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?
The most important thing a buyer can do is ask themselves a simple question: What am I trying to accomplish? Does a WMS or an ERP system fit the purpose better? Once you narrow your focus to one of the two, you’ll have much more clarity.
What Is An ERP System?
Malcolm Glen, author of The Enterprise Resource Planning Handbook, describes Enterprise Resource Planning (ERP) as “a group of enterprise software applications, networked together for improved communication and functionality.” ERP systems work within the context of an entire company and connect together many different functions, including financial management, warehouse management, product planning, and manufacturing. They help modern companies become more efficient, work towards a single vision, and reap the synergies described by Harvard Business School Professor Michael Porter. They make companies more profitable.
Therefore, ERP systems are very useful for large companies with a lot of operational redundancies in different departments. This is for companies that have manufacturing, warehousing, marketing, R&D, service, etc. It can be used by any type of company, from a small startup to a large corporation, as long as it has different divisions that rely on each other. The question for companies in this situation is also how to integrate the different systems into a single model that nobody can see the seams?
What Is A WMS?
Warehouse management software (WMS) is typically intended for smaller companies with fewer divisions within the company. Although it might be designed for this type of company, there is no restriction that would prevent large companies from using WMS to manage specific parts of their operations.
WMS systems are generally limited to warehouse operations and those who use them are generally looking to do something specific, like lean manufacturing, just-in-time, and total quality management.
WMS systems are also geared toward smaller companies because they are generally less complicated. For example, they do not manage all the financials or multi-faceted operations of a large company.
Additionally, WMS systems are relatively cheaper. WMS doesn’t involve a complex IT project that can cost tens of millions of dollars.
Another feature of WMS is that it can be implemented very quickly and is therefore often used by companies looking to outsource their warehouse management process.
So Which One Is It?
If you look at the different components of an ERP system, you’ll notice that it can easily be described as a WMS (Warehouse Management System) on top of a bigger project. In other words, ERP is not so much a format as a project management tool that has a lot of physical and mental prerequisites before it can be truly used to its fullest extent.
Sounds simple…? Not so fast. The reality is that there is a lot that goes into the implementation, from hardware requirements to business structure. What’s more, there are over 1,000 ERP packages on the market and all with different strengths, weaknesses, costs, features, and functionality.
Although ERP and WMS are similar, they are not the same thing. Therefore, companies looking to save time and money should do their homework and make sure that they know exactly what they need before tackling a task as complex as this one.