What Is a Smart Warehouse?

Key takeaways

A smart warehouse stores inventory for a company like a regular warehouse, but instead of manual labor, it operates using advanced technology. Here are some important things to know:

• The value of the global smart warehousing market is expected to increase from $28.68 billion in 2025 to $80.44 billion by 2032, representing a compounded annual growth rate (CAGR) of 15.9 percent [1].

• Core technologies in smart warehouses are the Internet of Things (IoT), artificial intelligence (AI), automated retrieval systems, warehouse management systems (WMS), and wearable technology.

• You can learn more about AI to gain a better understanding of how it contributes to the operations of a smart warehouse.

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What is a smart warehouse?

To upgrade supply chain operations, a smart warehouse uses data analytics and technologies augmented with AI and machine learning (ML) to enhance your company's storage processes, making them more efficient and cost-effective. For example, autonomous drones utilize spatial AI and computer vision to maneuver quickly through a warehouse while scanning barcodes and radio-frequency identification (RFID) tags, providing consistent updates to inventory with little effort. In terms of data analytics, your organization can review previous sales data to determine the optimal inventory levels you need to meet future demand. A smart warehouse establishes an ecosystem driven by data, simplifying operations. 

What is a smart warehouse used for?

Essentially, companies use smart warehouses to transform a basic storage space into an intelligent and efficient operation where every product, shelf, and machine can communicate with one another. This automation enables robots to scan, package, and transfer products while also providing your organization with real-time inventory assessments. By implementing smart warehouse technology, you can reduce human error and fulfill your orders faster. Organizations appear to recognize the benefits of smart warehousing, with the global value of the smart warehousing market expected to grow from $28.68 billion in 2025 to $80.44 billion by 2032, representing a CAGR of 15.9 percent [1].

What companies use smart warehousing?

For various reasons, many well-known companies, such as Amazon, IKEA, and DHL, employ smart warehousing. By using robots to locate and move items within its warehouses, Amazon allows employees to remain at packing stations. Smart software helps IKEA maintain an accurate count of products in its warehouses, reducing errors and increasing efficiency. To prevent employees from having to push and pull heavy equipment, DHL utilizes automated order selectors (AOS)—robotic machines that select, handle, and add items to orders. Other companies using smart warehouses are Lego, Coca-Cola, Shopify, and Walmart. 

Core technologies in smart warehouse solutions

A few core technologies that help a smart warehouse function effectively include IoT, AI, ML, WMS, automated storage and retrieval systems (AS/RS), and wearable technology. Working together, these advancements simplify operations, reduce errors, and enhance material handling efficiency. Explore these technologies in more detail:

IoT

If your warehouse employs a network of interconnected devices that share data to enhance operations, you’re using IoT. Components of an IoT system can include smart sensors, scanners, and robots. When you incorporate IoT into your warehouse, these devices gather data for analysis so that you can predict trends, monitor business operations, improve worker safety, track environmental conditions, maintain equipment, and streamline shipping.

AI and ML

Once the IoT devices collect real-time data about warehouse operations, you can leverage AI to analyze this information. This analysis can help you identify optimal picking routes, design the most effective warehouse layout, optimize your resources, and manage your inventory. Specifically, through the use of ML algorithms, robotic arms can learn to alter their grip and movements based on the item they are handling. 

Warehouse management system

By overseeing and simplifying operations, the WMS serves as the central intelligence of the smart warehouse system. The WMS directs the movement of products throughout the warehouse regarding selection, packing, and shipping. It also helps supervisors make resource distribution more efficient.

Automated storage and retrieval systems

AS/RS technology is an important component of a smart warehouse because it can help you utilize warehouse space efficiently, save time, and reduce errors. By employing various types of robotics, such as automated guided vehicles (AGVs), these systems are responsible for storing and retrieving products. AS/RS also uses other types of robotics, including autonomous mobile robots and advanced conveyor systems, which can minimize bottlenecks and streamline the transfer of goods.

Wearable technology

Workers in a smart warehouse can utilize technology such as extended reality (XR) headsets, wrist devices, and smart glasses to access real-time information, improving productivity, communication, and safety. This wearable equipment can help track an individual’s location, provide biometric identification, and record physical movements. Other types of devices warehouse workers can wear include cameras, body sensors, and exoskeletons.

Pros and cons of smart warehousing

Although smart warehouses offer several benefits, such as improved efficiency and cost reduction, this technology also presents some challenges, including the initial investment and time required for implementation. Take a closer look at these pros and cons:

Pros

• Improved efficiency: By automating job allocation, appointment scheduling, and order fulfillment, you can decrease errors and reduce the time it takes to process an order.

• Cost reduction: Smart warehousing optimizes storage space and energy use by identifying the appropriate equipment for the task, which can minimize waste and lower overall costs.

• Customer service: A warehouse using smart technology can fulfill and ship orders faster, enhancing customer satisfaction and increasing brand loyalty.

• Improved security: With IoT devices and surveillance systems in place, your inventory and employees are better protected from unauthorized access.

Cons

• Initial investment: Implementing smart technology throughout your warehouse can be a costly endeavor as it involves expenses for software licenses, employee training, and system integration.

• Time-consuming: Refitting your warehouse with smart technology can be time-consuming, especially if you have an older facility that requires structural and electrical upgrades.

• Fewer workers: The introduction of smart technology and automation may result in a reduced workforce, and current employees might face a knowledge gap when it comes to operating these new systems.

What are the 4 types of WMS?

Four types of WMS are standalone, cloud-based, supply chain module, and on-premise. Learn more about the following four types of WMS:

- Standalone: With this type of independent system, you can increase control and efficiency. By identifying patterns, analyzing data, and organizing your warehouse, you can minimize human error and optimize accuracy.

- Cloud-based: A cloud-based WMS is typically quicker to implement in your operations, and you can tailor it to meet your specific needs. Also, since it operates in the cloud, you may not need on-site IT and hardware specialists.

- Supply chain module: If you already have a working supply chain management system, the supply chain module WMS software can integrate with it. This facilitates data exchange between the warehouse and the supply chain, allowing you to monitor products throughout the distribution process.

- On-premise: This type of WMS does not require an internet connection because you store it in an on-site data center. Your organization hires IT staff to manage it. If your region has data restrictions, this can be a helpful type of WMS.

Getting started with smart warehouse technology

To integrate smart technology into your warehouse, you want to begin by developing a plan. You can use the following steps as an outline:

1. Determine your needs. 

2. Evaluate different products. 

3. Test the software on a small scale.

4. Formulate a plan for implementation.

5. Train your employees.

6. Monitor to improve efficiency.

7. Establish a plan for future investments in this technology.

A few companies offering smart warehouse software include Infios, Microsoft, Blue Yonder, Oracle, and SAP.

Discover more about careers in supply chain management and data analysis

To stay current about trends and job opportunities in supply chain management or data analytics, subscribe to our Career Chat newsletter on LinkedIn. You can also learn more with these free resources:

• Watch on YouTube: 7 Essential Supply Chain Skills to Launch Your Career

• Read this article: 7 Questions with a Data Analytics Professor

• Learn some terminology: Data Analysis Terms & Definitions

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