A Complete Breakdown of Warehouse Management System Functional Requirements

Warehouses have transitioned from simply being storage spaces to being an important hub of the modern supply chain. The warehouse management system (WMS) is the central engine of this transition. WMS allows businesses to streamline, automate, and optimize from inventory management to order fulfillment.

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Whether you are managing a high-volume distributor or scaling an e-commerce business, the right WMS will drive speed, accuracy, and efficiency. To choose the right system, you’ll want to nail down the functional requirements of the WMS and have a good understanding of how the system supports daily activities.

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This guide will help you understand the basic features any WMS should include, other unique features such as AI and live tracking, the business value of a WMS, and how to make your decisions based on real-life examples.

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Core functional requirements of a WMS

1. Inventory management

Inventory management is the core of any warehouse management system. It is also crucial to track all products in your facility from arrival to shipping. 

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Key Functions: 

• Real-time visibility into current on-hand, allocated, and available stock.
• Stock level alerts and automated replenishment triggers.
• Batch, lot, and serial tracking for traceability and regulatory compliance.
• Cycle and physical counting features to help maintain inventory accuracy.

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Why it matters:  

According to industry studies (WERC/Manhattan Associates) without a WMS, most businesses have an inventory accuracy of 60-70%. With a solid inventory management system, it can improve to 99.5%, reducing stockouts, limiting shrinkage, and speeding order fulfillment.

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This functionality leads to smarter inventory placement, better space optimization, and healthier cash flow. According to one estimate, stockouts and inadequate inventory visibility cost retailers nearly $1 trillion worldwide annually (IHL Group, HBR). While a solid WMS won't eliminate these risks, it will greatly reduce them.

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2. Order management

The WMS feature called order management helps to make sure that the orders are processed properly and effectively. A WMS ensures that the orders received through eCommerce, retail, or B2B portals undergo proper and efficient processing throughout the supply chain.  

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Key Functions: 

• Consolidation of orders on multiple channels (ERP, TMS, marketplaces).
• Wave, batch, and zone picking to optimize the process of order picking (size-based, location-based, or priority-based).
• Live tracking of order status, which happens upon receipt of shipment.
• Control errors and misshipments by validating the order.

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Why it matters:  

An efficient order management process will help reduce picking errors, reduce fulfillment times, and increase customer satisfaction. The WMS ensures that the right product is picked, packed, and shipped promptly, each time.   

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A research report released today by Saddle Creek Logistics Services explores how retailers, manufacturers, and e-commerce companies are leveraging order fulfillment to improve customer experience.

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3. Receiving & putaway

Receiving and putaway are the first critical steps in warehouse processes. A warehouse management system (WMS) improves performance in this essential process by making sure you effectively receive, record, and store inbound products. 

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Key Functions: 

• Supports advanced shipment notice (ASN) to help prepare space and resources well before the product arrives.
• Automated data collection in the receiving process (automatically capturing data via barcode/RFID).
• Provides quality checks for damaged and/or incorrect items.
• Provides directed putaway based on product type, throughput, or warehousing rules.

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 Why it matters:  

Fast and accurate receiving helps to eliminate bottlenecks and unnecessary waiting time for products to be on sale or produced. Directed putaway can help increase utilization of storage space and minimize retrieval time. 

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4. Picking & packing

Picking and packing are some of the most labor-intensive and error-prone activities in a warehouse. A WMS pulls multiple levers to optimize picking and packing, and thereby increase accuracy, speed, and efficiency.

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Key Functions: 

• Picking choices aplenty: batch, wave, zone, cluster, voice-directed picking.
• Dynamic assignment of jobs to eliminate downtime and unnecessary physical commuting.
• Automated creation of shipping labels and packing slips.
• Cartonization logic to plan the optimal packaging per order.

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Why it matters: 

Mistakes in picking and packing lead to returns, unhappy customers, and higher costs. A WMS allows a higher accuracy and ultimate speed of service because it sends workers on an optimized path within the warehouse and double-checks the order before it gets packed into the box.

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5. Real-time data & reporting

Contemporary WMS offers a real-time insight into each of the warehouse operations, including inventory stock and the current level of workforce productivity, via dashboards and personalized reports.

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Key Functions: 

• Live dashboards showing inventory status, order status, and bottlenecks.
• Custom reporting tools for stock turnover, fulfillment rates, and warehouse metrics and KPIs.
• Alerts and notifications for stockouts, delays in shipments, or SLA breaches.
• Audit trails for traceability and compliance.

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Why it matters:

Real-time data helps you make more and quicker decisions such as whether to reroute a stuck order, whether to stock a slow-moving SKU, or re-allocate labor at peak time.

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In 2025, approximately 77% of retailers will adopt automated systems, sensors, and analytics to maintain real-time inventory observation. This heightened readiness is an indication of further sensitivity about the necessity of real-time visibility to inventory aids to enhance the effectiveness of the supply chain procedures.

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6. Barcode & RFID scanning

Barcode and RFID scanning are at the core of the automation systems in a warehouse operation. A warehouse management system (WMS) connects to these scanning technologies to monitor the movement of every item within the warehouse in real-time and with high accuracy.

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Key Functions: 

• Barcode scanning for receiving, picking, packing, and shipping.
• RFID capabilities enable real-time tracking of all items, eliminating the need for a line-of-sight scan.
• Hardware connectivity with scanners, tablets, and wearable devices.
• Confirmation of errors through the identification of the item, location, and quantity at each step.

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Why it matters:

Manual data entry is time-consuming, error-prone, and fails to record accurate data. With scanning, the error rates are dramatically reduced, speeding the cycle of operation, and guaranteeing that the correct data is captured so you can avoid mis-shipments, lost inventory, and rework.

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Bill Hardgrave, dean of Auburn University’s Harbert College of Business and founder of the RFID Lab, puts it well: “RFID increases inventory accuracy from an average of 65 percent to more than 95 percent. A WMS leverages this technology to drive accuracy, which can lead to higher sales and healthier operations.

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7. Return management / reverse logistics

Returns have become a growing part of contemporary supply chains, especially as volumes of e-commerce rise. The WMS helps to streamline reverse logistics and guarantees that returns remain effective.

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Key Functions: 

• RMAs (Return Merchandise Authorizations) are used to track and receive return authorizations.
• Inspection and disposition workflows (restock, refurbish, quarantine, and scrap).
• Real-time updates to inventory and financial systems.
• Customer-specific return policies integrated into workflows.

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Why it matters:

A structured system of returns will prevent pile-ups at receiving docks, disrupt your inventory records, and waste employee man-hours on returns if you don't have the appropriate one in place. A WMS makes sure that every return is tracked, executable, and cost-effective.

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Reverse logistics often costs 20-30% of the item's sale price, sometimes exceeding outbound fulfillment costs. By leveraging a WMS, you can offset those costs with automation and accuracy.

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8. Warehouse layout & slotting optimization

Slotting is the process that defines the ways of locating products in a warehouse; it influences the operations of the business significantly. A WMS will automate your slotting with smart algorithms to streamline your warehouse layout which entails enhanced product flow.

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Key Functions: 

• Dynamic slotting based on product velocity, product size, and demand pattern.
• Optimized assignments for storage locations to reduce travel time.
• Zoning based on bin configuration to help reduce retrieval and replenishment times.
• Layout simulation tools to try different slotting configurations before committing.

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Why it matters:

Poor slotting results in wasted space, unnecessary labor, and inefficient processes. Good slotting enhances the efficiency of picking, reduces pileups, and makes the best use of your facility, without needing to expand the physical footprint

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9. Labor & resource management

Labor costs typically represent the largest expenditure in warehouse operations, often accounting for up to 65% of the total costs. A warehouse management system can help your warehouse operate efficiently by reducing the number of moving pieces and monitoring your labor team. 

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Key Functions: 

• Assigning and tracking tasks based on worker skills, shifts, or zones.
• Labor performance data to monitor productivity, idle time, and precision.
• Work out a balance that avoids under-staffing, over-staffing, or bottlenecks.
• Incentive programs that are based on individual or team KPIs.

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Why it matters:

With ongoing labor shortages and costs going up, wasting labor is not an option for warehouses. Utilizing a WMS will help ensure your team is working on the right tasks at the right time while improving morale and output. Analysts such as McKinsey estimate 20-30% productivity gains with advanced labor management.

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10. Software integration (ERP, TMS, etc.)

"WMS" doesn't work alone. A WMS must connect to other systems seamlessly, such as your ERP (enterprise resource planning) system, TMS (transportation management system) system, eCommerce systems, and supplier portals. 

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Key Functions:

• Real-time data synchronization with your ERP so your inventory, finances, and procurement processes stay updated. 
• Integration of your WMS and TMS for shipment planning, carrier selection, and tracking. 
• eCommerce and marketplace integration, such as Shopify, Amazon, Magento, etc. 
• Ability to support APIs and individual integrations that are scalable with out-of-the-box third-party connectors.  

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Why it matters: 

Disengaged and disconnected systems create delays, mistakes, and poor customer experiences. A WMS that integrates smoothly provides comprehensive end-to-end visibility from purchase order through to final delivery.  

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11. Security, vendor compliance & documentation

Security and compliance are essential to warehouse operations, especially for food manufacturers, pharmaceutical companies, and electronics manufacturers.  A WMS introduces, enforces, documents, and checks the vendor specifications.

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Key Functions:

• RBAC (role-based access control) provides access to systems based on an employee's job role.
• Audit trails and logs for traceability and accountability.
• Compliance support for various industry regulations (FDA, OSHA, ISO, etc.).
• Documentation management for certifications, bills of lading, and safety data.

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Why it matters: 

Compliance failures can lead to costly fines, lost certifications, and reputational damage. A warehouse management system (WMS) strengthens security and automates compliance processes, helping reduce these risks while building credibility with partners and regulators.

Advanced features of modern WMS

As businesses continue to grow and supply chains become more complicated, warehouses must evolve in tandem. Previous systems with only basic tracking and manual capabilities are no longer sufficient. Modern WMS applications offer intelligent tools and connections to automate processes, make more intelligent decisions, and scale.

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Advanced WMS plays a critical role for any company handling a significant volume of product with seasonal fluctuation, or global distribution networks, and those with complex products or processes. Advanced WMS reduces manual processes, increases visibility into stock and space availability, and ultimately provides valuable insight for continuous improvement.

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Here is a closer look at the advanced features most prevalent in next-gen WMS:

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1. AI & predictive analytics for demand forecasting

Artificial Intelligence (AI) is revolutionizing warehouse management by turning raw data into usable information. Warehousing Management Systems (WMS) platforms can utilize predictive analytics and use historical information and data regarding market behaviors and trends, along with seasonal activities, to forecast future activity in the warehouse. 

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This allows them to minimize stock-outs and overstocks, improve planning on replenishment processes, and site staffing levels to forecast activity in the warehouse. By automating this actionable information, warehouses can respond to the changing demand earlier than competitors and reduce waste.

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Additionally, AI can help identify unexpected variations in returns or damaged items in root-cause analysis and preventive actions. Predictive analytics can reduce forecast errors by up to 50% and cut inventory holding costs by around 25%. 

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2. IoT sensors & real-time tracking

The Internet of Things (IoT) enables physical assets to transmit real-time data with no human action. In warehouses, IoT sensors can locate and track the status of pallets, forklifts, bins, and even temperature-sensitive products. 

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The combination of IoT sensors and a WMS provides real-time visibility of goods movement, be it on a conveyor belt, under temperature control in a cold chain zone, or being loaded onto a truck. This real-time visibility improves security, reduces shrinkage, and allows for a quicker reaction time for unknown conditions.

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3. Robotics & automation support

Robots are not the future they are already revolutionizing warehouse operations. A warehouse management system (WMS) has the automation functionality to pass orders to make them compatible with autonomous mobile robots (AMRs), automated guided vehicles (AGVs), robotic arms, and high-speed sortation systems.

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These robotic systems perform the monotony of picking, palletizing, or inventory counting - denying human errors and operator fatigue. A WMS is the "brain'' of operations, dispatching the robots in the fulfillment operations based on allotted orders, priority, and location data. Automated picking systems have achieved productivity increases of 200-300% in case studies.

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4. Cloud-based accessibility

Web-based WMS solutions offer access from any place, at any time, and from any device, whether that be a desktop, tablet, or mobile. Companies with multiple warehouses or outsourced 3PLs that utilize a web-based WMS can implement their cloud-based WMS significantly faster and get location or network updates more easily, as well as scale on demand.

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This freedom and flexibility are essential for expansion and remote coordination, and less  IT and infrastructure overhead.

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5. Simple & customizable interfaces

Warehouse teams want to work with tools that are easy to use, flexible, and functional. Advanced WMS systems come with fully customizable and specific dashboards and functional or task-based interfaces that show what KPIs, tasks, and alerts are relevant to a specific role.

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For example, a warehouse manager's dashboard might show throughput metrics and labor stats, while a picker's dashboard would provide details of their task with real-time instructions. These interfaces can be configured or modified to align with workflows, both making the transition to the new system easier and reducing training time for the user.

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6. Lifecycle product tracking

Following a product's life cycle from start to finish is critical for any business with rigorous compliance requirements (pharma, food, electronics). Advanced WMS systems fulfill serialization, lot tracking, and expiration management capabilities. 

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This capability allows you, for example, to follow a product from the receiving dock to shipping, return, or destruction. Tracking can be useful for quality control, but it is also a requirement for many clinical or governmental audits and recalls.

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7. Multi-warehouse & global visibility

If your business operates out of multiple warehouses, uses third-party logistics partners, or has fulfillment centers all over the globe, central visibility is not an option. Advanced warehouse management systems (WMS) will allow you to aggregate all inventory data from every inventory location into a central dashboard.

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Users will be able to see stock levels, order statuses, and performance anywhere within the network. With inventory at your fingertips, it is easier to plan demand, reduce overstock, and even route orders based on proximity, cost, or capacity.

Key benefits of an advanced WMS

Investing in an advanced warehouse management system is not just another tech investment; it's a transformative experience for your warehouse operations. If applied correctly, a modern WMS can support all aspects of fulfillment, save money, and improve customer experiences.

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Here's a bit more detail about the major benefits:

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1. Better operational efficiency

Advanced WMS platforms will accelerate the automation of manual processes, increase pick speed, and help organize workflows. For example, with a WMS you can optimize pick paths, give accurate inventory tracking to the task, and efficiently manage all the processes in a warehouse.

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For each element of WMS, the process is faster, more accurate, and requires less labor, which can create efficient operations with little downtime.

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2. Cost savings & waste reduction 

If businesses were to improve inventory accuracy and address overstocking they could expect to achieve significant savings related to both, the hard costs of storing inventory, and the soft costs of labor, energy, and space usage.

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A Warehouse management system will help reduce these areas of lost cost, by eliminating unnecessary labor; energy wastage; waste of space; and ultimately simplifying operations and reducing costs.

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3. Reduce fulfillment time and mistakes

When you utilize smart picking procedures and real-time data you will achieve better order processing time and reduce mistakes before packing and shipping the load. Technology for example in the form of bar code scanning, guided workflows, and check automation will reduce the risk of error and missing items for shipment.

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4. Enhanced labor allocation

The next generation WMS assigns tasks when inventory is received, based on worker/location/skill, to optimize human resource management. The labor analytics provide managers with an opportunity to know the performance metrics of an individual worker and group, providing them with an avenue for workforce planning and coaching.

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5. Real-time inventory visibility

One of the key features of an advanced WMS is that you will know exactly what is in your warehouse and where it is at all times. This enables your business to plan more effectively, make faster decisions, and respond confidently to customer or partner inquiries by knowing exactly where the product is located. 

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6. Scalability for business growth

As your business grows, it is important that your WMS can grow with you. Advanced platforms should support multi-warehouse operations, allow integration with eCommerce platforms and ERPs, and allow you to access your information in the cloud, providing you with the flexibility to grow, without disrupting your operations.

Future-proofing: what to look for in a next-gen WMS

As technology advances and supply chains become more complex, selecting a scalable warehouse management system for your future is paramount. A future-ready WMS isn't limited to what it does now; it's also about how well it can respond to and adapt to whatever might come for your business.

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Whether that is automation, globalization, or seamless interoperability, investing in scalable, forward-looking functionality will save costs and time down the line. Here are the traits of a future-proof WMS:

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1. Cloud-native versus on-premise

Cloud-native WMS platforms are more agile, faster to deploy, allow for automatic updates, and have less upfront infrastructure costs. On-premise systems can be useful, but they often take longer to implement, require the use of internal IT resources, and need to be updated manually. Generally, the cloud is a more scalable, and accessible option, especially for many growing businesses. 

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2. API-first architecture 

In a world of interconnected systems, from ERPs and CRMs to carrier systems and eCommerce storefronts,  the WMS needs to provide easy, and flexible API-driven integrations. API-first means that your system can integrate with nearly every third-party tool, have custom workflows, and evolve at scale, without having to rewrite code.

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3. Support for emerging tech

Future-ready WMS should enable integrations with anything, including: 

• 5G connection - for scale real-time data transfer.
• Augmented Reality (AR) - for hands-free training and picking.
• Autonomous vehicles - for moving goods around the warehouse. 
• Wearable technology - for improved productivity, safety, and efficiency on the warehouse floor.

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Whether or not you utilize any of these enhancements today, your system should allow for them at any point in time when you are ready.

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4. Vendor support & update cadence

A good WMS provider does not simply sell you the software; they also continuously support it. You should look for vendors who have great customer support, a frequent schedule of feature and product releases, an advertised product and development roadmap, and an established history of innovating to meet the market's demands.

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WMS technology will advance, your customers' expectations will evolve, and an antiquated WMS can become a hindrance in no time.

Real‑world WMS case studies

The Co-operative Group 

The Co-operative Group, one of the largest consumer co-operatives in the world, experienced differing levels of communication and logistical issues with a few smaller depots and overlapping distribution areas.

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Upon launching Manhattan Associates’ WMS, they achieved at least a 10% productivity increase in each live distribution center, significant increases in on-shelf availability, and a significant reduction in shipping errors.

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DHL Supply Chain + Baycrew

DHL Supply Chain consolidated multiple Baycrew distribution centres into one facility and implemented a WMS to provide real-time integration of retail and e-commerce inventory.

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The inbound/outbound capacity almost doubled to 220,000 units per day, and the online sales doubled. An optimized and up-to-date WMS had the added benefit of task transparency daily, and employee-driven workflow improvements through the Kaizen philosophy resulted in faster shipping and improved order accuracy.

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Key insights from these implementations

• Improved productivity: The Co‑operative Group achieved an ongoing 10% productivity improvement per DC following implementation.
• Inventory consolidation: Bringing stock from many channels together into one WMS-led pool doubled the fulfillment capacity at Baycrew.
• Order accuracy and speed: Visibility of stock in real time and coordinated tasking led to improvements in shipment accuracy and lead time at both companies.
• Staff empowerment: visibility of continuous improvement tools, eg, Kaizen sheets in Baycrew’s operation, gave staff better outcomes with increased adoption.

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Why these case studies matter

• These examples reveal ways a modern WMS can change the landscape of warehouse operations, regardless of industry or company size:
• Cross-channel integration can create a unified view of inventory, enabling effective management of both electronic and in-person sales activity. 
• Scalable execution can allow you to double, triple, or increase your throughput by orders of magnitude without increasing the per-transaction staffing count. 
• Real-time coordination will create consistency, accuracy, and faster transactions. 
• Culture can enable your team to continuously improve through effective throughput practices, a transparent culture, and continual feedback loops.

Choosing the right WMS for your business

When selecting a warehouse management system, you are making a strategic decision that can impact everything in your supply chain, including customer experience and inventory accuracy.

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The many vendors and functionalities available can make choosing a warehouse management solution a hectic task; but by focusing on the performance needs and expectations you have for the long term, you can look past the distractions and choose a warehouse management system that will integrate well with your operations.

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The following are important considerations to think about and to guide you as you evaluate your options:

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1. Clearly understand your operating and business requirements

Before assessing any vendor, ensure you have provided your warehouse workflows. Are you processing B2B wholesale or direct-to-consumer orders? Would you like to include lot tracking, temperature tracking, and returns management? Begin by reviewing your use cases to prioritize features based on known needs, rather than vendor marketing.

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2. Think about scalability and flexibility

Select a WMS that can grow with your business, perhaps doubling in order volume, or opening new channels. If you plan to open more warehouses, implement automation, and/or grow globally, your WMS should be feature-rich enough to handle multi-location, multiple SKUs, and customized workflows.

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3. Emphasize integration capabilities

WMS is not a stand-alone solution; WMS needs to interact well with whatever ERP, TMS, eCommerce systems, accounting tools, etc. you have. Look for systems built with API architecture or already built connectors to allow for speedy, reliable integrations.

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4. Look beyond the demo, ask for a real test

It's easy for many products to look good in a demo, but it's not necessarily how they perform in the real world. Request a pilot or sandbox environment to see how the tool interacts with your data and workflows. This will highlight usability issues, integration issues, and functionality gaps promptly.

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5. Consider the total cost of ownership

Remember that you should not only look at license/subscription rates, but also include looking into all the initial setup costs (which may include training, hardware [if relevant], ongoing support, and a charge for any future updates).

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Many cloud-based systems have a lower up-front cost, but some providers may charge large amounts as you grow, or if you are looking for premium support, so it is important to understand the total cost.

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6. Inquire about support and vendor roadmap

A WMS is a long-term relationship. Inquire about the vendor's (or software development companies') release cycle and support availability, especially during peak times, and how often they create new features and updates. You want a partner that is innovating and evolving, not just maintaining obsolete software that they have customized.

Top 5 WMS providers

With a variety of warehouse management systems to choose from, it is no wonder that it can be challenging to begin to narrow down your options. Here are five leading warehouse management systems that you can trust, with a view to an expanded reach and growth that can accommodate many aspects of your business. 

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1. Fynd WMS

Best for: eCommerce and omnichannel businesses. 

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Fynd WMS is built for fast-moving, high-volume operations and is also extremely easy to use with strong API integrations. Fynd WMS enables brands to oversee their stock across multiple online marketplaces, retail locations, and warehousing options efficiently.

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It also has features for real-time visibility of inventory plus a host of plug-and-play automation options making it a great option for D2C sellers and multi-channeled businesses.

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Key features: 

• Inventory syncing in real-time across platforms.
• Using barcodes to pick and return items.
• eCommerce integrations, like Shopify, Amazon, and Flipkart.

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2. Manhattan Associates WMS

Best for: Large companies with diverse requirements.

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Manhattan WMS is among the most sophisticated options in many ways, boasting global scalability. These systems offer features such as AI-driven fulfillment optimization, labor management, and transportation integration that will help companies operate efficiently. It is geared towards distribution centers with very high volumes and custom workflows.

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Key features: 

• AI-powered slotting and picking optimization.
• Labor forecasting and task management.
• Built-in transportation management system (TMS).

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3. Blue Yonder (formerly JDA)

Best for: Retailers or manufacturers needing predictive capabilities.

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Blue Yonder offers demand forecasting, AI, and ML tools that can help businesses better plan and optimize operations, minimizing wasted effort. The Blue Yonder WMS is an integral part of a much broader supply chain suite, which allows companies to elevate their operations with end-to-end supply chain intelligence.

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Key features: 

• Predictive analytics for inventory and demand.
• Dynamic workload balancing.
• Integrated supply chain planning capabilities.

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4. Oracle WMS Cloud

Best suited for: Enterprises in search of enterprise-grade cloud flexibility.

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This WMS is a key component of Oracle’s comprehensive cloud ecosystem. It is highly configurable and can handle global WMS operations. Oracle WMS is built to provide powerful analytics, mobile access, and support for multiple sites.

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Key features: 

• Cloud-native platform.
• Advanced analytics and dashboards.
• Seamless Oracle ERP integration.

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5. SAP Extended Warehouse Management (EWM)

Best suited for: Companies that already use SAP as their ERP.

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SAP EWM has a deep level of integration with SAP S/4HANA, so for manufacturers and distributors that are already in the SAP ecosystem, SAP EWM will likely include many useful and relevant capabilities, from automation to serialization and compliance tracking.

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Key features: 

• Deep SAP integration.
• Advanced yard and labor management.
• Automation and robotics capability.

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A contemporary WMS is a requirement for many growing companies that want not just to survive, but to compete in a fast-paced, omnichannel world. A contemporary WMS offers a huge range of benefits, watertight inventory controls, streamlined order fulfillment, automation, and predictive analytics that put structure, visibility, and control on your warehouse operations.

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But the important thing is not just to choose a WMS, but to choose the right WMS. Defining your needs at the outset is a great start. We then encourage you to seek WMS systems that align with your growth plans and to thoroughly examine every aspect of the systems, including demos, references, and trials.

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Whether your organization is a mid-sized e-commerce brand or a global logistics company, the right WMS system can be the basis for future scalable supply chain operations. Purchasing a WMS represents your investment in your company’s agility, accuracy, and ability to meet your customers’ needs today and into the future.