ERP and WMS systems (Enterprise Resource Planning and Warehouse Management System) are the backbone to any distribution, wholesale, supply chain or FMCG business. Without them, this businesses wouldn’t be able to function. In this blog post we will explain the purpose of each system, the differences between them and provide directions that will help you decide between ERP and WMS software.
The earlier versions of ERP systems have a limited participation for WMS. This may be the reason why many companies installed a WMS software separately to manage their warehouse activities. But today, modern ERP software solutions have either inbuilt warehouse management system, or provide integration with already existing one.
Because of the specific requirements of the wholesale and distribution industry you can still find a WMS solutions as a stand-alone systems. So the big question is what is the difference and which software should you use?
What is WMS software?
A warehouse management system (WMS) is a software application, designed to support warehouse or distribution center management and staff. They facilitate management in their daily planning, organizing, staffing, directing, and controlling the utilization of available resources, to move and store materials into, within, and out of a warehouse, while supporting staff in the performance of material movement and storage in and around a warehouse.
A WMS system tracks the movement of each inventory item and provides intelligence on optimizing inventory based on real-time information. An advanced WMS system analyzes the data of the product, status, lot, dates, dimensions, location, area, region, owner and inventory details. And then it determines which would be the best location to store the recently received product. Some older ERP packages do not provide this functions. That is why WMS are often standalone systems, requiring additional modules like accounting and customer relationship management.
This are the minimum features required from and Warehouse Management System:
- Inventory location assignments
- Order picking & fulfillment management
- Warehouse capacity management
- Radio Frequency (RF) capability for data management
- Cross docking management
- Put-away and picking optimization
- ABC classification
- Labor utilization
What is ERP software?
Enterprise Resource Planning (ERP) is a business management software that integrates key areas and automates business processes across all departments of an organization like purchases, sales, marketing, human resources, services, inventory, financial management, etc., and improves the flow of information across the organization. When ERP software is implemented in the organization, all the departments can access updated and shared information. In addition to this, the entity is also able to analyze the profitability, performance, and liquidity at any point in time.
ERP software has many of the same capabilities as WMS software such as tracking the process of inventory items – picked, packed, and shipped. It’s important to know that ERP software is an all-in-one solution! It’s not recommended to integrate other systems with ERP software. Often times, it becomes counter-productive to have multiple software applications from different vendors managing your operations. Having multiple applications will decrease productivity and efficiency through duplicate entries. That is why and ERP suite with inbuilt WMS and other modules is the preferred choice of the majority of the organizations around the globe.
Key Differences Between ERP and WMS
The primary difference
WMS is a standalone system that needs support from other additional software, whereas ERP is an all-in-one solution. However, unlike warehouse management systems, some ERP solutions does not offer the optimization of inventory based on real-time information and does not have the ability to generate reports based on historical trends and data that identify the best location for each stock item.
Older ERP systems are founded on transaction-based logic, and they are best suited for linear environments with chronological operations and limited exceptions. If your business is vulnerable to constant priority changes, your best option is a WMS that is focused on real-time operations, or an innovative ERP system that can respond to the constant change.
Some ERP systems are also not through in in-depth product tracking. If your inventory and supply chain operations are complex, you may require the improved functionality of a best-of-breed WMS. But even than there might be some issues and concerns about integrating the WMS system int your existing ERP suite.
Which system is right for your business?
Deciding between ERP and WMS system could be a tough decision. You should consider the following things before making your choice:
#1 Clearly define the long-term goals of your business
This includes measureable outcomes that you would like to achieve, and the functional requirements that your enterprise needs in a management solution to reach your identified measurable outcomes.
#2 Examine all technical conditions of your company
Before deciding between ERP and WMS system you should carefully examine the technical requirements of storing and moving your products. This type of analysis is crucial for avoiding problems related to storage and delivery. No matter which system you choose, it should guarantee uninterrupted receipt, storage, movement, delivery and dispatching of goods.
#3 Determine the return of investment (ROI) of each system
Take what you have determined to be your long-term goals and the necessary functionalities of your system, and match them against implementation and/or integration costs to determine the return on investment for each system. Once you have accurately estimated your return on investment for each solution, your decision about whether to implement a WMS or ERP system will become much clearer.
ERP and WMS systems are both potentially valuable solutions for your company. Now that you know the differences between the two solutions, you will be able to more accurately determine which would be the best fit for your company’s unique needs.
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