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ERP vs. WMS: Everything You Need to Know

Read Time: 5 minutes

Every industry on earth is learning to code. Software brings order to the customer fulfillment process. It helps small or large companies demystify and prioritize their operations and keeps each partner in a complex supply chain in tune with the others. Enterprise Resource Planning (ERP) Systems and Warehouse Management Systems (WMS) are the two most common forms this software takes. Let’s dive into the ERP vs. WMS debate to see how each brings order to chaos in some of the most demanding and dynamic industries.

What Is a Warehouse Management System?

A WMS is a piece of standalone software that provides functionality for warehouses and distribution centers in real time. These features include:

  • Tracking order-picking operations
  • Monitoring and flagging product expiration dates
  • Providing insights into the speed and defect rates of various departments
  • Receiving, processing and prioritizing orders as they roll in from customers
  • Managing and providing visibility for racking locations and other storage areas
  • Facilitating the orderly movement of inventory between or within facilities and storage

The best warehouse management systems provide comprehensive data and traceability for all inventory, no matter which stage of handling it’s in.

This software makes it easier to get through busy peak seasons. A WMS can identify fast- and slow-moving products, making it easy to process orders for in-demand items. These insights about demand and supply levels help managers stay organized and design effective workflows.

Why is this important? To start, warehouse management systems bring visibility and traceability to the most expensive and error-prone activities within a business. Researchers estimate that order-picking alone accounts for up to 63% of the ongoing costs in the average warehouse.

Shipping is another source of financial loss that a WMS can help address. In 2016, online customers returned 30% of their purchases, compared with less than 9% of brick-and-mortar buys. Of these returns, 23% stemmed from shipping errors and 20% due to damaged products.

Warehouse management systems reduce mis-picks and damaged goods by ensuring proper storage. They also minimize customer disappointment and out-of-stock messages by clearly separating available inventory and items already spoken-for in new orders.

In a nutshell, a WMS automates all of the logic behind stowing, picking and shipping. With robotics, it can help automate labor, too.

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What Is an Enterprise Resource Planning System?

When talking about ERP vs. WMS, people sometimes use the terms interchangeably. While the two offer similar features, they’re both distinct technologies. ERPs are broader in scope. They’re also all-in-one solutions, which is both an advantage and disadvantage.

Large corporations and small businesses alike use ERPs. While a WMS focuses squarely on warehousing and inventory management, ERPs provide broad, companywide functionality that connects multiple departments into a streamlined whole with data mobility. These departments can include:

  • Accounting
  • Customer relations
  • Sales and e-commerce
  • Human resources
  • Purchasing and procurement
  • Inventory management

Enterprise resource planning systems duplicate only the most basic functionality of warehouse management systems. Specifically, they show all connected parties when workers pick the inventory items, package them and depart the facility.

Ultimately, the intention of an ERP system is to provide insight into the complete workings of the company for representatives from every department. They help streamline communication, such as the sales team providing information to the fulfillment department about a run of damaged shipments.

ERPs help procurement, make financial operations smoother and allow HR and workers to easily discuss hours, shifts and benefits. They also provide forecasting and data analysis tools that allow companies to learn from the past and plan for the future. The best ERPs are device-agnostic and cloud-based, meaning they’re accessible from anywhere.

When Is a WMS the Right Choice?

When deciding between an ERP vs. WMS, remember that warehouse management systems are standalone. If you need additional functionality, such as customer relationship management (CRM) or accounting tools, you’ll need additional software modules. A specific WMS may claim best-in-class functionality, but it’s more limited in scope than an ERP.

Warehouse management systems are ideal for organizations that see their priorities change regularly. ERPs, on the other hand, are better suited for working environments with chronological and predictable operations. The fewer planned or unexpected disruptions, the better.

Warehouse management systems are the ideal option for complex fulfillment operations. Enterprise resource planning is comprehensive in scope, meaning it lacks the detail, depth and granularity offered by a WMS when it comes to individual product tracking.

Companies with supply chain activities as a primary component of their business model may be able to make do with a WMS module within their ERP. However, they may be better served with a dedicated WMS system — particularly as the company scales in size, and the challenges become more complex.

Some of the best WMS products on the market today that enjoy strong customer loyalty include NetSuite, Zoho, Fishbowl, TradeGecko, Oracle and IBM Sterling.

When Is an ERP the Right Choice?

The primary advantage of ERPs is their comprehensiveness — there’s no other software or modules to find. With an enterprise resource planning system, the management of warehousing and supply chain activities is an ancillary concern — a bonus feature for when that type of work isn’t the main focus of the company.

Price can be a potential downside when adopting an ERP product. The company buying the software may need outside APIs and additional services to get their ERP to interface correctly with other modules, vendors and business partners. Some ERPs don’t provide this functionality easily or at all.

Warehouse management systems, on the other hand, as critical parts of multilateral supply chains, typically have libraries of APIs available to expand the system’s functionality and flexibility. An ERP is not this flexible, and because it ties together multiple departments in a linear environment, it provides a transactional data relationship rather than an analytical one.

A WMS, however, excels at finding exceptions and ironing out bottlenecks in dynamic, hard-to-predict environments. As a result, the typical WMS may provide more impressive cost savings compared to an ERP. The very purpose of a WMS is to streamline operations and eliminate problems that result in wasted time and money.

The best and most well-received ERP systems on the market today include NetSuite, SAP, Sage Intacct, Brightpearl, Epicor, Odoo, SYSPRO and PeopleSoft.

Last Words on ERP vs. WMS

Now that you’ve learned about ERP vs. WMS, which software will work best for your needs?

The most important thing the two have in common is that they’re essential components in the digital supply chain, which combines data mobility with advanced analytics and automation to create a tightly knit enterprise. Worldwide, the demand for shipped products, quick and error-free order fulfillment, product customizability and personalized services is only going to increase. Thriving in this new world requires the right kind of software.

Whether warehousing is part or all of your operation, a WMS can solve stubborn headaches and carve out a competitive advantage in cutthroat industries. Meanwhile, an ERP is the wiser choice for scaling more consistent and predictable processes within growing companies. In both cases, the result is a company that works in better harmony with itself and its partners.

Featured Image Credit: Business photo created by senivpetro – www.freepik.com

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Article by: Megan Ray Nichols

Megan Ray Nichols is a freelance science writer and science enthusiast. Her favorite subjects include astronomy and the environment. Megan is also a regular contributor to The Naked Scientists, Thomas Insights, and Real Clear Science. When she isn't writing, Megan loves watching movies, hiking, and stargazing.