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Warehouse Management

Warehouse Labeling: Best Practices, Advantages, Challenges, & Implementation

This guide discusses everything there is to know about warehouse labeling, warehouse labels and provides the best practices for implementing a warehouse labeling system.

Team Hopstack
March 8, 2024

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On a regular day, an average warehouse will see thousands of products moving in and out of inventory. With warehouse labels, you can always keep a beat on the location and movement of products and items. Warehouse labeling systems provide more visibility into inventory, warehouse locations, and handling equipment.

Labels help organize the space logically, making it easier for pickers and packers to locate and identify products and storage locations. In addition, it enables inventory tracking across all stages, leading to straightforward analytics and easier management.

With a centralized warehouse management system (WMS), you can generate and print various types of warehouse labels to exercise complete visibility across warehouse locations. Integration between different systems ensures seamless data flow for real-time updates on stock levels and locations.

What Are Warehouse Labeling and Warehouse Labeling Systems?

Warehouse labeling is the process of tagging and marking products, racks, shelves, bins, pallets, and other storage or handling units within a warehouse. Warehouse labels contain and convey information that enables efficient tracking, storage, retrieval, and management of goods within the working environment.

There are different types of warehouse labels:

  • Barcode Labels: Barcode labels are cost-effective and can be scanned with a barcode scanner to identify a product or location. When combined with text labeling, barcode labels ensure readability for both man and machine.
  • RFID Labels: Radio Frequency Identification (RFID) labels use small radio transponders to transmit information to a reader even from a distance and without line-of-sight.
  • QR Code Labels: Similar to barcode labels, QR (Quick Response) codes can hold a lot of information and can be read using a smartphone camera. QR labels are two dimensional while barcode labels are single dimensional.
  • Magnetic Labels: Magnetic labels have a magnetized back, making them easy to apply, remove, and reposition on metal surfaces.
  • NFC Labels: Near Field Communication (NFC) labels operate similarly to RFID labels, but require greater proximity (usually a few centimeters) to the reader.
  • Holographic Labels: These are used for high-security items. They include a 3D hologram that can't be duplicated, offering protection against counterfeiting.

Depending on the business model and the types of goods, labels include purpose-driven information like:

Warehouse labeling guide

Warehouse labels, when combined with a warehouse management system, can help create a cohesive and safe warehouse layout for the workers.

What is a Warehouse Labeling System?

A warehouse labeling system is a combination of the hardware (labels, printers, scanners) and software (warehouse management system) needed to implement and operate labels within the warehouse layout. Digital warehouse labeling systems can seamlessly integrate with WMS or ERP software to automate and improve inventory tracking, space utilization, and picking and packing processes.

Based on the reliance on manual processes or advanced, automated systems, there are various types of warehouse labeling systems:

  • Manual Warehouse Labeling Systems: Labels are usually created from a printer and manually applied to goods, pallets, and storage locations. Manual systems are feasible only in smaller operations that don’t handle a significant volume of orders or unique SKUs.
  • Automated Warehouse Labeling Systems: Automated systems include industrial warehouse label printers that can print and apply labels without human intervention, or conveyors and robotic systems that move goods past a label applicator. With warehouse automation systems, these systems can interface directly with a WMS to automatically print labels based on incoming data about the goods.
  • Digital Warehouse Labeling Systems: RFID and NFC fall under this category as they use digital technology to store and transmit information. These labels contain printed information and digital data that can be read by scanners. Digital warehouse labeling systems can integrate with a centralized management system to manage and encode digital labels.
  • Integrated Warehouse Labeling Systems: These systems are fully integrated with other warehouse systems, such as the WMS, ERP, or TMS (Transportation Management System). They can automatically generate labels based on data from these systems, and the scanned data automatically feeds back into the system.
  • Dynamic Warehouse Labeling Systems: These systems use technology like electronic shelf labels (ESL), which are digital, wireless display units that can be updated remotely. They are majorly used in applications where product locations change frequently, as they can be updated instantly without physical intervention.

The most appropriate labeling system for a particular warehouse depends on multiple factors — warehouse layout, size, volume and variety of goods, existing technology infrastructure, and available budget. Large warehouse operations will benefit from greater automation and integration. However, the large initial investment might not be the best option for smaller warehouse operations just starting out.

Advantages of Thorough and Accurate Labeling in the Warehouse

Accurate labeling is crucial to efficiency, reliability, and productivity in warehouse operations. With warehouses moving increasing volumes of orders, warehouse labels offer an easy way to minimize errors and facilitate product traceability at all points. The benefits of warehouse labeling include:

Precise Inventory Tracking Across Warehouse Locations

According to research by Cushman and Wakefield, warehouse development is trending toward units ranging from 50,000 to 200,000 sq ft in size. The massive expanse of the warehouse layout makes it almost impossible to navigate without a guidance system. 

A proper warehouse labeling system enables accurate inventory tracking of every item, making it possible to narrow down the exact location. It helps reduce misplaced or lost inventory, thus minimizing the chance of stockouts or overstocking. Greater SKU visibility for warehouse managers, pickers, and packers translates to improved productivity and better business intelligence (BI) reports.

Enhanced Labor Productivity 

Correctly labeled products and storage locations help warehouse workers locate items and identify picking and putaway routes. Compared to manual processes, warehouse labeling systems allow for significantly smarter picking, packing, and replenishment workflows. If a warehouse uses scanning technology, such as barcode scanners or RFID, workers can simply scan labels instead of needing to write down or manually enter information.

Elimination of Errors in Inbound and Outbound Processes

Research by Datalogic states that a typical warehouse has an annual inventory error value of $195,000. Warehouse labeling adds another additional layer of protection against errors in inbound and outbound processes. Accurate labeling ensures the correct items are received from suppliers, put away in the appropriate storage locations, picked for orders, and shipped to the right customers. The additional oversight significantly reduces the chance of errors in both inbound and outbound processes, leading to improved order accuracy and customer satisfaction.

Elimination of Manual Data Entry

With comprehensive labeling and scanning technology, you can automatically enter product information into a WMS, eliminating the need for manual data entry. This speeds up data collection, reduces errors, and ensures more accurate record-keeping. 

Improved Safety for Warehouse Personnel

Proper labeling can contribute to a safer warehouse environment for floor workers. For example, you can use labels to mark hazard zones, indicate the correct handling procedures for certain goods, or show the maximum load capacity of racks. Automation and warehouse labeling systems can work in tandem to prevent accidents and improve worker safety.

Facilitated Quality Control

Labels contribute to the quality control process by enabling the tracking of batches or lots, indicating the date of production or expiration, or showing whether an item has passed inspection. The written record helps warehouse managers quickly identify and isolate any quality issues.

Better Forecasting and Planning

With accurate inventory tracking through labeling, businesses can gather data that aids in demand forecasting and planning for future needs. Knowing which product is at what stage of the fulfillment pipeline is the foundation for efficient purchasing and production decisions. 

Different Labels Required for Warehousing Activity

Depending on the type, warehouse labels facilitate various activities across the floor. Below we have singled out a few of the important functions of warehouse labels.

The Function of the Warehouse Label

Floor/Location Labels

These labels demarcate different areas or locations within the warehouse, such as aisles, rows, columns, shelves, and bins. Warehouse workers use these labels to navigate and find the right storage location quickly and accurately. Sometimes, you can also scan them to record the movement of goods in and out of these locations. Floor labels are usually durable to withstand traffic and wear.

Rack Labels

Rack labels are attached to storage racks and are used to identify individual locations within the rack where items are stored. These can be freezer-grade labels, magnet-backed, ultra-durable labels, multilevel labels, or color-coded. They allow for precise control over inventory location and facilitate efficient picking. In large warehouses, rack labels often include barcode labels or other scannable codes that can be read by handheld devices or automated systems.

Tote and Bin Labels

Totes and bins are used to group items for storage or transport within the warehouse. Labeling these containers allows for easy tracking of their contents, even if the individual items within are not directly visible. Accurate warehouse labels ensure the correct items are picked for orders, and that products are put away in the correct location after being received or returned.

Station and Dock Labels

In a busy warehouse, there are likely to be various stations where specific tasks are carried out, such as receiving, packing, sorting, or kitting. Similarly, there may be multiple loading docks for inbound and outbound shipments. Labeling these areas helps to direct workers and goods to the right place, improving efficiency and reducing errors. For example, when a truck arrives, it can be directed to the correct dock based on the labels.

Inventory Labels

Inventory labels are used at all stages of the inventory's lifecycle, from receiving to shipping. They usually contain information about the product, such as SKU, description, quantity, lot number, and expiration date. They can also include tracking codes like barcode labels or RFID tags. The format and content of inventory labels may vary based on the form factor of the inventory. For example, a warehouse pallet label might include a summary of all items on the pallet, while an item label would have information about that specific item.

Most warehouses will use a combination of these warehouse labels to guide the flow of goods and information. Together, they act as a real-time guide to navigating and accessing the warehouse layout.

Best Practices for Implementing a Warehouse Labeling System

Implementing a labeling system in a warehouse requires careful planning and execution. The larger the scale of your warehousing operation, the more challenges you’re like to encounter.

Here are some best practices to consider while implementing a warehouse labeling system:

Understanding the Warehouse Layout

Before implementing a labeling system in warehouse, it's crucial to fully understand your warehouse layout. This includes not only the physical structure and arrangement of the space but also the flow of goods and activities. Consider factors like the types of goods stored, the size and weight of items, the methods used for picking, the storage equipment used, and so on. This will help you decide where labels should be placed and what information they should include.

Selecting the Right Labels

The labels used should be suitable for the environment and the specific application. For example, labels for outdoor storage areas should be weather-resistant, while labels for freezer storage should be able to withstand low temperatures. The labels should also be compatible with your scanning equipment if you use barcode scanners or RFID technology. In terms of size and color, the labels should be visible and easy to read from a reasonable distance.

Implementing a Logical Labeling System

The labeling system should be logical and consistent to make it easy for workers to understand and use. This includes using a consistent format for the information on labels and a logical scheme for assigning location labels. For example, you might label aisles, racks, shelves, and bins with a combination of numbers and letters that indicate their position within the warehouse. 

Also, consider how the labels will be sequenced - for instance, whether you want to sequence your locations in a way that optimizes the pick path. It’s always logical to number shelves from the ground up; it leaves more room for vertical expansion.

Integrating with Warehouse Management System (WMS)

Your labeling system should be fully integrated with your WMS software. This allows for real-time tracking of inventory and locations, automatic printing of labels based on incoming or outgoing goods, and other advantages. 

To begin with, define the data fields that need to be captured on the labels and ensure these are compatible with your WMS. This may include data such as SKU numbers, product descriptions, lot numbers, location identifiers, and so on. Once you’re done, set up data mapping to ensure data flows correctly between systems, configure label printers to work with the WMS, and set up any necessary hardware like barcode scanners or RFID readers.

It might take a minute to test, monitor and make the necessary adjustments, but it’s essential to the success of mid to large-sized warehouse operations.

Staff Training for Use of Warehouse Labels

Comprehensive staff training is essential to understand and correctly use the new labeling system. This should include not only how to read and apply labels, but also how to use any new technology or software involved, such as scanners or label printers. 

Keep in mind that staff training should not be a one-time event. Regular refresher courses can help ensure that staff members retain their knowledge and stay up-to-date with any changes or updates to the system. 

While the exact practices will differ based on industry and product specifications, these are more along the lines of a guideline for proper implementation. With the right design, intent, and execution, you can considerably improve efficiency and streamline warehouse processes at all points of the fulfillment journey.

Next Steps in Warehouse Labels

Running a high-functioning warehouse is a lot of work, especially for mid to large-sized operations. Managers have to continuously keep tabs on a lot of moving elements while pickers and packers have to effectively navigate the warehouse layout. A warehouse labeling system simplifies inventory model tracking and improves productivity through real-time guidance across warehouse locations. 

While printing and implementing warehouse labels from scratch can be a major task, the improvement in warehouse efficiency makes it worth the effort. A warehouse labeling system can integrate with the existing WMS to significantly extend visibility across inbound and outbound operations, leading to reduced errors and greater customer satisfaction.

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