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WMS vs ERP Which one is right for you?

Does any of this sound familiar?

You need software to help your operations team, but you don’t know where to start
You plan all your work on an Excel spreadsheet, but your operation has grown
You have a lot of manual work processes and want technology to work for you
You are struggling to see a full picture of your diverse operations teams
It’s time to up your automation game, but should you start by adding a WMS or an ERP? Which one is better? Do you need both?

What is a WMS?

A Warehouse Management System (WMS) is a software system that captures, stores, and analyzes data generated as goods and material flow in and out of your warehouse. For example, a WMS can generate reports based on historical trends that detail the optimal pick location for every SKU.

A WMS captures data pertaining to:

Manufacturing and shipping of raw materials
Ordering of goods and materials
Receiving
Racking
Inventory
Replenishment
Order fulfillment
Sales
Shipping of finished products

All these operations and data must be tightly integrated as part of a complete supply chain management strategy. There are many benefits of a WMS – it drives operations, helps you make critical decisions, and allows you to make those decisions based on real-time data.

Warehouse management systems (WMS) are used by a variety of industries, including:

Third-party logistics (3PL) providers: 3PL providers often use WMS, especially those with multiple warehouses
Distributors: Larger distributors often use WMS, especially those with multiple warehouses
Pharmaceutical, healthcare, and cold storage companies: These companies are also common users of WMS
E-commerce fulfillment centers: WMS is often used by e-commerce fulfillment centers

What is an ERP System?

An Enterprise Resource Planning (ERP) System is a business management software that collects, stores, manages, and interprets data related to accounting, procurement, project management, risk management and compliance, and supply chain operations. It has some functional overlap with a WMS, though ERP systems prioritize accounting and financial data.

An ERP system can include a variety of integrated modules that give more visibility to data pertaining to a variety of business functions:

Procurement / Purchasing
Manufacturing
Inventory management
Shipping
Marketing
Sales
Finance / Accounting
HR

The capabilities of an ERP are like those of a WMS, such as tracking the status of inventory that is picked, packed, and shipped. The main difference between WMS and ERP software is that ERP is primarily accounting software that automates processes across the business and analyzes operations against the bottom line.

In warehousing and inventory management, 'WMS vs ERP' is the same as 'Inventory Management vs. Inventory Accounting'.

ERP software is primarily used by CFOs or financial executives to analyze inventory related to high-level accounting decisions (i.e., profits, loss reports); rather than the many data points and reports that a WMS can provide to facilitate supply chain oversight, create operation al efficiencies, and improve a warehouse’s or 3PL’s profitability. While many large companies that use a WMS may also use an ERP, the reverse is not always true. Companies in professional services, hospitality, finance, and banking arenas, for example may only need an ERP for their tracking and reporting of business variables.

Integration

Many companies maintain warehouses for goods and materials both pre- and post-production and manage a production line. While there is certainly an overlap between the functionalities of a WMS and ERP, in terms of scalability and inventory management, a WMS will provide more detailed and specific information, as well as more useful insights that allow you to optimize your supply chain.

While use of a WMS is necessary for success in any operation, selecting the right WMS for your business, today and in the future, is equally crucial. You will need to understand what software the right fit for your operational needs, and which is at the right price point and at the right ROI for your company.

A WMS is specific to inventory and warehouse data, and it provides optimization insights for the movement and storage of inventory based on real-time information.

Advantage of a WMS over ERP WMS Module

Here are several considerations when deciding to roll out a true WMS or trying to use the WMS module of an ERP as a WMS substitute:

Picking - A true WMS will give you enhanced picking flexibility.

If you need to improve productivity and capacity for example, you might try using a new picking method like voice-directed picking or pick-to-box which will allow you to tailor your needs to your operations, and a true WMS can make these transitions seamlessly. Many ERP WMS modules restrict your options to just a few methods or just one.

Putaway - Putaway is an essential part of inventory control.

A WMS will provide advanced putaway options with the ability to create rules allowing for smart use of floor and rack space, as well as to manage a high number of SKUs across multiple zones. An ERP WMS module is typically limited to only one primary location when addressing Putaway.

Task Management - A WMS gives you the ability for high prioritization.

It can have a worker directed to perform numerous types of tasks, instead of repeating the same task over and over; a practice referred to as “task interleaving”. This reduces wasted movements and assures that your orders leave the warehouse as scheduled. Most ERP WMS modules have limited prioritization ability, and often do not offer task interleaving.

Reporting and Dashboards – Essential to the success of any warehouse operation is access to real-time data and reporting.

This is the life blood for measuring success and finding opportunities to create efficiencies to improve profitability. A WMS can provide several dashboards that allow managers and the warehouse floor to view operational data. A cloud-based WMS will allow access to your data and reports anywhere you have access to the internet, so you can view operations no matter where you are in the world. Unfortunately, many ERP WMS modules do not offer real-time data or reporting based on historical trends.

Advanced Capabilities

WMS systems can include advanced capabilities; such as, transportation management, dock scheduling, advanced vendor compliance, labor management, and advanced automation integration (robotics, AS/RS etc.) ERP WMS modules usually do not offer such modules since their primary function is that of accounting rather than operations.

Conclusion

A WMS is specific to inventory and warehouse data, and it provides optimization insights for the movement and storage of inventory based on real-time information either in a cloud-based or in-house server. A good WMS is flexible, scalable, and customizable. A great WMS is affordable and well supported by an implementation team. An ERP is primarily accounting software that automates processes across the business and analyzes operations against the bottom line. A WMS will improve the operations of businesses not currently using one. They can improve efficiency and reduce costs across the warehouse, while using an ERP WMS module as a WMS substitute can limit a company’s ability to be flexible within their operations, as well as restrict growth. There are times when using both tools will benefit a company, so talking with experts who can assess your specific business’ needs is essential, but order of operations when introducing new software and solutions to any business is key.

Are you interested in talking with one of our experts to better understand if your business needs a WMS or ERP? Let's connect! Schedule a no-pressure conversation today