I spend a considerable portion of my day chatting with business managers from various walks of life, who run many types of businesses. One thing that I have learned from experience is that different people use business and software terminology differently. This can make it difficult when looking for industry-specific software. Two businesses that are virtually identical, for example, may consider themselves in completely separate industries (such as “manufacturers” who really operate as distributors where all manufacturing is outsourced to 3rd party vendors). Today we’ll specifically examine another example where terminology is used differently between businesses and across industries – the difference between Warehouse Management Software (WMS) vs. Enterprise Resource Planning (ERP) Software.
Warehouse Management Software (WMS) is defined as “a key part of the supply chain and primarily aims to control the movement and storage of materials within a warehouse and process the associated transactions, including shipping, receiving, putaway and picking. The systems also direct and optimize stock put-away based on real-time information about the status of bin utilization”. WMS systems manage warehouse operations and typically lack accounting, contact management and other functionality associated with an ERP system – thus WMS typically integrates with an ERP system. Most small businesses do not require true WMS functionality as many ERP solutions will have built-in warehouse management functionality that is appropriate. What begins to become confusing is that many ERP systems also contain various levels of inventory management and some warehouse management features. For example, an ERP system may be able to track inventory locations but not be able to make warehouse layout recommendations. If your business requires inventory management along with accounting, order entry and contact management, chances are you are looking for ERP software. Essentially, ERP software will have WMS functionality but on a smaller scale and where WMS is most useful is in businesses with large warehouses and a high volume of daily orders, with multiple storage locations and levels of shelving for the same SKU.
When searching for an appropriate software, be wary of the added cost of WMS. Warehouse management software can be several times more expensive than ERP software and so make sure you use the correct terminology when speaking with vendors – the need for warehouse management, shipping, receiving and inventory functionality is different tha the need for true WMS software. A proper ERP system should be able to accommodate most inventory requirements including basic warehouse management at a far more affordable price. The “Amazons” and “eBays” of the world most certainly require WMS, however, many small and medium businesses will find that a modern ERP system provides all the functionality they require.
Warehouse Management Software (WMS)
- Functionality for picking, packing, receiving and shipping
- Barcode scanning with radio-frequency identification for monitoring product movement
- Inventory location recommendations
- Stocking location priorities and ratings
- Warehouse layout planning
- Price: As high as $150,000 or more
Enterprise Resource Planning (ERP) Software
- Functionality picking, packing, receiving, shipping
- Barcode scanning
- Inventory location tracking
- Accounting (AR, AP, GL)
- Order entry and invoicing
- Purchase orders
- Contact management
- Inventory management
- Price: starting at $10,000