Depending on the number, variety, and diversity of the products you purchase, sell, or produce, you may have different requirements of storing these materials, as the following examples indicate:
- A mining company that digs ore and sends it directly to a refining factory does not need to store the ore. That company does not need a warehouse.
- A factory that refines ore to produce steel needs a simple warehouse to hold the steel until it is sold to a customer.
- A distributor receiving thousands of products from many manufacturers and distributing those products to hundreds of customers needs a complex warehouse. That warehouse needs to facilitate the following tasks, among others:
- Track the product received
- Determine the location to store incoming product
- Track current stock levels for each product
- Determine the location to retrieve product from (before distributing that product)
- Track distributed product
Why Use Warehouse Management?
Inventory must be stored efficiently to satisfy customer orders and supply production with raw materials.
Warehouse Management means the management of stock and the management of the locations where that stock is stored. When running a business, it is essential to fulfill customer orders without delay. Although it may be difficult to forecast customer-order requirements, you try to have stock for order fulfillment.
Manufacturing plants often use a Just-In-Time model, which means that they hold very little stock in their warehouse. The advantage of this is reduced warehousing costs. The disadvantage is that there may not be enough stock to meet production requirements to fulfill customers’ orders. It is very important for a successful business to hold sufficient stock and to avoid that situation.
Warehouse Management System Functions
A Warehouse Management System:
- Tracks the amount of a particular good or material that is stored in a warehouse.
- Tracks the location of every storage bin that holds a particular good or material.
- Controls and records all movements of goods and materials in the warehouse.
Also, a Warehouse Management System can increase warehouse efficiency. It can provide tools to monitor warehouse activities and to plan resource requirements, for example, warehouse staff or equipment resources, and so on.
Large warehouses with many storage bins and many different goods and materials, need a Warehouse Management System to be efficient and satisfy customers' needs. They use a Warehouse Management System to:
- Control the putaway of goods and materials that come into the warehouse. The Warehouse Management System determines an available and suitable storage bin to store the goods or materials.
- Control the picking of goods and materials to leave the warehouse, for example to fulfill an order. The Warehouse Management System determines a stocked and suitable storage bin to pick the material from.
Complex Warehouses
In more complex warehouses, additional functionality can be provided to manage other information or services related to goods and materials, for example:
- Serial number
- Batch number
- Minimum shelf life
- Vendor Managed Inventory (VMI)
- Yard Management
- Value-added Services (VAS)
Examples of warehouses with this level of complexity include distribution centers or logistics service providers. Warehouses become more complex as they become responsible for Value-added Services (VAS) tasks, for example, packaging.
When knowing the quantity of your stock (without knowing the location of that stock and other information) is insufficient, then you know that you need a Warehouse Management System.