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Its not a person, and the location is here on earth. Yet there are some good reasons for distributors to consider using a Warehouse Management System (WMS) that resides on someone else’s computer(s) – often termed "cloud computing" or Software as a Service (SaaS). Both WMS and cloud computing have been described in previous articles, so this article will summarize the combination of both technologies, and present some pros and cons of the combination. (for the previous articles, SEE "The Truth About Warehouse Management Systems" and "Computing On Cloud Nine: No More…")

Warehouse Management System (WMS)

Remember that the kind of systems used by most distributors to operate their businesses is referred to as an Enterprise Resources Planning (ERP) system. An ERP mainly plans and manages logical business activities; e.g., entering data for sales orders, generating recommended purchase orders. Some ERPs contain a few WMS functions (e.g., after entering receiving data, the ability to print a put away list), but not many.

A WMS is separate, optional, extra-cost software that plans and manages the physical arrangement and activities of a warehouse. Its typically available as software that resides on a distributors computer, yet today it can be available as a service – a form of cloud computing.

When used as a service, or if a 3rd party software package, a WMS must be interfaced with a distributor’s ERP in order to send transactions to the WMS, which uses them to initiate warehouse activities (e.g., generate a suggested re-slotting report, for re-arranging the storage of items). And it must be interfaced so that the ERP can receive from the WMS the data used to update the ERP (e.g., quantity received on a PO) and to initiate ERP activities (e.g., generating invoices for shipped orders).

Some summary characteristics and functions of a typical WMS are shown in the sidebar at the end of this article; the side bar should be read before proceeding. See the original article for details.

Cloud Computing

A distributor subscribing to a cloud computing for WMS has no computer dedicated to the WMS, no IT staff dedicated to the WMS and no WMS software; only PC-type terminals, printers and a high-speed internet connection. The computer that the distributor uses for WMS functions is located somewhere, often a location unknown to the distributor; hence the term "in the cloud." Software, WMS in this case, resides on that computer in the cloud, as does WMS-only data. The vendor’s IT staff resides somewhere on planet earth. Users at the distributorship use their terminals as if the WMS computer and software were located in the building, including printing documents and reports on the printers. (Some WMS can be installed in a way that allows users to use their terminals to access the ERP system, then toggle to the WMS system.)


The possible benefits of using a WMS, on-site or through cloud computing, are increased productivity and reduced lost time, perhaps to the extent that staff can be reduced. Mistakes can be reduced, which saves time and money, and results in happier customers (and less lost business). Better utilization of warehouse space can mean not having to add shelving or add-on to the warehouse or move to a larger one. Read the "Cons" to see why benefits are not guaranteed.

The benefits from cloud computing tend to be more achievable than those from a WMS: all the money saved from not owning WMS-dedicated computer servers and a WMS software license, and from not having a WMS-dedicated IT staff. Other savings come from not needing a maintenance contract for the server(s), nor a contract for vendor-provided software support and updates, and avoiding possible annual software license payments, and data communications. (Cloud computing pricing assumes that many distributors will share the same computer(s) and software, and subscribe for many years. This sharing enables a provider to spread its cost over a larger, longer-term base and so lower the charges to subscribers.)

But there are costs and other challenges.


Cloud computing is not free. There is a charge for training and educating warehouse workers that will the WMS system and use RF guns or other devices; and perhaps a small set up fee. If changing from an in-house WMS to the cloud, there is a charge for converting data from the old system; if starting from scratch, there is the time-cost of keying in data needed by the WMS. And, there may be a charge for interfacing the ERP system with the WMS in the cloud; and for maintaining the interface as the ERP and/or WMS change over time – as they surely will do.

On-going costs can involve a fixed monthly fee plus charges for using resources (such as storing data, doing computing, and printing). Often there is no fixed monthly fee, but no cap on the monthly charges for using resources. If a distributor’s volume increases a lot, and/or more people start using the WMS, the monthly charges can mount up.

Another con is that the warehouse must be arranged and function in a way that doesn’t prevent obtaining the benefits of using a WMS; and good procedures and controls must be in place in the warehouse. On the flip side, a warehouse may now be functioning so well that a WMS would not provide much improvement.

When using a WMS in the cloud, the operation of the warehouse would be totally dependent on that provider. If that provider suddenly went out of business, how would the warehouse function? how would the distributor get its warehouse data back?

How secure from hackers is the warehouse data in the cloud? Even with data encryption, hackers can determine how to read secure data. What stops an unauthorized user from logging into the cloud like a legitimate new user, and viewing data – or worse, damaging it? Passwords may not be effective – all the users exchange them so no one is ever unable to log into the system.

Some cloud computing providers do not own the software they use, but license it from the software's author. That license can be terminated by the author under certain circumstances, which would leave subscribers with zilch. Short of termination, the contract between a provider of cloud services and the author of the software it uses could allow the author to make such changes as increasing the licensing fees and/or limiting a subscriber's use of the software.

True cloud computing software was written specifically to be used by multiple subscribers. But some companies that offer cloud computing use software that was written to be used by only one company; it was modified to support multiple companies. The latter kind of software can lead to unexpected bugs that don't occur when the software is used by only one company. The author of the latter kind of software may or may not be the cloud computing provider, and if it isn’t, the author may not be obligated to fix bugs, and cloud computing personnel may not know how to do so.

Cloud computing providers usually require that all user companies use the software as is; they won’t make real modifications. And subscribers can't make modifications because they don't possess the software and can’t get at the "source code" (which is required for changing software).

If access to the Internet becomes temporarily unavailable, how would a subscriber run its warehouse?

To avoid fruitlessly spending a lot of time and money, before getting quotes for a cloud-based WMS or seeing demos, determine if the warehouse is ready for a WMS; estimate all the long term costs (including any warehouse changes and interfacing to the ERP system) and estimate the truly attainable cash savings and intangible benefits. For some warehouses, many of the savings and benefits of a WMS can be obtained by using cheaper technologies or other measures not involving much expense.


Dick Friedman is a recognized expert on warehouse operations, WMS and warehouse technologies for distributors and wholesalers. He is a Certified Management Consultant and is unbiased, so he does NOT SELL computer systems/Saas/cloud-computing, WMS or warehouse technology. Dick applies more than 30 years of experience to help distributors objectively determine if WMS software or a cloud version, or warehouse technology, would be worthwhile. He also helps prevent warehouse mistakes and reduce warehouse costs, often through inexpensive, quick changes that don’t require any technology. Call 847 256-1410 for a FREE consultation, or visit for more information or to send e-mail.



Define the warehouse

- define the ID of each bin (aisle, bay, level and slot)

- optionally, define zones (e.g., aisles where only certain items can and must be stored)

- optionally, for each bin, define capacities and dimensions

- define the characteristics of each item that is stored

- optionally, define capacities for mobile material handing equipment

- optionally, define labor standards

Cohabitating Items

- track multiple items stored in the same aisle/bay/level

Planning for Receipts

- use vendor-transmitted EDI Advance Shipping Notice (ASN) determine which receiving dock will be used by each inbound truck

- use ASN to determine put away locations, before or after items are received

Receiving, QC and Put Away

- in the absence of ASN, capture receiving data

- determine where to put bulk/overflow not stored in fixed locations

- if bar code labels are used, print needed ones

Pull Down

- determine when to pull down items, before pick bins are emptied (pull down overflow quantities)

- if labor tracking is in use, WMS determine who gets which tickets


- generate "pick to truck" documents or RF displays

- generate "mini-wave" pick ticket(es) for picking items in common

- determine when an item should be picked from bulk/overflow

- if labor tracking is in use, assign orders/tickets to specific pickers

Pack, QC, Load

- by order, determine the kind of shipping carton(s) needed, and the quantity needed

- as each carton is packed, store data on items in each carton/pallet

- determine which orders should be loaded on each truck, and print a loading report for each

- store data about a truck and the orders loaded – the answer to "Where’s my order?"

(Re)Determining the Bin Arrangement

- determine where each item should be stored, initially or "permanently"

- re-determine where each item should be stored

Labor Management, Standards and Productivity

- store standards by type of task: receiving, picking, etc.

- store captured-data on task times and quantities involved

- generate productivity reports/displays

- capture and report on various kinds of warehouse errors