ERP vs WMS: What’s the Difference and Which is Right for You?

Modern business operations require efficiency and precision. Given that, choosing the right software solution can make or break an enterprise. This is where ERP and WMS systems become truly useful. According to statistics, companies that use ERP systems enjoy reduced process time, greater collaboration, and a centralized data system. Meanwhile, the share of warehousing and logistics providers in the US using a WMS in 2021 was 83%. 

In other words, ERP and WMS systems are solutions that can make or break a business’ growth. But how do you choose between the two? What features does each system have that make them a must-have for your business?

What is Enterprise Resource Planning (ERP)

Enterprise resource planning (ERP) is a system that companies use to manage and integrate different parts of their business. It allows organizations to integrate all essential processes into a single unified system. 

An ERP system can integrate processes such as planning, inventory, sales, marketing, HR, finance, and more. Over the years, ERP systems have evolved and come in different forms. Nowadays, they tend to be web-based apps that organization members can access remotely. 

Main ERP Features

Companies use ERP systems to achieve operational efficiency and streamlined processes. Such a solution optimizes their operations and enables stakeholders to make informed decisions. Given that, the main features of any good ERP systems include: 

• Integration and scalability: an ERP system seamlessly integrates with existing software, such as CRM, supply chain management, and supplier management tools. It should also be scalable to accommodate a business’ growth and evolving needs.
• Real-time analytics and reporting: an ERP system provides real-time analytics and reporting features that allow users to make informed decisions based on up-to-date information. 
• Mobile optimization and user-friendly interface: cloud-based ERP systems have mobile-friendly capabilities and offer great accessibility. They also have user-friendly interfaces that allow users to quickly adapt to it. 
• Advanced security and data protection: robust security measures are a mainstay of any good ERP system. Must-have security-related features include access control, data encryption, and regulation compliance, such as GDPR and HIPAA compliance. 
• Automation and AI: automation and AI help businesses to achieve productivity and efficiency. An ERP system leverages these technologies to streamline processes, optimize resource management, and automate routine tasks. 

Pros and Cons of ERP Software

Implementing a piece of ERP software allows businesses to enjoy benefits such as improved efficiency, better data management, and streamlined processes. Customer service and regulatory compliance also become better. Companies also have great cost savings in the long run. 

That said, ERP software implementation also has downsides. For example, implementing a robust ERP system requires high initial costs. The implementation process itself may also prove complex. On top of that, you’ll be dependent on a specific vendor, which may prove challenging when you want to upgrade or switch providers. 

 

 

What is Warehouse Management Software (WMS)?

Warehouse management software (WMS) allows organizations to control warehouse operations from the time products enter the warehouse to the time they move out. A WMS ensures goods and raw materials move through the warehouse most efficiently and cost-effectively. On top of that, WMS systems offer visibility into your business’ inventory regardless of time or location. 

Main WMS Features

WMS systems have capabilities that cover many aspects of the supply chain. These features include:

• Inventory management: good WMS systems offer useful inventory management features such as purchase order creation, receiving and putaway, storage and tracking, and stock level control. 
• Order management: this is a must for sales-oriented businesses. Order management features include sales order processing, picking, packing, shipping, returns, and invoicing. 
• Labor management: as your company grows, tasks such as payroll, scheduling, and performance control — all of which can’t be done manually when your workforce is growing.  
• Financial management and reporting: good WMS systems let you customize financial metrics and create automatic balance sheet accounts. They also allow you to integrate with accounting platforms such as QuickBooks or Xero.
• Risk Management and Forecasting: companies need robust risk analysis and comprehensive planning to fully develop their operations. Demand planning functions, for example, help you prevent overstocking in warehouses. 

Pros and Cons of WMS Software

WMS systems offer great advantages to businesses including improved inventory accuracy, better customer service, and lower stock inventory costs. You’ll also require less time managing everything in the warehouse. On top of that, you can expect faster deliveries. 

However, some downsides also exist. For one, setting up WMS systems requires a good amount of investment and expense. Integrating the WMS system into our existing programs can prove complex. You’ll also likely still spend time ensuring data management is properly done — not everything will be automated. 

Essential Differences Between ERP and WMS

While ERP and WMS may share similar or, at times, the same functions, they also have major differences. The following are some of them. 

Key Differences in Functions and Features

Businesses primarily use ERP systems to manage business processes across departments, which include finance, HR, and inventory. Meanwhile, WMS systems focus on optimizing warehouse operations and inventory management. 

Some unique aspects of using ERP systems include e-commerce integrations, accounting, and purchase order management. On the other hand, WMS systems are more specialized and focus on unique modules such as barcode scanning, inventory location recommendations, and warehouse layout planning, among others. 

How do ERP and WMS Compare?

ERP and WMS systems are both useful to any business trying to achieve growth, operational efficiency, and scalability. They have overlapping features such as inventory management, order processing, and reporting. 

The main difference: ERP systems have a broader scope. You can use ERP systems to integrate and manage multiple business processes. Meanwhile, WMS is designed to focus on tasks such as inventory tracking, order fulfillment, and warehouse optimization. 

Is ERP or WMS Better for Your Business?

Now that you know each system’s features, pros and cons, and their key differences, let’s talk about how you can choose the right system for your business. 

Understanding Your Industry

Consider the nature of your industry, which is a critical factor in deciding whether your business needs an ERP system or a WMS. 

If your industry has diverse and interconnected operations — such as manufacturing or retail — consider using ERP systems. With a robust manufacturing ERP, you can integrate and streamline processes. This is ideal for managing complex workflows. 

To illustrate, consider a company that needs to synchronize production schedules, inventory management, and financials. A good ERP system can serve as a unified platform for seamless coordination. 

If you’re in an industry that requires efficient warehouse operations — such as logistics and distribution — WMS is the better choice. WMS is excellent at optimizing warehouse tasks, ensuring that each supply chain component runs smoothly. 

Your Business’ Size Matters 

Small to medium-sized enterprises (SMEs) may find a dedicated WMS that is perfect for their immediate needs. This is great because they don’t have to worry about the complexities associated with a full-scale ERP implementation. WMS systems are more straightforward to implement. 

But if you’re a larger enterprise with diverse departments and complex operations, ERP systems are the wiser choice. ERP solutions are more scalable, and you can integrate additional modules as your business expands. They also serve as a centralized platform that can grow alongside your organization. 

Organizational Needs 

Before picking one system, consider your organization’s specific needs. If your primary goals are: 

• Optimizing warehouse operations 
• Minimizing errors in order fulfillment 
• Enhancing inventory control 

…then a WMS solution is the better choice. A WMS system is specifically created to fine-tune warehouse picking processes, and it offers specialized features that will cater to your requirements. 

On the other hand, if your business needs a solution that covers more than just warehouse management, then go for an ERP system. Such a system encompasses things such as HR, financials, and customer relationship management (CRM). 

With an ERP system, you’ll have a unified platform that facilitates seamless communication between various departments. This way, you also foster collaboration and efficiency. 

 

 

 

Long-Term Goals 

Long-term goals are the driving force of any major business decision. The same is true when choosing between an ERP system and a WMS solution. 

If your goal is to expand into new markets or diversify into additional product lines, choose an ERP system. It’s much better equipped to handle increasing business complexity. It’s also scalable and flexible, making it an ideal choice for businesses with ambitious growth plans. 

On the flip side, if your business’s core competency is around warehouse operation optimization, then a robust WMS is a must. It can contribute significantly to your long-term success, and your business will stay agile and responsive to the changing demands of the dynamic market. 

Strengths and Weaknesses 

Both ERP and WMS have strengths and weaknesses. ERP systems provide a comprehensive solution for business processes, but implementing them can be resource-intensive both in terms of time and cost. Using complex ERP systems may also necessitate extensive user training. 

Meanwhile, WMS systems are more focused, but they lack the breadth of features that you may need for managing other aspects of your business. As a result, carefully assess whether or not the functionalities of your chosen WMS system align with your operational priorities. 

Making the Decision 

Overall, the choice between an ERP and a WMS system depends on your understanding of your industry, business size, needs, and long-term goals. Consider each system’s strengths and weaknesses, and measure them against your most important requirements. Consult with industry experts and seek recommendations. 

Conclusion

ERP and WMS systems are both useful for businesses aiming to achieve operational efficiency. They both offer fantastic functionalities such as inventory management, order processing, data analytics, and reporting. However, they differ in their scope. ERP covers more business processes while WMS specializes in robust warehouse management. 

If you’re looking for a partner that can provide you with a robust solution — whether that’s ERP or WMS — check out Kohezion, a highly customizable online database builder that delivers customized solutions for you and your business. Build your core business application now.