What is a WMS? | Warehouse Management System | Extensiv

What is a WMS?

Discover the four types of Warehouse Management Systems (WMS) and find the perfect fit for your warehouse operations.

What is a Warehouse Management System?

A warehouse management system, or WMS, is software that runs the day-to-day work inside a warehouse: receiving stock, putting it away, tracking where everything sits, picking and packing orders, and shipping them out. It replaces the spreadsheets and paper pick lists that stop working the moment volume climbs. For a third-party logistics provider, a WMS has to do all of that for many clients at once, which is a different job from running one brand's warehouse.

Few WMS software platforms include options for customer management for third-party logistics (3PL) warehouses, which offer the option for customer portals and notifications so that the brands 3PLs serve can monitor their own inventory control. One of the highlights of WMS platforms is the extensive data analytics and reporting options that provide insights into inventory tracking for both warehouse and customer users. Additionally, many 3PL-specific WMS platforms also include billing and payment portals to drive invoice generation and ease of payments.

What makes a 3PL WMS different from a single-brand WMS

Most warehouse systems assume one company storing its own products. A 3PL runs a harder operation: many clients, each with their own inventory, their own rates, and their own reporting expectations, often sharing the same building and sometimes the same shelf.

That changes three things. Inventory has to be separated at the record level, so one client's adjustment never quietly moves another client's numbers. Billing has to calculate per client, because storage and handling charges differ by contract. And reporting has to be client-facing, so each client can see their own stock without calling your team. Single-brand systems can be made to fake this with separate instances or spreadsheets alongside. It holds together for two clients. It stops holding together somewhere around the fourth, which is the point most 3PLs start looking for a system built for the job.

Extensiv 3PL Warehouse Manager handles client separation, per-client billing, and client-facing visibility natively, so growth does not mean another workaround.

What is the best WMS for a 3PL?

The best WMS for a 3PL is one built for multi-client operations, which means per-client inventory, per-client billing, and per-client reporting in a single system. For small to mid-size third-party logistics providers, Extensiv 3PL Warehouse Manager is a common choice because client separation and billing are native rather than workarounds. Single-brand warehouse systems can look cheaper up front, but most 3PLs outgrow them at the point they add a third or fourth client.

On-Premise vs. Cloud-Based Warehouse Management System

On-premise warehouse management system refers to software that is hosted and maintained on-site using the warehouse’s own servers. The warehouse’s IT department and resources are responsible for managing both the software and hardware required to run their business.

On-premise solutions used to be the industry standard for their customizability to accommodate a warehouse’s specific workflows. However, they lack scalability and force users into the “buy, upgrade, maintain” software cycle with software updates that come at a cost. In addition, when using on-premiseWMS solutions, IT departments must download and manage updates, making implementation complicated, bugs and errors hard to manage, inefficient to maintain, and costly to upgrade.

Cloud-based warehouse management system software is hosted online in the cloud, often with no downloads needed. Instead, the warehouse accesses the software online, so users can securely log in to the system on any connected device, not just at on-premise terminals that have the WMS software installed. Additionally, cloud-based WMS software providers publish updates automatically, drastically decreasing downtime spent implementing upgrades, and build the software to standard specifications for broad warehousing needs to help align warehouse workflows to best practices.

Factor On-Premise WMS Cloud-Based WMS
Initial Cost Higher due to licenses, hardware, infrastructure Lower with subscription-based pricing
Operational Cost Includes maintenance, updates, energy consumption, and technical headcount Provider manages WMS upgrades automatically, usually leading to lower costs
Customization Can be fully tailored to specific needs May offer less customization but improving with advanced offerings
Control Full control over data, security, configuration Provider has more control, which affects data and system management
Data Security Managed in-house; effectiveness varies by capability Handled by provider with industry-standard protocols and updated frequently
Integration Can be complex with existing infrastructure Simplified and streamlined for leading cloud-based order sources and shipping carriers, challenges with legacy systems
Scalability Requires additional hardware, time investment Easily scaled with service plan adjustments
Accessibility On-site or via VPN; potentially more limited Available anywhere with internet, enhancing remote work and customer visibility
Reliability Depends on internal IT resources Typically higher due to provider's redundant systems
Update and Upkeep Updates can be costly, disruptive, and require downtime Handled by provider with little to no downtime
Internet Dependency Local access less internet-reliant Highly reliant on robust internet service
Compliance Company's responsibility to ensure adherence Providers often certified to global standards
Technical Expertise In-house IT staff needed for system management Provider's responsibility, less in-house IT needed
Time to Implement Can be lengthy, requires significant setup Quicker deployment as no hardware setup is required

Embracing a Cloud-based WMS future-proofs your operations. It ensures your business stays agile and adaptable, allowing for rapid growth without the constraints of traditional on-premise systems.

WMS Integrations

For those fulfilling ecommerce operations, especially with an omnichannel fulfillment strategy in which the warehouse handles transactions across a wide range of sales channels with a unified approach, cloud-based WMS software is great for integrations with shopping cart platforms, marketplaces, and application programming interfaces (API). Such systems can also communicate with other customers, vendors, and suppliers through technologies like Electronic Data Interchange (EDI), UCC-128 label printing, and receiving against advanced shipping notice (ASN).

Top warehouse management systems are also able to integrate with a wide range of internal and external software systems including Enterprise Resource Planning (ERP) Systems, Supply Chain Management Systems, Order Management Systems (OMS), Transportation Management Systems (TMS), Barcode Scanning Systems, accounting programs, and ecommerce platforms.

Automated Warehouse Processes

The key objective of a WMS is digital automation. Digital automation refers to eliminating manual processes with software and/or hardware to reduce human error, inconsistencies, and slow speeds of handling repetitive tasks. With digital automation, a WMS creates best practice workflows and processes that are repeatable across customers, which is particularly valuable to third-party logistics warehouses who serve multiple customers.

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Warehouse Management System vs. Order Management System

What’s the difference between a WMS and an OMS? Warehouse Management Systems and Order Management Systems are similar software solutions used by warehouses, but the two have different functionalities. Whereas a WMS offers a comprehensive software platform that captures, records, and analyzes data on all day-to-day functions performed by a warehouse, an OMS monitors the coming and going of all inventory throughout the supply chain for its entire lifecycle, including in the warehouse, and orders related to it. An OMS often includes routing and inventory allocation functionality based on sales channel.

Because of this, OMS is not a replacement for a WMS, which does much more than track inventory and orders, but an OMS can complement a WMS in a warehouse’s technology stack. OMS is also a good solution for private warehouses that do not have multi-client operations or for customers of third-party logistics warehouses that want to visibility of their own inventory across multiple sales channels and warehouses.

How Does a WMS Work?

A warehouse management system works by incorporating all the steps your company must take to quickly and efficiently move products from your warehouse into the hands of your customers or the consumer. Generally speaking, these steps include labor management, pick efficiency, real-time inventory tracking, shipping and order fulfillment, and forecasting and reporting, all of which are crucial components of the warehouse management process.

Labor Management

An intuitive warehouse management system allows business owners to track applicable data about each warehouse employee, including which orders they’re handling and/or which products they’re picking at any given time. This feature not only helps companies closely monitor and optimize employee performance, but it also offers notable gains in productivity and quality — which ultimately results in enhanced workflows and improved profit margins, as well as avoiding warehouse management challenges.

Pick Efficiency

Picking is one of the core functions of any warehouse. Reliable WMS software will actually create pick lists so goods can be retrieved in the most efficient way (whether that’s zone picking, wave picking, or batch picking). With each new order, the picker receives a packing slip of the items and their storage locations within the warehouse; a WMS can determine the best sequence to pick these inventory items to increase both fulfillment speed and accuracy.

Real-Time Inventory Tracking

Inventory tracking is the process of monitoring stock levels so you know which SKUs you have on hand and the exact locations where they’re stored, or if they’re in transit from a manufacturer. A modern WMS divides warehouses into numerous bins and compartments to help companies access real-time inventory data on specific product allocation. If your company manages multiple warehouses, the WMS should also provide a holistic view across all your facilities.

Shipping and Order Fulfillment

Shipping and order fulfillment are at the forefront of any comprehensive warehouse solution. Most warehouse management systems offer integrations with shipping label providers to facilitate the creation of shipping labels. Based on the delivery options your brand offers, shipping carriers like DHL, USPS, FedEx, and UPS will pick up orders from your warehouse and ship packages to their next destination. Once the order ships, your WMS will automatically send ecommerce order tracking information back to your store so customers can follow along with their shipments for themselves.

Forecasting and Reporting

The top warehouse management systems offer detailed reports on the inventory and operations data from your warehouse. These reports may highlight your accuracy in fulfilling orders (i.e., mispicks or mispacks), the number of orders fulfilled each hour, the rate of orders shipped out on time, and more. In addition, there are also reports that relate to operational aspects like inventory forecasting and labor management (or staffing needs). These reports provide valuable insights and warehouse management tips for optimizing your operations.

What are the 4 Types of Warehouse Management Systems

Warehouse management plays a critical role in daily warehouse operations. Right now, there are primarily four types of warehouse management systems to choose from: standalone WMS system, supply chain management modules, and enterprise resource planning. The trick is to understand the differences between each of these options so you can select the one that’s best suited for your company.

1. Standalone WMS System

A standalone WMS system is often embraced for its warehouse management features and not to run other back office functions. That’s because as far as warehouse management systems go, the standalone option is really the most basic; in fact, it’s often included within a greater inventory management system, since it can be easily applied to other industries beyond warehouse management. For that reason, standalone software has become an ideal choice for small and midsize businesses or similar companies who value streamlined and cost-effective software solutions.

A warehouse cannot function without these two things, thus making standalone systems great for those who just need to improve those facets of their supply chain. When a business decides to utilize a standalone WMS, they benefit from the simplicity of it, and can quickly begin using it without waiting for full integration. Many warehouses begin by managing many things manually, and via spreadsheets, so a standalone can provide a major uplift to those existing systems. Some of the things a business can manage using a standalone system include:

2. Supply Chain Management Module

Supply chain management (SCM) software has a fairly broad scope — it helps retailers manage everything from business relationships to warehouse processes to risk assessment. It focuses on automating tasks like inventory management and product life cycles. If you decide on software with supply chain management (SCM) features, note that it will require you to invest in supply chain planning applications that include warehousing components. This trajectory is not uncommon, seeing as it allows some brands businesses to explore the many benefits of SCM, but may require significant management and cost.

3. Enterprise Resource Planning (ERP) Module

Enterprise resource planning (ERP) is a multifaceted solution that merges the features and functionality of a number of platforms into one cohesive package. In simple terms, ERPs contain most of the core software applications that make business processes run smoothly — think supply chain planning, customer relationship management (CRM), accounting, and so on. ERP is a good option for companies looking to upgrade their software to support significant complexity and scale, and also presents a chance for enterprises to run much of their system from a single system.

It’s important to remember, however, that while integrated ERP systems have a range of warehouse management features, it’s not a core function of such platforms. With that in mind, make sure you find an ERP that offers the specific warehouse integrations you need (a tough challenge indeed!).

4. Cloud-Based Platform

For fast integration and added convenience, a cloud-based WMS platform is going to be the best option. Cloud technology in the warehouse brings a load of benefits such as increased security, less IT maintenance, and a lower cost. Because cloud-based WMS systems run on a server and system outside of their organization, the integration and management of the WMS become much easier and cheaper.

On-premise warehouse management systems require far more work when it comes to implementing the platform within existing technology and supply chain steps. Businesses would also save money on having an outside IT team manage their systems, rather than in-house or bringing in an outside team.

Other critical features of a cloud-based platform include:

Cloud-based platforms will often be chosen and used by third-party logistics, as they require significant visibility into warehouse operations and must stay up to date on the most recent technology to stay competitive. The cloud can help tie together all aspects of their business in one easy-to-use format.

Who Needs a WMS?

Both private and 3PL warehouses use Warehouse Management Systems to digitize and automate their warehouse operations. A WMS is useful for all order fulfillment types including pallet in/pallet out, B2B, B2C, ecommerce business, and omnichannel, as the software allows warehouse users to manage inventory and transactions from a variety of receiving and sales channels. Furthermore, WMS systems can handle the needs of warehouses serving multiple industries and verticals including but not limited to retail, apparel, bulk goods, raw materials, cold storage, nutraceuticals & pharmaceuticals, wine & spirits, and hazardous materials.

Private warehouses will sometimes opt for an inventory management system (IMS) instead of a WMS because they only want to track inventory, but this software is extremely limited compared to WMS software and would not suit more complicated operations. Because of the versatility, adaptability, and customizability of WMS software, any warehousing operation – whether public or private – can benefit from using a WMS to record data on all the happenings within their warehouse. Both comprehensive and robust, WMS software is the best solution for warehouses to manage order volume demands and keep track of all transactions performed by the warehouse.