Warehouse management is crucial to maintaining the smooth operation of modern commerce. It encompasses the day-to-day operations of storing and moving goods within a warehouse. From the moment items arrive to the moment they ship out or are returned, warehouse management keeps everything in order.
At its core, this process ensures customer orders are handled accurately and on time. Over the years, it has evolved from basic storage to a more organized and connected enterprise.
Below, we’ll take a look at what warehouse teams do, the systems they use, and the growing impact of returns. You’ll also see how the proper tools and setup improve how work gets done across the warehouse.
The Five Main Functions of a Warehouse
Warehouses do a lot more than store inventory. They follow a cycle of five main functions, beginning with receiving and ending with returns. Each step plays a vital part in keeping orders moving, inventory accurate, and customers satisfied.
No. 1: Inbound Operations (Receiving)
This is where everything starts. Inbound operations include accepting shipments from suppliers, checking for damage, and ensuring that the items match the purchase order. Once verified, goods are labeled and stored in the designated areas.
A warehouse management system enables teams to track each item as it moves from the dock to the shelf, reducing mix-ups and providing real-time updates on what’s available.
No. 2: Storage Operations
After items are received, they’re stored in a way that keeps them organized and easy to locate. This includes tracking the amount of inventory on hand and optimizing stock movement to maximize space utilization.
Good inventory management prevents overstocking and ensures that you avoid running out of key items.
No. 3: Picking Operations
When picking, you want to select the correct items to fill customer orders. Some warehouses use batch picking, while others use zone or wave picking. It all depends on order volume and product layout.
Speed and accuracy are crucial here, and returns automation can enhance pick accuracy by up to 99.9%, thereby reducing returns and ensuring customer satisfaction.
No. 4: Outbound Operations (Packing and Shipping)
Once orders are picked, they are moved to the packing area. Teams pack items based on size, weight, and destination, ensuring each package is labeled and routed correctly.
Shipping comes next. Whether it’s going to a customer, a store, or another facility, precise coordination keeps orders on track and avoids incorrect deliveries.
No. 5: Returns Processing
Returns are the final step in the warehouse cycle. However, they’re frequently overlooked. This role involves receiving returned products, inspecting their condition, and determining the next course of action: restocking, repairing, or reselling.
Having returns management solutions in place makes the process more dependable. It also saves time by automating the handling of returns and ensuring teams make faster decisions.
Technology and Warehouse Management Systems (WMS)
Technology enables warehouses to efficiently track everything, from inbound shipments to returned items. A warehouse management system (WMS) is the key tool that connects everything.
What is a WMS?
A WMS is software that tracks and manages every item in a warehouse. It provides real-time updates on where items are stored, how quickly orders are being processed, and what inventory is available.
It also automates routine tasks such as inventory checks, order updates, and shipment tracking. A good WMS integrates with other systems, such as your order or transportation system. This way, everything runs more simply and easily.
Marketing Growth and Adoption
Warehouse technology has grown rapidly to keep up with increasing demand. As more companies move to online selling and multi-channel fulfillment, they’re turning to WMS tools to manage growing volumes and organize their work.
Key WMS Features
Most WMS platforms offer tools that track inventory, manage employee tasks, and automate order processing. Some also provide dashboards that show performance over time.
These features keep warehouses running well and reduce time spent on manual updates.
- Inventory tracking and control
- Labor management tools
- Order processing automation
- Built-in reporting and analytics
When WMS Falls Short: The Returns Gap
While WMS platforms do a lot, many aren’t designed to handle reverse logistics. That becomes a concern as returns grow, especially in e-commerce.
WMS tools cannot often flag return fraud, manage return conditions, or guide actions for used or damaged items. Disposition workflows are complex to track, and it isn’t easy to see which products were refurbished or restocked.
This gap creates even more work and makes it harder to recover value from returns. For this reason, many companies pair their WMS with tools designed explicitly for returns management.
Measurable Benefits of Effective Warehouse Management
Effective warehouse management ensures teams remain organized, reduces waste, and handles more orders with less effort. When everything is tracked and stored correctly, the results appear consistently across the board.
Inventory stays accurate, which means fewer out-of-stock items and less extra stock sitting on shelves. Order picking becomes faster and more precise, and space is utilized more efficiently. All of this leads to better delivery times and lower costs.
It also becomes easier to adjust when sales spike or seasons change. That kind of setup has a significant impact on both daily work and long-term growth.
Key Challenges Facing Warehouse Operations
Warehouses face mounting pressure to operate efficiently and accomplish more with limited resources. At the same time, they’re dealing with rising labor demands, safety concerns, space shortages, and the rising costs of running day-to-day tasks.
Labor Shortages
Warehouses are hiring more people than ever. However, finding and keeping workers is becoming more challenging. Demand for warehouse labor has jumped by over 30%, yet 73% of operators say it’s difficult to hire enough staff.
Turnover is also high, averaging 43% each year. With an aging workforce and fewer workers interested in warehouse jobs, staffing is now one of the main challenges.
Safety Concerns
Warehouse work is physically demanding, and safety remains a top priority. The industry sees about 4.8 injuries per 100 workers, compared to 3.2 across all jobs. From 2016 to 2021, reported injuries increased by 89%, and some areas, like New York State, have seen yearly spikes as high as 30%.
Common injuries include slips, falls, and strain-related issues. Regular training and clear safety routines are key to lowering these numbers.
Space Constraints
Many warehouses are running out of room. Approximately 47% of operators report needing more space, while 37% are already operating at over 95% capacity.
High inventory levels result in higher carrying costs, typically accounting for 20-30% of the inventory’s value annually. Layout changes and improved storage methods, such as vertical racking, free up space without requiring a new building.
Rising Operational Costs
Running a warehouse is becoming more expensive. Fuel, electricity, and shipping prices are all increasing. To add to that, carrying extra inventory costs money, particularly if it doesn’t sell quickly.
Even minor mistakes in picking or shipping cause wrong orders, lost stock, and redeliveries, all of which impact the bottom line. Strong inventory management is key to reducing waste and keeping costs under control.
Returns Volume and Intricacy
Returns are rising, especially in e-commerce, where 20-30% of orders come back. Holiday seasons and shopping trends such as bracket buying (ordering multiple sizes and colors) only add to the volume.
Returns also take more time to handle. Each one may have a different reason, condition, and source (e.g., store, mail, or marketplace). All of this leads to more work, from checking the product to deciding if it can be resold.
Optimizing Your Warehouse Management
Warehouse performance improves when small changes are made in the proper places. By examining how work is done, where time is spent, and how tools are used, the team can make meaningful improvements without overhauling the entire enterprise.
Process Optimization
Begin by mapping out each step in the warehouse, from receiving to shipping. This lets you identify tasks that take too long or create confusion.
Slotting strategies also significantly impact picking times. Placing fast-moving items in easy-to-reach spots shortens picking times. Standard steps for each task keep things consistent and make training easier.
Technology Adoption
Not all warehouses need the same tools. Some might benefit more from an all-in-one WMS. Others, particularly those handling high return volumes, may require a return-specific platform.
Think about your biggest challenges. Are you dealing with a lot of returns? Do you need better tracking? The answers will guide the proper setup.
Automation Solutions
Automation reduces manual work and ensures you meet demand during peak times. Tools like Autonomous Mobile Robots (AMRs) or Automated Storage and Retrieval Systems (AS/RS) move items quickly without the need for more staff.
Software automation is also useful. It handles order updates, inventory changes, and tracking in the background, reducing manual data entry.
Workforce Management
Training goes a long way in making sure employees are confident and productive. Training should cover both tasks and safety. This way, workers can do their jobs well and avoid injuries.
Labor management tools are also beneficial for scheduling and tracking performance. And when workers are supported and see opportunities to grow, they’re less likely to leave.
Safety and Compliance
Clear safety rules, and regular reminders, prevent accidents. Training sessions, walkthroughs, and simple checklists all play a crucial role here.
Warehouses also need to meet workplace safety standards, like those from the Occupational Safety and Health Administration (OSHA). Staying compliant means fewer fines and a safer place for people to work.
Essential KPIs for Measuring Workhouse Performance
Keeping track of the correct numbers lets warehouse teams see what’s working and what needs attention. These key performance indicators (KPIs) offer a snapshot of how well the warehouse is running:
- Inventory accuracy (target: 99.5%-99.9%)
- Order accuracy
- Picking accuracy
- Throughput time (how fast items move through the warehouse)
- Space utilization
- Labor productivity
- Order cycle time
- Cost per order
- Return processing time
- Return-to-stock rate
- Returns cost as a percentage of revenue
Tracking these metrics frequently lets you spot trends, set goals, and make better decisions over time.
A Better Way to Run Your Warehouse
Improving how your warehouse runs doesn’t mean starting from scratch. With better tracking, better layouts, and the proper tools, you can reduce wasted time, cut down on extra steps, and get orders out quicker.
ReverseLogix is here to help. Our platform gives you:
- Real-time inventory tracking to avoid overstocking and stockouts
- Tools to design layouts that make the best use of your space
- Automation to simplify repetitive tasks and lower labor demands
- Streamlined order handling from picking to packing
- Scalable systems that grow with you
FAQs
What is the warehouse management system?
A warehouse management system (WMS) is software that helps track, organize, and control everything inside a warehouse—from receiving items to shipping them out.
What are the 4 main functions of a warehouse?
Warehouses focus on receiving, storing, picking, and shipping products. Many now include returns as a fifth core function.
Can small businesses use WMS?
Yes, many WMS platforms are built for small businesses and can grow with them. They help save time and reduce mistakes.
Is WMS part of the supply chain?
Yes. A WMS connects with other systems in the supply chain to keep orders moving and inventory accurate.
Does WMS handle product returns?
Most WMS tools aren’t built to manage returns well. They lack features for tracking conditions, detecting fraud, or processing returned items. Learn more in our WMS vs. RMS comparison.
What’s the difference between WMS and RMS?
A WMS manages day-to-day warehouse tasks. An RMS (Returns Management System) focuses only on handling returns quickly, accurately, and with less manual work.
