What are they?
Controlling the processes in your warehouse and knowing the inventory levels, fill rates and various other parameters are key information that needs to be tracked in case you owe a warehouse and are operating an eCommerce business. Having complete control over the information about the key parameters of any warehouse is imperative if you want to run the warehouse efficiently. To achieve this, there are a number of methods and software available. Some may vouch for a warehouse management system (WMS) while some may place their bets on the enterprise resource planning (ERP) software. Let us first understand what each term actually is.
A warehouse management system is singularly used to manage the storage and the movement of inventory. With the help of warehouse management system, one can track the movement of each and every goods in the inventory and the process that it is going through such as item received, picked, packed and shipped. The main different between a WMS and ERP is that a warehouse management system works on the real time optimization of the inventory based on the on the spot information it gets from various inputs. Information can be utilized based on the historical trends and data on parameters such as the location of every item in the warehouse depending on the past data as discussed. More, it needs to be understood that WMS is an isolated system which need connection with other modules such as accounting software and customer relationship management systems so that it can effectively track the orders of various goods coming in and going out of the warehouse.
On the other hand, enterprise resource planning software encompasses all the activities going on in a warehouse and automates each and every one of those activities. For example an ERP system will take care of all the departments such as accounting, customer relationship management and inventory management systems and aggregates the data from each process in order to build a database based on which informed and calculated decisions may be taken. Thus, on a whole, an ERP system facilities the flow of information from all the functional areas of a warehouse and integrates all the processes so that no system can function in isolation. Thus, in order words a WMS can be said to be a subset of the ERP where in the ERP software has all the functionalities of a warehouse management system software such as tracking the flow of inventory. However, one cannot have the best of both the worlds and thus one cannot simultaneously run both a WMS and an ERP since it may become counterproductive. This is because multiple applications decrease the efficiency and leads to reduced productivity in the form of duplicate entries and rekeying errors.
Which one to choose?
Choosing the right inventory management system is the key that affects the daily operations, customer relations and the financial health of your eCommerce business since it directly affects the efficiency of your warehouse. Hence, we try to address the big question whether you should opt for a high end warehouse management system or go for a specialized enterprise resource planning tool for maintaining the efficiency of your warehouse. In the present times, the differences between an ERP and a WMS are blurring. Many ERP solution providers are increasing the capabilities of their software further while on the other hand the WMS are becoming more sophisticated and are adding supply chain visibility and other management features in their packages.
Choosing between the two becomes quite difficult especially since various stakeholders in any eCommerce organization will have their own viewpoints and preferences when given a choice between the two. Thus, the chief finance officer may opt for an existing ERP while given a choice on preferring a top of the line WMS or an existing smoothly functioning ERP system. On the other hand, a chief operations officer may choose a new WMS since they are looking for adaptable, multi-functional and a solution that averts risk. However, if the chief IT officers are taken into consideration, they would be just concerned with the capabilities of their IT staff and with their current workload and existing hardware investments.
However, the key lies in understanding the fact that such of decisions are not taken in isolation just thinking of a particular department but are taken much more keeping the view the direction your eCommerce business needs to take. Balancing the goal of each department, clarity and defining the long term goals of your eCommerce business in detail and matching these goals with the financial implications and the implementation costs is the main aim that needs to be fulfilled by any system that is chosen. Also, following parameters should be considered while making the final decision.
ERP systems are based on transaction based logic, best examples being in the financial and order management systems. Thus, ERP systems are best suited for linear environments with chronological operations and limited exceptions where every process is documented and presumed in advance. However, if your business is suspect to constant priority changes, your best bet is a WMS that is focused on real time operations.
The ERP for warehouse may not be able to cope up in intricate operations where they as a norm will force important compromises in the operations. In addition, some ERP systems are not adept in product tracking. Hence, if your operations are complex, you may need the functionality of a top of the line WMS.
Will your existing ERP system be able to handle the expansion in your business and handle a more complex environment? This is especially true for organizations with a heavy supply chain components that face a major dilemma of choice. The decision has to in between using the WMS module that comes with their ERP software or purchase a more top of the line WMS solution? This should figure out in your return on investment (ROI) analysis which will state to you how much do you lose or make by not investing or investing in a top of the line WMS solution. The key is to remember that there is no perfect solution to such a kind of choice and the perfect answer will depend on the type of your business operations, your goals for the future and most definitely the state of your finances. Last but not the least, you have to take care of factors such as ease of integration into the existing systems, the impact on customer relationships and what is the likely scenario if the WMS doesn’t work as per the desired expectations.
Both the ERP and the WMS systems are integral parts of supply chain management designed to help eCommerce companies to manage their inventory in the best possible manner. However, any of the above two, namely ERP or WMS should be selected based on the type of processes that your eCommerce company has, the type of budget you are operating upon and your scale of operations.