When speaking with businesses seeking inventory management software, the terms Warehouse Management System (WMS) and Enterprise Resource Planning (ERP) software is often used interchangeably. Although ERP software has warehouse management capabilities, they are not the same, and there are areas that set them apart. It's important to understand the definition and difference between these terms when talking to software providers.
ERP vs WMS
Both WMS and ERP software systems are the backbone to any distribution and wholesale business - without them, the business wouldn't be able to function. This blog post aims to educate you on the similarities and differences between warehouse management and ERP software.
Warehouse Management System (WMS)
A Warehouse Management System (WMS) is mainly used to manage the movement and storage of inventory within a warehouse. It tracks the movement of each inventory item such as the item being received, put-away, picked, packed and shipped. The key differentiator between ERP and WMS is that WMS systems provide intelligence on optimizing inventory movement within your warehouse based on real-time information. Users can generate reports to indicate the optimal location for each item to be put-away based on historical data and trends, and the system helps dictate where product should live within a warehouse based on bin and shelf utilization. Additional functionality includes:
- The ability to set up stocking and non-stocking locations in order to show the true count of inventory, while at the same time separating product available and product already allocated to an existing order
- The ability to set up stocking location priorities and ratings for more efficient picking
- Precise movement tracking of product – from shelf, to cart, to specific stations etc.
- Cross docking features which provide employees the ability to receive and ship product without putting it away
WMS are often standalone systems to manage warehouse operations and they lack accounting, customer relationship 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. Most businesses are able to reduce costs and grow their business with a few inventory management techniques they can use in conjunction with their ERP.
Enterprise Resource Planning Software (ERP)
Enterprise Resource Planning (ERP) Software on the other hand, automates business processes across all departments of a business including accounting, order entry and processing, purchasing, inventory management, warehouse management, eCommerce integration and customer relationship management. The main purpose of ERP software is to facilitate the flow of information between all functional areas of a business. What begins to become confusing is that many ERP systems have many of the same capabilities as WMS software and contain various levels of inventory management and warehouse management features. For example, an ERP system will have functionality for tracking the process of inventory items being received, picked, packed, and shipped and the ability to manage bin and shelf 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.
Both ERP and WMS are a part of supply chain management and aim to help businesses manage their resources in the most economical way possible. They report information based on real-time data in a variety of ways and can be managed on-premises or in the cloud. Each system and module come with its own price tag - starting from a few thousand, to upwards of hundreds of thousands. Although ERP software will include some WMS functionality, the features provided will not be as robust as that of a full WMS – however, for small-medium size wholesale and distribution businesses, ERP software is frequently all that is required.
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 than the need for true WMS software. Not every warehouse needs a WMS - they're designed for complex operations and the initial and on-going costs are quite expensive. Many ERP systems have the main functionality of WMS systems at a lower price-point. A proper ERP system should be able to accommodate most inventory requirements including basic warehouse management at a far more affordable price. There are different levels of inventory management software and it's best to understand business needs when searching for systems.
- Functionality for picking, packing, receiving and shipping
- Barcode scanning with radio-frequency identification for monitoring product movement – the system logs every single movement of product in the warehouse (from receiving dock, to cart, to shelfing, to cart, to packing station etc.)
- Inventory location recommendations – stocking location priorities and ratings
- Warehouse layout planning
- Price: $150,000+
- Functionality picking, packing, receiving, shipping
- Barcode scanning and mobile picking capabilities
- Inventory location tracking – bin and shelf location
- Accounting (A/R, A/P, GL, bank management)
- Order entry and invoicing
- Purchase orders
- Contact management
- Inventory management
- eCommerce integration
- Landed cost tracking
- Price: $20,000+