Brand WMS vs 3PL WMS: Key Characteristics and Differences

In today’s hypercompetitive marketplace, it is imperative for companies to serve their customers through as many touchpoints as efficiently possible making omnichannel fulfillment much more of a necessity than a novelty. By adopting an omnichannel strategy, a business can reach more customers, improve customer satisfaction and increase sales and gain a substantial edge over their competitors, but this added ambition inevitably comes with increased supply chain complexities and vulnerabilities.

Some of the key challenges often faced by businesses in implementing omnichannel fulfillment are:

Data Integration: Omnichannel fulfillment warrants the need to integrate data from multiple channels, including e-commerce platforms, brick-and-mortar stores, and mobile apps. This requires a robust data integration strategy and the right technology infrastructure to support it.

Inventory Management: One of the biggest challenges is managing inventory across multiple channels and locations. Businesses must ensure that they have the right products in the right quantities in the right locations at the right time.

Order Management: With multiple channels come multiple orders, which can be difficult to manage without a centralized order management system.

Shipping and Logistics: Fulfilling orders across multiple channels often means working with multiple shipping carriers and managing complex logistics.

Returns and Exchanges: Managing returns is a complex process that requires a dedicated team and resources. Higher volumes of order returns lead to high costs and cut into the bottom line of any 3PL or third-party logistics services or brands.

A Warehouse Management System can go a long way in addressing all of the above challenges and many more. It can act as a backbone to the omnichannel approach around which a supply chain transition can be built.

WMS as a foundation of your omnichannel strategy

In the simplest terms warehouse management System (WMS) can be summarized as a software application utilized to optimize and manage end-end warehouse operations. It offers functionalities ranging from Inventory Management, Order Management, Shipping, external logistics and advanced data analytics & forecasting, depending on the suit one is using. It can often also be integrated with other ERP modules to enable end-end operational control and visibility.

Market forces are increasingly pushing brands to go omnichannel and by extension the best 3PL providers globally who want to hold onto their share of the outsourced supply chain dollars. The issue that many 3PL providers face is, unlike WMS solutions for standalone brands, there are few offerings in the market that reliably cater to the unique operational needs of 3PL providers such as multi-client structure, 3PL billing, and flexible multi-platform integrations.

The right Warehouse Management System (Brand or 3PL) can go a long way in supporting the omnichannel strategy: 

By providing a unified view of inventory and integrating various sales conduits with a real-time view across all channels. These channels can either be brick & mortar stores, online aggregators, D2C funnel, or distributorship networks, a unified view of the inventory helps in preventing stock-outs, overstocking, or overselling ensuring orders across all channels are honored.

By Enabling efficient order management across channels. A WMS can help businesses manage their orders from multiple channels in one centralized system. This allows businesses to track orders in real-time, and ensure accuracy in order processing and fulfillment This can include generating pick tasks, packing, and dispatch from multiple locations, reducing the time it takes to fulfill an order.

By Reducing errors and improving inventory accuracy through the automation of processes and real-time visibility into inventory levels. By having an accurate inventory map at all times, businesses can minimize errors and ensure that the right products are delivered to the right customers.

By providing rich data for analysis, optimization, and forecasting: A WMS generates volumes of data on order fulfillment rates, inventory levels, and shipping times across all channels. This data can thus be analyzed to identify areas of improvement and optimize operations for greater efficiency and profitability.

Predominantly two primary types of WMS' exist:

Brand WMS: These systems are designed for a single brand or business to manage inventory and order fulfillment across multiple channels. It provides real-time visibility into inventory levels and order status, allowing businesses to streamline operations and improve customer service. 

3PL WMS: These are used by third-party logistics providers (3PLs) to manage warehouse operations for their clients. They are designed to handle the inventory and order fulfillment needs of multiple clients from different industries and have different sales channels simultaneously.

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A Deeper Dive into Brand Warehouse Management Systems:

Brand Warehouse Management System (WMS) as briefly introduced prior is a comprehensive in-house solution for managing inventory, orders, and fulfillment across multiple channels but for a single business or in-house brand. In-house fulfillment offers a business several advantages over 3PL outsourcing namely – better control over the fulfillment process, better visibility of the inventory movement, brand control/quality & higher levels of process customization.

Some of the primary features essential and often incorporated in Brand WMS' are: 

• ‍Product Information Management (PIM): PIM is a module for managing all the information related to a product, such as its attributes, descriptions, images, and pricing, in a centralized repository. The PIM functionalities within a WMS can help manage the data related to products, including their description, dimensions, weight, and other attributes. This information can be used to optimize warehouse processes, such as storage, picking, packing, and dispatch. ‍
• Procurement & Vendor Management module is crucial for brands to order goods from suppliers, manage backorders, and automate replenishments. With the ability to manage vendors and orders in a single location, brands can ensure that they have the products they need to meet customer demand across all channels. In fact, a study by SC Digest found that companies with effective supplier management strategies achieved an average of 53% reduction in supplier lead times and 50% improvement in on-time delivery.‍
• Catalog management enables brands to create and manage product catalogs across all channels. With the ability to manage catalogs through a single window, brands can ensure that they have consistent and accurate product information across all channels. ‍
• Multi-channel order management: This module is crucial for brands as they need to cater to both online and offline channels once they achieve a certain scale. This involves having a two-way sync of orders, products, and inventory with e-commerce channels, retail stores, distributors, marketplaces, and more. According to a recent report by McKinsey, omnichannel sales are expected to account for nearly 30% of all retail sales by 2025, highlighting the importance of a robust omnichannel fulfillment strategy for brands. ‍
• Forecasting and optimization: Demand forecasting and more complex inventory optimization are critical for brands to attain optimal levels of inventory, inventory allocation, etc. Brands lose out on sales, customer service, and brand experience by having their products out-of-stock. Similarly, overstocking adds to a brand’s carrying cost and eats into the margins. 
  According to a report by the National Retail Federation, retailers lose an estimated $1.75 trillion annually due to excess inventory, highlighting the importance of effective inventory management. With a Brand WMS, brands can accurately forecast demand and optimize inventory levels to maximize efficiency. ‍
• Batch and serial number tracking is another essential feature of a Brand WMS, enabling brands to track products at a granular level. Barcode solutions can be especially beneficial for FEFO/Perishables items that are on the clock. It minimizes the chances of such inventory being stranded, delayed, or worst lost through the fulfillment pipeline. According to a study by Zebra a Barcode-RFID solutions provider, nearly 90% of retailers plan to implement serialized inventory tracking by 2021, highlighting the growing importance of this feature for retailers.

In conclusion, a Brand WMS is a critical tool for brands with a focus on multi-channel order management, both online and offline. With the ability to manage inventory, orders, and fulfillment across all channels, brands can ensure that they have the products they need to meet customer demand while maintaining consistency and accuracy.

A Deeper Dive into 3PL Warehouse Management Systems:

Third-Party Logistics (3PL) WMS on the other hand enables 3PL providers to manage inventory, orders, and fulfillment for a spectrum of clients. With the growing demand for omnichannel fulfillment, 3PLs need to seamlessly fulfill different kinds of orders using a single platform, catering to a wide variety of clients. According to a report by Transparency Market Research, the global 3PL market is expected to grow at a CAGR of 5.1% from 2020 to 2030.

• ‍Multi-client structure and client-facing platforms enable 3PL providers to collaborate with their clients efficiently. 3PLs can define a higher-level workflow and processes for inbound, storage, and outbound activities to maintain the overall synchronization of the fulfillment activities, But a true 3PL solution should also be able to offer a substantial degree of control to the clients themselves in controlling the underlying transactional activities such as creating order, inventory visibility, analytics, order metrics, shipment tracking, returns/exchanges.‍
• 3PL Billing is a crucial feature of a 3PL WMS, enabling providers to capture client-specific transactional data, create custom billing profiles, and auto-generate invoices. With the ability to manage billing in a single location, 3PL providers can ensure that they are accurately billing their clients while saving time and reducing errors. ‍
• Inventory Management (IM): 3PL IM differs from brands’ IM in handling multiple clients’ inventory. The key function of inventory management for a 3PL is to have complete visibility of inventory that includes, physical quantities, location, inventory yet to be stocked or inventory allocated, and more. In addition, the 3PL inventory module must also be able to intelligently recommend inventory placement and putaway locations for effective fulfillment.
• Location management is critical for 3PL providers to meet the unique requirements of each client. With the ability to define buffer zones, cold storage, dry storage, and damaged goods locations, 3PL providers can ensure that they are meeting their clients' unique requirements while maximizing the use of their warehouse space.

3PL providers strive to meet the unique needs of each client and therefore have to be nimbler and more flexible in their approach to supply chain management. Every client uses multiple tools and fulfillment channels and a true WMS should be similarly accommodative. 3PLs must be equipped to deal with a wide array of product attributes (shapes/sizes/fragility/perishability) and customizable inbound, storage, and outbound processes they warrant. With the ability to fulfill different kinds of orders seamlessly using a single platform, 3PL providers can cater to a wide variety of clients enabling cross-collaboration.

Conclusion

To sum it up, choosing the right warehouse management system is crucial for businesses looking to build a robust supply chain. While brand and 3PL solutions share some common features, they also have key differences that set them apart.

Brand WMS focuses on managing inventory and orders for a single business, whereas 3PL WMS can cater to a broad spectrum clientele, enabling collaboration and cross-vertical customization. It is important for businesses to carefully evaluate their needs and requirements in terms of scalability, flexibility, customization, and compatibility with existing software and hardware systems before selecting one. They should also assess factors such as their business size, the number of channels they operate in, their client base, inventory volume, and growth potential before coming to a conclusion.