage of the warehouse management process is the shipping of your products to your customer's doorstep.
Warehouse Management Fulfillment Strategies
A warehouse fulfilment strategy is the game plan you adopt and put into action to fulfil your order quantity, in any given period. There are a variety of different warehouse management fulfilment strategies that you can choose from.
The choice should be made based on the type of products you need to process, the volume of the orders, and the scale of your business overall. Let's evaluate some of the popular techniques of warehouse management fulfilment:
- First in first out: This method, also known as the FIFO method, is when the order in which you process your products is based on what was received first. The first order that is received by your warehouse is the first one that is put into the warehouse and is also the first one to leave the warehouse for final delivery. After that, the second product received is processed, and then the third, and so on.
- First expired first out: This method is usually applied to perishable products. If a product is prone to expire and has a set date by which this expiration is expected, then the First expired first out method is employed. In this method, the order in which the products are picked for processing and shipping is based on how soon they are set to expire so that they make it to the customers before they perish.
- Batch processing: When you need to fulfil larger quantities of orders and they need to be processed within a fixed time frame, the batch fulfilment strategy can be very effective. By using this method, you can receive, store, pick, package, and ship large volumes of similar products, thereby saving time and unnecessary inventory management expenses.
- Zone picking: Another warehouse management fulfilment strategy is known as zone picking. In this method, you can allocate certain zones across your warehouse and initiate picking for order fulfilment in a zone-by-zone manner.
Warehouse Monitoring and Reporting
One of the most crucial benefits of adopting warehouse management effectively is the amount of useful information you get access to. This data is generated from every process that works together to create your entire warehouse management system. Each data point is an opportunity for you to learn something about the efficiency of your system and identify areas of improvement.
Everything from how well a product is received and checked into your facility to how accurately your team can pick products meant for shipping is useful data. By establishing and measuring the right kind of key performance indicators, you will be able to optimize your entire warehouse operations.
Here's a look at some of the popular metrics tracked by warehouse managers:
- The lead time of an order: An order lead time is established by measuring the total time it takes for an order to be completed. From the time it is placed by a customer to the time it arrives at their doorstep. This is a key metric used to measure customer satisfaction and business owners are always trying to compete to deliver the shortest possible order lead time.
- Product return rate: This is a key indicator of how many disgruntled customers you have. The product return rate is a calculation based on how many orders ended up getting returned as a percentage of the total orders that were taken. Ideally, you want to aim at having as low a product return rate as possible, indicating your customers are always happy with what they receive from you.
- Accuracy of order picking: An effective warehouse management system depends highly on the accuracy of order picking that is done. If orders are picked incorrectly, they will have to be sent back once the discrepancy is detected, wasting a lot of time and resources. This metric can be calculated by dividing the number of accurately picked orders by the number of total orders processed. A successful warehouse management system will have a very high order-picking accuracy number.
- Order receiving efficiency rate: Another key metric is the rate at which orders are received accurately in your warehouse. You can calculate this at an hourly rate, a daily rate, a weekly rate, or any other time frame that is relevant to your particular business. An efficient order-receiving rate is one where a higher number of orders are received and checked in accurately, per unit of time.
Challenges in Warehouse Management
Warehouse management can be a very useful tool in helping you increase the efficiency of your operations. However, there are often challenges you may face when trying to incorporate a robust warehouse management system.
Here are a few challenges in warehouse management you need to watch out for:
- The warehouse layout: A badly planned warehouse layout can lead to unwanted accidents and an inefficient flow of products through the warehouse.
- Inaccurate inventory planning: A core part of your warehouse management process is effective inventory management. If this is not done properly, you will face delayed shipments and unhappy customers.
- Volatile labour costs: The cost of labour always needs to be balanced out with the productivity it can create for you. Increasing costs can be tackled in many ways and warehouse management is the best way to identify potential solutions.
How to Choose a Warehouse Management System
As we have covered in this blog post, there are significant advantages of warehouse management for your manufacturing business. So, what are the things you need to keep in mind when choosing the right warehouse management software for your business? Here's a handy guide for your reference:
Return on investment: When evaluating the right warehouse management system, make sure you keep the bigger picture in mind and try to calculate the return on investment of implementing this system.
Real-time data: An efficient warehouse management system provides you with real-time updates and alerts.
Sophisticated analytics and reporting: Make sure you evaluate the reporting capabilities of your warehouse management system. The software should be able to derive useful insights from across your operations and workflows.
Scalability of the system: As a manufacturing company, you need to adopt tools and systems that can scale up when you need to so that order fulfilment and customer satisfaction are never negatively impacted by growth.
- What is the difference between a warehouse management system and an inventory management system?
While these two terms are often used interchangeably, there is a difference between them. An inventory management system is created to track the movement of stock in a particular warehouse, at any given period. On the other hand, a warehouse management system looks at the entire day-to-day management of a warehouse which includes everything from receiving the product, storing, picking it up, packing it, and shipping it, as well as managing the staff of the warehouse.
- What is the difference between inventory and stock?
Stock is a term used to describe the products that are already available to a seller and are ready to be sold to customers. Inventory is a term that is more encompassing in that it describes all the available resources including the raw materials, the goods that are currently being manufactured as well as the goods ready to be sold.
- What is the difference between material management and warehouse management?
Material management is considered to be a part of warehouse management as it focuses solely on the raw materials that are used to develop finished goods. The overall objective of material management is to try and lower the costs of the raw materials and ensure quality doesn't suffer.
Warehouse management is the term used to describe the system that is put in place to optimize the running of a warehouse and all the processes within it.
- Why is a Warehouse Management System (WMS) essential for manufacturing businesses?
A WMS is crucial for manufacturing businesses because it provides a comprehensive view of all warehouse activities, ensuring that operations run smoothly. With a WMS, businesses can optimize storage space, streamline picking and packing processes, manage staff efficiently, and ensure timely and accurate delivery of products. Additionally, a WMS can integrate with other systems, providing real-time data and insights that can help in making informed decisions, improving efficiency, and reducing costs.
- How does an efficient Warehouse Management System (WMS) contribute to cost savings?
An efficient WMS streamlines warehouse management operations, reducing the need for manual interventions and minimizing errors. By optimizing storage layouts, improving inventory tracking, and enhancing order fulfilment processes, a WMS can significantly reduce operational costs. Furthermore, by providing real-time data and insights, a WMS allows businesses to make informed decisions, leading to better resource allocation and reduced wastage.
- What are the key features to look for when selecting a Warehouse Management System?
When selecting a WMS, it's essential to consider features like real-time data tracking, sophisticated analytics and reporting capabilities, scalability, and integration with other systems. Additionally, the system should offer tools for optimizing warehouse layout, tracking inventory with technology like barcode scanners, setting and tracking employee performance goals, ensuring quality control in picking, packing, and shipping processes, and providing in-depth reports and actionable insights. Choosing a WMS with these features ensures that warehouse operations are optimized for efficiency and accuracy.
- What are some essential resources for warehouse managers to optimize operations?
Resources for warehouse managers range from technological tools to educational materials. Key resources include Warehouse Management Systems (WMS) that offer real-time data tracking and analytics, inventory management software for accurate stock control, barcode scanners and RFID technology for efficient tracking, and training programs or workshops focused on the latest warehouse management best practices. Additionally, industry publications, webinars, and forums can provide valuable insights and updates on emerging trends and technologies in warehouse management.