Warehouse management is the process of tracking inventory, organizing storage, and fulfilling orders. Retailers use a warehouse management system (WMS) to coordinate these physical and digital tasks.
Ecommerce accounted for 16.4% of total US retail sales in 2025, according to Census Bureau data. This growth means retailers need more warehouse space and better ways to manage their inventory.
It’s easier to run an efficient warehouse with organized processes for storing inventory and picking orders. This guide shows how to set up these systems.
What is warehouse management?
Warehouse management is how retailers track inventory, locate goods, and fulfill orders. A warehouse management system (WMS) helps them manage staff schedules and organize storage space.
A WMS helps retailers:
- Track all their products
- Organize limited warehouse space
- Ship orders faster
- Reduce mistakes to save money
Warehouse management vs. inventory management
A warehouse management system (WMS) manages entire facility operations. An inventory management system (IMS) tracks the stock within those facilities.
Retailers use an IMS to:
- Record incoming inventory
- Monitor stock levels across multiple locations
- Track order-fulfillment rates
Integrating an IMS with a WMS connects stock data to physical operations. Use inventory software to forecast customer demand. The WMS uses this data to direct staff to products, such as showing the location of a single SKU within a 10,000-square-foot warehouse.
How warehouse management works
1. Receiving
Receiving is the first step in warehouse management. It involves accepting, inspecting, and storing goods that arrive from suppliers. Warehouse staff use the WMS to coordinate when delivery trucks arrive at the loading dock.
Staff perform several tasks during the receiving stage:
- Match the physical shipment to the digital purchase order (PO).
- Scan barcodes to record new stock in the system.
- Inspect boxes for signs of damage or leaks.
- Log serial numbers for electronic goods.
Accurate receiving prevents stockouts and overselling. Descartes’ "2025 Warehouse Performance Benchmark Report" states that “accurate inventory starts at goods-in/goods receiving,” and reports that replacing a paper-based process with a WMS results in 99.84% stock accuracy.
2. Putaway
Warehouse staff place products in their assigned storage locations after receiving and verifying a shipment. This process, known as putaway, keeps inventory organized so staff can retrieve items later.
A warehouse management system automates the process by:
- Location suggestions: Suggest storage locations based on product type, turnover, and space.
- Real-time tracking: Record product locations to simplify picking.
- Path optimization: Route staff through efficient paths to reduce congestion.
- Item safety: Identify high-value or fragile items to prevent damage.
Putaway efficiency determines how quickly staff fulfill orders. Fast, accurate shelving makes picking easier when orders arrive.
3. Storage and slotting
Storage holds goods securely between receipt and fulfillment. In a warehouse, the facility stores items to support distribution rather than selling them directly.
Slotting assigns SKUs to specific storage locations to reduce travel and labor. Order picking accounts for 50% of total warehouse operational costs, according to a warehouse-slotting project from MIT.
Efficient slotting yields performance gains because picking and slotting account for a large share of logistics costs. Researchers at MIT found that an advanced slotting model reduced picker travel distance by 24% when warehouses re-slot fast-moving products.
Slotting relies on SKU velocity, product size, and order affinity rather than random placement. The study also found that combining SKU weight, frequency, and interaction frequency—how often customers buy items together—produced the most effective results.
4. Picking and packing
Picking is the stage where staff retrieve items for an order. Packing is when they check, box, and document those items.
Warehouses measure labor productivity through these tasks. In their 2025 warehouse performance benchmark report, Descartes found that customers averaged 23.5 orders picked per hour, per person.
Fast, accurate fulfillment is the goal. Lift-truck technology company Yale found that best-in-class operations achieved a correct pick rate of 99.68% in 2025. It also found that higher picking accuracy reduces wasted time and returns.
Systemization improves performance here. Descartes reports that replacing paper-based picking with a warehouse management system led to 99.84% stock accuracy. This change increased orders picked per person by 50% per hour.
5. Shipping
Fast and free shipping has become the baseline expectation for many online shoppers. More than 95% of consumers say they prefer free standard shipping over paid expedited shipping, according to research from McKinsey.
A WMS helps warehouses process orders quickly and efficiently enough to hit promised delivery windows without adding unnecessary fulfillment costs.
When using a WMS, staff can:
- Print packing slips containing order details
- Identify item-storage locations
- Generate shipping labels with customer addresses
Quick processing helps staff meet cutoff dates for same-day shipping. It also gives them more time to handle orders that arrive later in the day. They’re able to manage high volumes without missing delivery windows.
6. Returns processing
It’s inevitable that some products shipped from your warehouse will make their way back. NRF research puts the return rate for items at 15.8%. Use warehouse management software to process returns, approve them for refunds, relabel inventory, and get it back on the shelf.
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.”
Main components of warehouse management
Warehouse management processes cover specific areas to help operations run. These components work together to improve warehouse performance.
Warehouse layout and material handling
Warehouse design affects how quickly and accurately staff store, find, and move products. A clear layout supports steady product flow, cuts handling time, and reduces delays.
A warehouse management system can help teams:
- Track inventory movement in real time and identify fast-selling products for high-access locations
- Assign products to locations that reduce walking time
- Analyze picking patterns and spot layout bottlenecks
A WMS also collects data on sales activity and demand forecasts. Managers can use that information to place fast-selling products near packing stations or store related products together to speed up picking.
Labor management
In Instawork’s 2025 “State of Warehouse Labor” report, 52% of operators said finding reliable, quality labor was their top challenge.
A warehouse management system can help managers support the staff already in place. Workforce management features can help teams:
- Plan schedules and shifts that comply with labor rules
- Track whether staff have completed required training, including safety training and equipment certification
- Set key performance indicators (KPIs) and monitor progress
Safety and compliance
The Occupational Safety and Health Administration (OSHA) considers warehouses to be hazard-prone environments due to injury risks presented by forklifts, materials handling, slips/trips/falls, hazardous chemicals, heat, and automation/robotics. If your warehouse isn’t managed in compliance with OSHA’s guidelines, you’ll face fines and unplanned downtime.
A warehouse management system can support compliance efforts. Teams can use it to send automatic safety reminders, including equipment inspection prompts and restocking alerts for safety supplies. Real-time inventory tracking can also help staff monitor item locations and reduce lost or stolen goods.
Technology integration
Warehouse management is part of a larger retail ecosystem. Unified commerce brings your ecommerce storefront, point of sale (POS), enterprise resource planning (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)
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 and replenishment
Demand forecasting helps warehouse teams estimate which products customers may buy and when those orders may happen. Replenishment uses the forecast to decide when to restock inventory.
Used together, these processes help teams keep enough stock on hand while limiting excess inventory. A warehouse management system can support that work by showing inventory levels, order patterns, and reorder points in one place.
Reporting and warehouse KPIs
Warehouse KPIs track how the operation performs over time. Common metrics include:
- Order fulfillment rate: The percentage of placed orders that ship
- Orders shipped on time: The percentage of orders shipped by the promised cutoff date
- Order accuracy: The percentage of parcels packed with the correct items
- Orders fulfilled per hour: The number of orders processed each hour
- Dock-to-stock cycle time: The total time from when goods arrive at the warehouse to when they are available for picking
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 warehouse management
Warehouse management affects how inventory moves, how orders get out the door, and how much the operation costs to run. These benefits show how better warehouse management can improve day-to-day performance.
Faster and more accurate fulfillment
Zebra’s "Warehousing Vision Study" found that 51% of warehouse leaders struggle to maintain fill rates tied to service-level agreements (SLAs), while 47% struggle to prepare orders to SLAs. Order accuracy and outbound processes were also among their top operational challenges.
In daily operations, disconnected systems, unclear pick paths, and outdated inventory data slow order processing and increase errors. Better warehouse management helps teams move orders faster and improve accuracy.
Better inventory visibility
Zebra also reports that 82% of warehouse decision-makers say better operational visibility improves staff and asset utilization. Visibility means knowing what is in stock, where it is located, and how quickly it is moving.
When visibility is weak, inventory gets misplaced and teams spend time looking for products that the system says are already there. Higher visibility helps warehouse teams match inventory to demand.
Lower operating costs and less waste
In a 2025 Zebra/Oxford Economics study, companies that improved inventory management workflows saw, on average, 3.4 percentage points higher revenue growth and 2.2 percentage points higher profitability.
Warehouse costs aren’t tied to labor alone. Inefficient storage, excess stock, rushed shipments, duplicate handling, and avoidable write-offs all can reduce target margins over time.
A well-managed warehouse runs leaner. It helps businesses protect margins by reducing unnecessary movement and lowering carrying costs.
Improved labor productivity
Zebra’s 2025 research with Oxford Economics also revealed that transportation and logistics leaders reported a 21% increase in productivity with better workflows.
Warehouse management helps teams produce more with the same headcount. The payoff is a warehouse that runs faster and uses labor efficiently.
Better customer experience
Warehouse performance affects customer experience in direct ways. Fast shipping, accurate orders, and reliable stock availability all depend on what happens in the warehouse.
PwC’s 2025 "Customer Experience Survey" found that 29% of consumers stopped buying from a brand because of poor customer experience. Warehouse management helps brands deliver more reliable service, which can reduce the risk of order issues that push customers away.
Warehouse management best practices
Choose the right picking method
Warehouse employees fulfill customer orders with an order-picking system. This strategy determines which items are sourced from the warehouse first to reduce step counts and collect sold inventory.
There are three common picking systems:
- Batch picking: A warehouse management system groups customer orders with similar or adjacent SKUs. A picker collects inventory for several orders at once.
- Wave picking: Employees fulfill multiple orders at once. Systems group packing slips by inventory zone, shipping date, or SKU similarity. The employee sources these items in waves, such as every 30 minutes.
- Zone picking: Warehouses divide floor space into zones that house specific products. An order picker in each zone sources products from within their area. The parcel then passes to another zone, similar to an assembly line, for the next pick.
Use barcode scanning or RFID to improve accuracy
Barcode scanning and radio frequency identification (RFID) help warehouse teams verify products during receiving, putaway, picking, and shipping.
Barcode scans require a line of sight and confirm one item at a time. RFID can automatically capture tagged items without line of sight, giving teams another way to see what moved and where it went.
A 2025 case study published by the Asia Pacific Conference on Industrial Engineering and Operations Management found that RFID increased inventory record accuracy from 85% to 95% in a textile manufacturer. The same study found that RFID reduced inventory registration time by 81%, from 2.6 hours to 0.49 hours.
Nick Malinowski, cofounder of OTW Shipping, 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.”
Automate repetitive workflows where possible
The warehouse robotics market is predicted to reach $24.55 billion by 2031, according to data from Mordor Intelligence. Ecommerce automation drives this growth. It’s a process that removes repetitive tasks from warehouse staff.
For example, if a warehouse management system shows 500 units are ready for sale but 400 are in the receiving area, use Shopify Flow to display a low-stock message for that SKU on your ecommerce store.
Place inventory closer to demand
Ecommerce brands with global expansion goals use international warehouses. Stocking inventory in trade hubs like Houston or London expands a brand's footprint. Retailers send international orders from the closest warehouse to reduce shipping costs and delivery times.
CEO Jason Wong uses this strategy for Doe Lashes. He says, “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.”
A localized inventory strategy leads to faster orders and fewer carbon emissions. Doe Lashes uses this model to help them build a supply chain that withstands disruptions.
Choosing a cloud-based warehouse management system
Questions to ask WMS vendors
Vet potential warehouse management partners with these questions:
- How do they handle order fulfillment? Efficient technology focuses on speed and accurate counts.
- Do they have the core functions your brand needs? Ask your team for must-haves, like immediate data syncing and automated workflows.
- How often do they count inventory? Frequent comparisons against actual stock help you fix discrepancies.
- What’s the total cost? Account for implementation, licensing, support, and training costs beyond monthly fees.
- Do they integrate with your existing tools? Ensure the system syncs with your ecommerce platform, third-party logistics (3PL) provider, enterprise resource planning (ERP) software, and inventory software. Ask about customizable modules for labor planning or cycle counting.
- What are the system's limitations? Identify the limit for warehouse square footage and inventory levels to ensure the software doesn't break as sales volume grows.
Signs you've outgrown manual workflows
Look for these signs that manual processes no longer support your growth:
- Lagging fulfillment speeds: If your current process can’t keep up with order volume, technology can accelerate the workflow. In a 2024 warehouse study, 31% of operators said order fulfillment speed is a top facility problem.
- Accuracy errors: Manual tracking leads to discrepancies. A need for immediate data syncing suggests manual entries don't reflect the current stock.
- Repetitive tasks: When your warehousing team identifies repetitive workflows as a pain point, manual intervention costs you time and money. Zebra found nearly three-fourths of warehouse associates say they spend too much time on tasks that could be automated.
- Data silos: If inventory levels don’t update across your ecommerce platform in real-time, manual synchronization has reached its limit. In Anvyl’s 2025 supply chain report, 43% of brands said they will continue relying on manual processes and outdated systems, and data silos/lack of integration ranked among the biggest visibility barriers.
When to outsource to a third-party logistics (3PL) provider instead
Consider a 3PL when your brand experiences the following:
- Physical space constraints: If your brand hits limits regarding warehouse square footage, a 3PL has the infrastructure to scale without a real estate investment.
- Complex inventory management: When inventory counts become complex, a 3PL’s auditing processes improve accuracy.
- Rapid sales growth: If sales volume grows faster than you can hire and train staff, a 3PL lets you use their labor planning and WMS modules.
- Technical debt: If building a custom integrated set of tools uses too many resources, a 3PL has a ready-made solution.
Benefits of working with a 3PL for warehouse management
A third-party logistics provider handles logistics and supply chain management. You’ll deliver inventory to their warehouse, and they’ll manage all warehouse operations.
They’ll receive order details as soon as your ecommerce store processes them. They pick, pack, and ship inventory to customers without needing you to intervene.
Shopify Fulfillment Network helps businesses connect with trusted 3PL partners through Shopify, including direct Flexport support and additional fulfillment-partner apps available through the network.
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 (WMS) 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 a “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.
