Importance of Warehouse Management & How It Can Be Improved

Joydeep Das

Senior Writer

Warehouse Management

If your business sells any type of goods, you automatically require a place to store them. Such storage facilities/warehouses or distribution centers help you keep your goods safely tell they are sold/used.

Looking for Warehouse Management Software? Check out SoftwareSuggest’s list of the best warehouse management solutions.

Businesses purchase land, hire staff, buy equipment and create a warehouse plan to ensure the safety and longevity of their goods/inventory. However, without a proper warehouse management system (WMS) in place, you will be dealing with high operating costs, low-profit margins, inconsistent staff performance, and poor client relationships.

Inbound and outbound warehouse operations are among the most complex business functions dealing with multiple variables. To help you understand WMS and its benefits, we have created a detailed guide on warehouse management. Learn how effective warehouse management impacts supply chain management and translates into business success.

What is Warehouse Management?

Warehouse management refers to the act of controlling and organizing goods within your warehouses, ensuring that all operations run smoothly and optimally. Warehouse management includes the following:

  • Tracking & improving overall warehouse performance
  • Managing incoming stock at your facility
  • Arranging warehouse inventory
  • Picking, packaging & shipping orders
  • Housing & maintaining appropriate equipment

How To Measure Warehouse Performance

Tracking the performance of your warehouse is an important part of supply chain management. Generally speaking, the performance of a warehouse system can affect the accuracy of fulfilling customer orders and the speed at which each order is fulfilled.  However, there are four main performance indicators of a warehouse management system:

  • Receiving efficiency: This signifies the average time it takes for your team to receive and put away a newly delivered order for sale. The better the receiving efficiency, the better are your retail results. Therefore it is a good idea to have timestamps for new stocks being delivered, stocks ready to be put away, and once stocks have actually been sent out.
  • Rate of return: It may occur that a customer may return the goods that they had ordered. It might not necessarily mean that there is some problem with the warehouse. However, a warehouse operations manager must look into the reasons for the returns and develop strategies to mitigate them. The following formula helps you determine the rate of return: 
  • Picking Accuracy: Tracking and proper segmentation of the rate of return enable you to understand your picking accuracy. To find out the picking accuracy for a period, you need to find the incorrect item picked by your personnel (which have been returned by customers) and use the formula below: Formula for picking accuracy
  • Order lead time:  This determines the average processing time for an order, i.e., the duration it takes for a customer to receive an order made. Order lead time can be further divided as per geographies, types of products, online orders, etc. However, it is believed that the lower your order lead time is, the happier are your customers – as long as the goods ordered are received in good condition.

What is a Warehouse Management System?

A warehouse management system is a tool designed specifically to optimize the operational processes within a warehouse. Warehouse systems offer complete real-time visibility over inventory, storage, demand, staff productivity, and order fulfillment workflows, ensuring that everything is in order. 

Warehouse management services help eliminate manual warehousing processes and guesswork while streamlining several interdependent processes. This saves time, prevents duplication of efforts, and provides you with a holistic overview of multiple processes within your facility without needing continuous audits. 

Warehouse management solutions help the management identify areas that need improvement and track progress throughout. Additionally, WCM benefits the organization by driving optimizations throughout the supply chain, from the time of inventory loading until it is shipped out.

Warehouse management solutions drive strategic improvements that benefit the entire process as well as monitor day-to-day activities. They offer different insights to different user groups and often have different functionalities developed as per the business units they serve. 

5 Key Warehouse Management Processes 

Warehouse management is a key aspect of supply chain management that affects inventory management, storage, retail order fulfillment, distribution, and shipping. Having an all-in-one warehouse inventory management system allows you to see different warehouse operations in real-time such as:

1. Inventory Tracking

Inventory tracking involves monitoring the level of stock to understand which units are placed in your warehouse and where. It also helps you monitor in-transit stocks that are en route to different stores. Warehouse inventory management informs you about the exact amount of product that is ready to be shipped if a customer orders an item right now.

Inventory management also gives you a forecast of how much inventory needs to be ordered based on projected volume and market demand trends. It can cater to large warehouses in different locations housing multiple product lines, helping you accurately track each item’s movement.

2. Picking & Packing

Picking and packing are the two main functions that are performed within warehouses. A warehouse system generates packing lists for each picker for retrieving items in the most efficient manner. This might include batch picking, zone picking, or ware picking.

For each new order placed, the picker receives a packing slip of the items being ordered and their storage locations within the warehouse. The picker then collects the ordered products from the given locations. 

Once orders are picked, it is handed over to a packer responsible for safely placing the ordered items into a packaging box, adding additional packaging materials, and putting shipping labels on them. The packages are then shipped to the delivery personnel, who take them to their destined locations.

3. Stowing and Receiving

Warehouse operations must receive freight or inventory from trucks at loading docks and then stow them away in their storage locations. The warehouse management system then needs to scan each new box received with the inventory quantities it possesses. The warehouse system should offer clear instructions for each user to know how each item needs to be received, unpacked, retrieved, picked, packed, and shipped.

4. Shipping

Based on the delivery and shipping options you provide to customers, shipping carriers such as DHL, FedEx, USPS, etc., will pick up orders from your warehouses to ship packages to their designated destinations. Once an order ships, your warehouse system must be able to send out order tracking information back to your store’s database. This allows your customers to track their shipments in real-time, improving transparency.

5. Reporting

Reporting is one of the key aspects of warehouse management services. Ideally, the system should offer out-of-the-box inventory and operational reports within your storage facility. This could include accuracy in fulfilling orders, total orders fulfilled per hour (for measuring staff efficiency), orders shipped on time, mis-packs, and much more.

Contemporary warehouse systems also offer extensive reports related to people’s operations to help understand staffing and labor management needs. Using a warehouse management tracking system, you can instantly get to know which of your employees have completed their safety training, which of them have the licenses required to operate specific instruments, and which of them needs to attend a re-training.

Importance of Warehouse Management in Ecommerce 

Since eCommerce stores have to deal with storage packaging and deliver thousands of orders daily; warehouse systems are a necessity to them. Such systems help eCommerce stores in the following ways:

  • Enabling logistical growth

As an eCommerce store grows, it faces several challenges related to fulfillment logistics. Fast-emerging brands fully understand the impact of warehouse efficiencies on their operations, from the number of pickers and packers needed on the floor each hour of the day to the spaces currently available in the facility.

E-Commerce firms need to select the right technology, delivery options, shipping carriers, and the best warehouses that meet their future demands without having to outgrow their existing space immediately. Using an effective warehouse plan, these firms can receive inventory more efficiently, deliver more orders on time, and pack boxes much quicker.

  • Faster shipping & processing of packages

Warehouse management software improves the efficiency of your supply chain and makes your operations leaner. They help deploy and monitor stations designated in all areas of your warehouse for each step of the fulfillment process. Moreover, they can track the performance of each fulfillment associate and help maximize their output.

Setting up functional areas for success means reducing the physical steps required to go from one place to the next within the workflow, routing all processes in a streamlined manner. The faster this work is finished, the sooner packages will be ready to go out the door.

  • Better storage allocation

Warehouse systems help eCommerce stores store each storage keeping unit(SKU) in a dedicated storage location depending on the item concerned and the layout of the warehouse. Once the inventory is stored in its designated place, the warehouse management system helps identify the exact location of any SKU for quick retrieval.

An accurate warehouse plan also helps you keep close tabs on inventory levels in real-time, ensuring that you never run out of stock and storage space. Moreover, if you happen to sell products with short shelf lives, quick expiries, or ones subject to recalls, these systems help you store them by lot numbers, enabling you to ship the oldest goods first.

Warehouse Management with Third-Party Logistics (3PL)

Warehousing processes are extremely complicated and require much investment and manpower. This is why many organizations choose to outsource their entire order fulfillment process to a third-party logistics (3PL) partner. 3PL companies run their own fulfillment warehouses and manage them for their clients, offering them several strategic benefits.

Having a professional third-party logistics partner helps retail organizations in the following ways:

  • Optimized Logistics Management

3PLs offer warehouse management services to multiple companies simultaneously — including high-growth brands, seasonal brands and everyone in between. They maintain and manage tons of data and can use it for demand forecasting, analysis of shipping zones, and inventory control. A 3PL warehouse system constantly collects and learns from data to optimize all its facilities with greater efficiency. It also reduces shipping costs and transit time frames for its customers, helping them prosper.

  • Multiple warehouses & broader geographic footprint 

When a business has only one warehouse, they have to ship and store goods in one location, which is often limiting. Partnering with a 3PL company allows such businesses to have several fulfillment centers, which are closer to their customers.  For example, if you ship goods nationwide, it makes more sense to have warehouses in all corners of the country. Availing 3PL warehouse management services allow easy shipping, less transit costs, and faster delivery, which saves costs and improves customer satisfaction.

  • Time-saving

Order fulfillment through 3PL allows retail and eCommerce firms to eliminate the most time-consuming warehouse operations like inventory storage, order tracking, shipping, packaging, picking, and replenishing supplies. These tasks not only take time but require significant planning. 3PL companies not only unload this burden from their clients but also allow them to monitor their inventory and performance in real-time. These insights play a pivotal role in future business decisions and organizational success.

  • Better space utilization

If your business is on the verge of outgrowing your warehousing space, working with a 3PL partner can make your life significantly easier. Even after 3PL outsourcing ,you can utilize your warehouse space you can utilize your warehouse space for other business purposes or lease it as per your convenience. 3PL companies make you pay for only the space you require for housing your products, which saves you a ton of money and reduced costs associated with hiring personnel for moving/maintaining inventory.

  • Real-time insights

Even though you are not present in your 3PL partner’s warehouse physically, technology allows you to get a minute-by-minute report of what is going on with your goods. 3PL warehouse systems help you track your inventory flow and movements in real-time, allowing you to know the status of each package/order.

Modern 3PL providers help you track each order through their tracking numbers, destinations, items, sales channels, and fulfillment centers, allowing you to measure performance parameters such as fulfillment speed, orders delayed, space occupied, etc. Thus, you get all the information needed minus any of the legwork required for warehouse maintenance.

Top 3 Things To Look For in a WMS

If you are planning to manage your warehouse by yourself, ensure that you do proper research and pick a warehouse system that matches your business’ unique needs. Here are the top 3 things you should consider before picking one:

1. Software connecting your stores

Having software that integrates seamlessly with your online store can be a massive boon to your business. From sending individual tracking data to customers to monitoring changing customer preferences and trends, compatible software can improve the performance of your warehouse. 

It is also prudent to go for tools that allow you to optimize the workflow of each picker based on logic matching your warehouse’s design and the goods ordered. Choosing software that can expedite shipping based on user priority is also a great advantage.

2. Technology compatible with your existing equipment 

Technologies used in the warehousing business today can become outdated a couple of years later. Hence, while making a warehouse plan it is wise to use tools that are compatible with your existing warehouse equipment. It is wise to consult your warehouse operations manager for the exact configuration/specifications that are needed before making a commitment.

All industries prefer to use the latest tools and technologies, hoping to gain a competitive advantage. However, if the solution you pick does not work well with your warehouse hardware/IoT devices like scanners, terminals, labels, etc., it becomes a bad investment. Even if you are picking an advanced cloud warehouse management system, be sure to factor in the additional equipment purchases you need to make to make the whole system work.

3. Demonstrated ROI

Before finalizing the WMS, it is crucial to understand if the option you are choosing has demonstrated success in similar industries as yours. Companies can easily list hundreds of WMS benefits on their websites. However, going through case studies/use-cases of money and time savings achieved through the warehouse system can save you from potential losses in the future.

Here are a few key parameters that you must consider:

  • % increase in order processing speed
  • Average time saved hourly 
  • % improvement in accuracy or error-reduction
  • Return on investment (money recovered or saved)

If you are unable to decipher how the WMS can positively impact your operations, it is highly unlikely that you can justify the investment you are making. 


Efficient warehouse management is crucial to the success of any retailer, be it online or offline. Warehouse inventory management requires a clear understanding of how a warehouse is to be organized and when. Efficient warehousing can ensure the steady growth of your business, while Efficient inefficient warehousing can sabotage any chance you have of business success. This is why most retail firms look for professional warehouse management services. 

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