Key Differences Between WMS and ERP Systems

Are WMS and ERP Systems the same?

Logistics companies in the market for warehouse management software face a bewildering array of options. There are many kinds of software that offer functionality for managing warehouse operations, all at varying prices and different levels of functionality. Choosing between WMS and ERP systems can be difficult and many buyers are stuck wondering which is the best for their company?

To begin with, it is important to understand the difference between a Warehouse Management System (WMS) and an Enterprise Resource Planning (ERP) system. Though many of today’s ERP systems have tightly integrated WMS systems, the earlier version ERP systems had a limited participation for WMS. This may be the reason why many companies installed a WMS software separately to manage their warehouse activities.

A Warehouse Management System (WMS) is mostly used to manage the storage and the movement of inventory. The system tracks the movement of every stock item such the item received, picked, packed and shipped. The main difference between WMS and ERP is that WMS systems offers optimisation of inventory on the basis of real-time information. Information can be generated to show the best location for every item to be put based on historical trends and data. Moreover, WMS are usually standalone systems, needing other modules such as accounting and customer relationship management.

Enterprise Resource Planning (ERP) Software on the other hand, automates the activities across all the departments in an organisation including accounting, customer relationship management and inventory management. An ERP software mainly facilitates the flow of information among all functional areas. ERP software has most of the capabilities of WMS software like tracking the course of inventory items picked, packed and shipped. The ERP software is an integrated all-in-one solution. It is important to note that it is counter-productive to have more than one software application running your operations. This is because multiple applications decrease efficiency and productivity through duplicate entries and rekeying errors.

Deciding on the right system for your business

Not many supply chain decisions affect the daily operations, customer relations and the financial health of your business more than choosing and implementing the right inventory management system. The big question is whether to choose the warehouse module of your ERP System or a specialised best-of- breed WMS.

Nowadays, the differences between traditional Enterprise Resource Planning and Warehouse Management System providers are blurring. Many ERP vendors are increasing the capacities of their system’s functionality while most WMS vendors are adding supply chain visibility and other management capabilities.

If Fiance Directors have to choose between a new WMS and sticking with an existing ERP functionality, they will certainly choose the latter. The Operations Director on the other hand, looks for systems which are adaptable, multi-functional and risk-averse- which means choosing a best-of-breed WMS. If it is the IT Directo making the decision, they are most concerned with the current workload, the skills of their IT staff and existing hardware investments. But the decision to choose which WMS and ERP Systems is best, is more complicated than who is in charge of the budget. It is a combined effort that balances the goals of finance, IT and operations with those of the entire organisation. The selection process has to focus on enhancing business value and delivering important performance goals. Two considerations are crucial: clearly and comprehensively defining the long-term goals of your business and functional requirements; and matching the goals against the implementation and the integration costs.

Many companies wrongly suppose that implementing a current warehousing module in their ERP system is inexpensive. But this is far from the truth. Just ask anyone who has tried to follow this process. You also cannot assume that the warehouse module will securely integrate with the other components of your ERP system, leave alone other details like materials handling equipment. Check these key points:

  • what is the cost on workarounds to compensate absent functionality?
  • What is the likely impact on customer relations?
  • You may realise that the free warehousing module that comes with your ERP is not actually free after all.

Flexibility

ERP systems are founded on transaction- based logic, for example in financial and order management systems. ERP systems 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.

Functionality

ERP warehouse modules conventionally force important operational compromises in intricate operations. Some ERP systems are also not through in in-depth product tracking. If your operations are complex, you may require the improved functionality of a best-of-breed WMS.

Value for Money

Eventually, it is the value of the system that should determine your final decision. Sticking with the module in your ERP system may be a short-term solution, but what about its value as your business expands? It is vital to consider the tough question in your return on investment (ROI) analysis: how much do you lose or gain by not investing or investing in a best-of-breed WMS solution?

Organisations with a heavy supply chain component face a major dilemma. The organisation has to make a decision between using the WMS module that comes with their ERP software or purchase a more vibrant, best-of-breed WMS package.

Here, too, there is no perfect solution. It all depends on the operations of your business, your future goals and your financial situation of course. Less obvious but nonetheless essential are factors such as ease of integration into other systems, the likely impact on customer relationships and the cost of workarounds in case the WMS does not have the desired functionality.

In Summary

Both the WMS and ERP systems are important components of supply chain management designed to help organisations manage their inventory in the best way possible. They provide information based on real-time data in a number of ways and can be kept on the cloud and on a server. Each of the systems and modules come with its own price, starting from a few thousand ponds to hundreds of thousands. There are various levels of inventory management systems and it is important for an organisation to understand its needs when choosing a particular system over another.

The key to overcoming warehousing and distribution challenges lies in the ability of a WMS to bridge disperse tools and processes found throughout. An integrated WMS/ERP solution maximises the return on your investment by augmenting ERP capability with WMS sophistication.

Warehousing, distribution, and manufacturing companies of all types and sizes are documenting tremendous results by bridging ERP with a WMS.

Here are a few results:

  • Gaining real-time visibility and reducing bottlenecks
  • Boosting order fulfilment speed, accuracy and volume with little or no added headcount.
  • An integrated environment that doubled annual revenue growth.
  • Real-Time visibility in orders, SKU movements, inventory status, individual/team productivity and other key metrics
  • 99% + order accuracy
  • Year-end inventory virtually eliminated

About us:

Speak to one of our team to understand how Clarus’ WMS system can cost effectively support best practice warehouse management processes, better customer service and highly efficient working for a range of warehouse operations with pay per month options and no IT infrastructure needed.

Our platform can scale from a one user, small depot system to a 100’s of user distribution centre operation. The ClarusWMS platform will cost effectively scale with your business based on demand.

ClarusWMS is a UK based supplier of warehouse management solutions with a wealth of industry experience in third party logistics, wholesale / retail distribution, online fulfillment and manufacturing warehousing.

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