Online shopping is growing fast. By 2025, experts predict that 26% of all retail sales will happen online. This big shift means retailers need more warehouse space and better ways to manage it.
From the way they store inventory to the method of picking orders, strong warehouse management processes help retailers run their warehouses like a well-oiled machine. This guide shares how.
What is warehouse management?
Warehouse management is the set of operational processes that help a warehouse run efficiently. An effective warehouse management solution includes tracking inventory levels, locating goods, managing staff schedules, fulfilling orders, and optimizing warehouse space.
A good warehouse management system (WMS) helps retailers:
- Keep track of all their products
- Make the most of limited warehouse space
- Ship orders faster
- Save money by reducing mistakes
- Increase profits
With the right warehouse management system in place, retailers can stay ahead of the growing online shopping trend and turn what could be a logistics headache into a business advantage.
Aspects of warehouse management
A well-designed warehouse management process addresses several key areas to ensure your operations run smoothly and efficiently. Let's explore these essential components that work together to optimize your warehouse performance.
- Inventory management
- Order fulfillment
- Warehouse layout optimization
- Material handling
- Labor management
- Safety and security
- Technology integration
- Demand forecasting
- Shipping and receiving
- Putaway
- Returns management
Inventory management
Unlike a warehouse management system, which manages the entire operation of running a warehouse, an inventory management system (IMS) is responsible only for managing inventory within it.
Retailers can use this technology to:
- Record receiving inventory
- Monitor stock levels across various warehouses
- Show order-fulfillment rates
An IMS is a subsection of the warehouse management process, so it should be integrated with your WMS. Use the inventory software to track data and forecast customer demand. The WMS will pull this data and streamline the process for how warehouse staff source inventory, like displaying the location of a single SKU within a 10,000-square-foot warehouse.
Order fulfillment
Modern consumers have a long list of demands they need brands to meet. For many, speedy delivery is the most important.
Fast and free shipping is the new standard for customers. A WMS streamlines this order fulfillment process and helps warehouse staff pick, pack, and ship orders in as little time as possible. The technology will:
- Print a packing slip containing details of a customer’s order
- Show the location in which the item is being stored
- Print a shipping label with the customer’s address
This speedy order processing gets products to your customers as soon as possible, meeting cutoff dates for one- or same-day shipping and giving your warehouse staff more time to process orders that follow.
Warehouse layout optimization
A good warehouse layout helps teams store, find, and move products quickly and correctly. It creates a smooth flow that saves time and reduces extra handling.
Part of this involves smart slotting, deciding where each product should go based on how often it’s picked, its size, and how it moves through the warehouse. When done right, slotting reduces travel time, prevents congestion, and makes it easier for staff to locate inventory fast.
A good WMS helps:
- Track what's moving in real time and figure out which bestselling items should be placed in the best spots
- Put each product in the best location to reduce walking time
- Study picking patterns and find problem areas in the warehouse layout
A WMS automatically collects important data on what's selling and what's expected to sell. With this information, managers can make smart decisions about where to put items, like placing fast-selling products near packing areas or grouping related products to make picking easier.
Material handling
Material handling is about moving products safely, on time, and accurately within a warehouse. This includes using the right equipment, like forklifts and pallet jacks, and following standard processes that reduce damage and waste.
Warehouse managers can use a WMS to:
- Coordinate equipment use by tracking workloads and available resources
- Provide clear instructions for moving products, which prevents confusion and mistakes
- Track damage rates and identify areas where handling processes can be improved
Labor management
For warehouses, logistics managers say their inability to attract and retain a qualified workforce is their biggest problem.
Keep hold of the employees already inside your warehouse. With a WMS system, merchants can plan resources to keep inventory in the warehouse constantly moving, and keep employees in their roles. Look for one with workforce management features that help to:
- Plan staff schedules and shift times (that don’t breach regulations)
- Assess whether warehouse staff have had the adequate training—be that health and safety training or qualifications in operating machinery—to complete their job
- Establish KPIs and monitor progress toward them
Safety and security
Protecting both workers and inventory is very important in any warehouse. From following safety rules to stopping theft, keeping a secure workplace keeps operations running smoothly and reduces costly incidents.
You can send automatic safety reminders to staff, like equipment checks or restocking safety supplies. Plus, keeping real-time records of where each item is, which greatly reduces lost or stolen goods.
Technology integration
Modern warehouse management is part of a larger retail ecosystem. Unified commerce brings your ecommerce storefront, POS, ERP, customer data, and WMS together into a single platform. A real-time data exchange ensures that inventory levels, order statuses, and customer profiles are always up to date, no matter where the purchase happens.
With a unified commerce strategy, retailers can:
- Automatically sync inventory between physical stores, ecommerce platforms, and warehouses
- Instantly reflect orders placed online or in-store within the WMS
- Avoid overselling or stockouts with real-time inventory visibility
- Offer customers flexible fulfillment options like buy online, pick up in-store (BOPIS)
💡 Tip: Connect with other systems (like Shopify's unified commerce solution) to create a single source of truth for inventory, orders, and customer data.
Demand forecasting
Predicting which products customers will want, and when, helps warehouses keep the right amount of stock without tying up money in slow-moving inventory.
Good demand forecasting keeps popular items available and prevents expensive overstocking that can waste space and lead to markdowns.
By using these forecasting tools along with a WMS, warehouse teams can confidently plan when to restock, reduce waste, and make sure the right products are always available.
Shipping and receiving
Your warehouse management processes aren’t over once a product leaves the warehouse. A good WMS has order-tracking capabilities to show:
- When a parcel was shipped
- Its current location
- The shipping carrier used
- An estimated delivery date
Parcel transparency is important to consumers. Use a self-serve portal, such as the one found in the Shop app, that shows the location of their order at any time. It’s your WMS that will pull this data once an order has been marked as fulfilled in a distribution center.
Putaway
Once products are received and verified at the warehouse, the next step is putting them in their assigned storage locations. A strong putaway process reduces the time it takes to store goods and ensures inventory is organized and easy to retrieve later.
A WMS can automate and improve this process by:
- Suggesting optimal storage locations based on product type, turnover rate, and available space
- Tracking product locations in real time to simplify future picking
- Reducing congestion by routing employees through the most efficient paths
- Helping warehouse staff avoid misplacing high-value or fragile items
Putaway efficiency directly impacts how fast orders can be fulfilled later. The faster and more accurately items are shelved, the easier they are to pick when orders come in.
Returns management
It’s inevitable that some products shipped from your warehouse will make their way back. Research puts the return rate for items at 16.9%. Use warehouse management software to process returns, approve them for refunds, relabel inventory, and get it back on the shelf.
The best part? Data from your WMS can be used to preempt returns from plaguing your warehouse.
As Kurt Ellis, president of GLF E-Commerce Fulfillment, explains, “Data-driven insights from warehouse and inventory management software can also be used to identify customer behavior patterns and help make policy adjustments, like limiting the number of items a customer can buy in different sizes or colors to reduce the rate of returns, and help avoid the need to discount unwanted items.”
Warehouse management tips
Warehouse management technology offers clear advantages for busy warehouses. To maximize efficiency in yours, follow these best practices.
Choose an order-picking system
Continuing with the speed theme, help warehouse employees fulfill customer orders faster with an order-picking system. It’s a strategy used to determine which items are sourced from the warehouse first, reducing step counts and collecting sold inventory more efficiently.
Options include:
- Batch picking: The WMS prints a packing list for each order, grouping together customer orders with similar or adjacent SKUs. A picker collects inventory from several packing slips simultaneously.
- Wave picking: With this strategy, warehouse employees also fulfill several orders simultaneously. Packing slips are grouped by inventory zone, shipping date, or SKU similarity. The employee then sources these items in “waves” throughout their shift—like once every half-hour.
- Zone picking: Used by larger warehouses, this picking strategy works by dividing your warehouse into zones, each housing a particular suite of products. An order picker in each zone sources products from within it. The parcel is then passed to another zone, similar to an assembly line, for another zone pick.
Localize inventory in different warehouses
Any ecommerce brand with a vision of going global needs international warehouses. By stocking inventory in locations that are sales hotspots and global trade hubs, such as Houston or London, you’ll expand your geographical footprint.
International orders can be sent from the closest warehouse, already cleared by customs—a tactic with the potential to reduce shipping costs. Customers also have products in their hands within as little time as possible.
Take it from Jason Wong, CEO and founder of Doe Lashes: “The way we respond is to place our inventory near those cities to reduce the overall miles traveled by those packages. We’re now stocking inventory outside of the country for our international customers, just to reach them faster. We have a warehouse in China and that helps us reach Australia and the whole Southeast Asia region.”
Not only does this localized inventory strategy result in faster orders and fewer carbon emissions, but Doe Lashes’ formula to minimize the distance between products and customers helps it build a supply chain that’s resilient against disruptions.
Automate where possible
The warehouse robotics market is set to reach $9.5 billion by 2025. The surge in valuation derives from the benefits of ecommerce automation—a strategy that takes repetitive tasks off your warehouse employees’ plates.
A mad dash to store, pick, pack, and ship orders leaves room for mistakes. Those mistakes, like adding the wrong product to a parcel, wreak havoc with customer experiences.
Automations in workflows eliminate the chance of human error, while also leaving staff more time to focus on higher-impact tasks. For example, if your warehouse management system shows that 500 units are ready for sale but 400 of them are still in the receiving area, use Shopify Flow to automatically display a low stock message for that SKU on your ecommerce store.
Nick Malinowski, cofounder of OTW Shipping, also advises, “If you have the budget, utilize barcode scanners. Not only will this make inventory management quicker, but it will also make your pick and pack more accurate. Higher pick accuracy means fewer returns and corrective orders that need to be compensated by you. The result is happier customers and more five-star reviews.”
Measure warehouse performance
Your warehouse is a machine with many moving parts. Periodically check whether yours is working at its optimal level by paying close attention to these performance metrics:
- Order fulfillment rate: The percentage of orders placed that have been shipped
- Orders shipped on time: The percentage of orders shipped within the cutoff date for delivery time you’ve promised a customer
- Order accuracy: The percentage of parcels packed with the correct items from the packing slip
- Orders fulfilled per hour: Benchmark this against order accuracy. It’s great if you increase output from 40 to 75 parcels per hour, but not so much if order accuracy decreases.
- Hours without reportable accidents: A successful warehouse has minimal safety breaches. The longer you go without an incident, the better.
Find a warehouse management system with these advanced reporting capabilities, such as Easyship or ShipBob. The more data you have, the better decisions you’ll make when operating a busy warehouse.
Benefits of working with a 3PL for warehouse management
A third-party logistics provider (3PL) is an external company that handles your logistics and supply chain management process.
You’ll deliver inventory to the 3PL’s warehouse, offloading all warehouse management operations to your partner. They’ll receive order details as soon as they’re processed through your ecommerce store. It’s their job to pick, pack, and ship inventory to your customers—no intervention required.
The Shopify Fulfillment Network makes this process seamless for Shopify merchants. In partnership with Flexport, Shopify Fulfillment Network offers fast, affordable fulfillment with easy onboarding and direct integration into your Shopify admin. You can track everything—from orders and returns to inventory levels—in one place.
Faster, accurate order fulfillment
Warehouse technology has clear impacts on how efficient a distribution center is. Yet investing in your own technology stack is a big commitment.
A 3PL’s entire business revolves around warehouse management. They’ll absorb the cost of warehouse technology that helps them pick, pack, and ship orders faster and more accurately, such as:
- RFID scanners
- Barcode scanners
- Collaborative robots like Chuck
Shopify Fulfillment Network builds on this foundation with a data-driven logistics network that positions your inventory closer to your customers. Thanks to Flexport’s strategically located fulfillment centers, Shopify Fulfillment Network enables two- and three-day delivery nationwide—helping you meet rising consumer expectations for fast shipping without the overhead of owning and managing a warehouse.
Reduce shipping and operational costs
Third-party logistics providers send large volumes of parcels each month. As a result, many shipping carriers provide them with discounted shipping rates—often to persuade the 3PL to continue using their services. Many 3PLs pass on these discounted rates to their customers, making shipping costs cheaper than they would be if parcels were shipped from your own warehouse.
For merchants like The Dad Hoodie, relying on Shopify Fulfillment Network for shipping and fulfillment has made a big difference to their bottom line. Average shipping costs have been cut by 40%, with founder Taylor Llewellyn saying, “As a business owner, fulfillment is only something you think about when it isn’t working well, and luckily, I never have to think about it.
"Knowing that we have a premium partner that gets orders out of the warehouse quickly and at a cost we could not achieve elsewhere [means] we’re able to focus on growing our business."
When you’re using a 3PL’s warehouse, you pay storage and fulfillment fees for its services. The same applies to labor management, allowing you to reduce overhead by leaning on warehouse employees already contracted by your 3PL.
Depending on sales volume, employee count, and inventory levels, this could be a much cheaper warehousing option than fronting an entire lease of your own.
Scale internationally
Lean on a 3PL’s existing collection of international warehouses to reach global shoppers in less time, rather than opening up your own in popular warehousing locations with expensive leases.
Take it from Noelle Taylor, senior marketing manager at Taylor Logistics, who says, “Partnering with a 3PL to handle warehouse management allows brands to focus more on what’s important—growing their business and delivering the best possible customer experience.
“Committed 3PLs see their relationship with brands as a long-term partnership. As a result, they may be willing to invest in space, technology, and equipment to take your business to the next level.”
Access warehousing expertise
There’s nothing else for a 3PL provider to focus on other than running an effective warehouse. It’s safe to assume that they’ll have boundless expertise on how to run one, with tried and tested processes to:
- Handle order-picking mistakes
- Maintain employees’ health and safety
- Package items and reduce damage in transit
- Manage resources and and provide staff training
With Shopify Fulfillment Network, you also gain access to Flexport’s years of experience in global logistics, giving you peace of mind that your operations are being handled by industry leaders.
As Elliott Davidson, ecommerce consultant at Parcel Master says, “Not having to think about and manage a process as complex as warehouse management, and knowing that someone who specializes in it is taking on the pressures and responsibilities, allows you to focus on other areas of growing your business.”
Reduce carbon footprint
Any business owner with a conscience knows that shipping parcels to the other side of the world has some negative consequences on the environment. Unfortunately, it’s an issue only set to worsen as the years go on.
Consumers are becoming increasingly aware of this, and they’re voting with their wallets—choosing brands they know are actively working on reducing their carbon footprint.
Look for a 3PL that has measures in place to reduce its carbon footprint. From using lightweight packaging made from sustainably sourced materials to LED lighting within the warehouse, customers are already looking for brands who support these climate-friendly options.
Choosing a cloud-based warehouse management system
Despite the benefits a warehouse management system has to offer, not all systems are created equal. Find the right WMS software—one that grows as your ecommerce brand does—by asking these questions to potential vendors:
- What does their order fulfillment process look like? The most effective warehouses and distribution centers use technology to speed up the fulfillment process and maintain accuracy.
- Does it offer the core functions your business needs? Ask your warehousing team for need-to-haves in any new software—be that repetitive workflows they should be automating or immediate data syncing.
- How often is inventory counted? If you’re using a 3PL, ask about their process for physical inventory counts. The more frequently both recorded and actual inventory are compared, the quicker any discrepancies can be rectified.
- How much does it cost? Vendors often have monthly fees to use their WMS, though these can come under different categories. Get the full picture of your investment by asking for implementation, licensing, support, and training costs.
- Does the WMS integrate with your toolstack? Streamline your entire warehouse operation by choosing a tool that syncs with your ecommerce platform, 3PL company, an enterprise resource planning (ERP) system, and inventory management software. Some WMS platforms offer customizable modules that allow you to build a system tailored to your warehouse’s specific needs, whether that's inventory tracking, labor planning, or cycle counting.
- What are its limitations? From warehouse square footage to inventory levels, choose a WMS that scales with your business. It’ll save the headache of moving to a new one once your sales volume increases.
Take the stress out of warehouse management
Warehouse management is a tough thing to get right manually. By investing in a WMS, repetitive tasks will be taken off your warehousing team’s plate. You’ll improve order accuracy, ship parcels faster, and have the data you need to make the warehouse run at peak efficiency—even when you’re scaling internationally.
Warehouse management FAQ
What are the 5 essentials of warehouse management?
The five essentials of warehouse management are accurate inventory, efficient space utilization, optimized picking and packing, timely and accurate shipping, and continuous improvement.
What are SAP and WMS?
Enterprise software company SAP makes customer relations and business management software. Warehouse management system software helps warehouses and distribution centers manage inventory, pick processes, and audits.
What is the most important thing in warehouse management?
Keeping inventory levels accurate is the most important part of warehouse management. This ensures a quick delivery, which keeps customer satisfaction high, and prevents you from overstocking or understocking, which can hurt the bottom line.
What is warehouse management called?
In general, warehouse management is called “warehouse management system” (WMS) when referring to the specific software solutions used, or “warehouse operations” or “warehouse logistics” when referring to the broader aspect of warehouse management.
