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ERP vs. WMS: which is the best fit for your business?

Written by Doron Neuhaus
Created: 17 April 2018

ERP bs a warehouse management systemChoosing software for your warehouse may not seem like a huge decision, but it directly impacts the financial and operational health of your business. If you want to know whether a best of breed WMS or an existing module of your ERP is right for your business, this article will help you understand which system better suits your needs.

The system you choose to help manage your warehouse will have a huge impact on your operational efficiency! The right system should help you simplify your operation, reduce expenses, increase productivity, improve staff morale and customer service, and assist you in achieving your overall business goals.

There are two main types of software you can use in your warehouse - Enterprise Resource Planning (ERP) software and a Warehouse Management System (WMS). This article will help you understand the key differences between the two in order to choose the right option for your warehouse.

Which is better for your business ERP or WMS?

The short answer is this: whichever system is fit for purpose.

Just like choosing a car that’s fit for purpose, you need to first understand what your requirements are and how you intend to use the software to support your business goals. Only once you fully understand your needs, will you be able weigh up the merits of each system.

 

If you haven’t aligned your supply chain goals with your business goals, and clearly defined what needs to be done to achieve your goals, read our article, Why benchmarking your warehouse matters. This will help you do the groundwork needed before you choose software for your warehouse management.


Need help benchmarking your warehouse operations? Our supply chain experts will assess your needs and make recommendations to help you achieve industry best practices.

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Now onto the good stuff. . .

The key difference between ERP software and a WMS

The main difference between the two is that a WMS has a very niche purpose. ERP systems on the other hand have a much broader range of applications throughout your business and often are strong in some business functions but don't always offer deep functionality across all business functions - and that's ok - sometimes!

Put simply, if your ERP is a Mercedes Benz Roadster, your WMS is a 4x4.

How does an ERP compare to a WMS

The Mercedes Benz may be very comfortable to drive in the city, come with all the bells and whistles and make you feel like a million dollars, but take it off-road and its just wont perform. The 4x4 was built with a specific purpose in mind: off-road adventures. In the city, your 4x4 may not perform as well as the Mercedes, but you can’t beat a 4x4 in its natural habitat.

A WMS is specifically designed to optimize your warehouse operations. ERP software, on the other hand, is designed to automate processes across your entire business - from marketing and sales, to human resources, client service, procurement, inventory and financial management. Does this mean an ERP will give you more bang for your buck? Not exactly.

Both systems offer great potential value to your business. The only way to determine which system will deliver the best return on investment (ROI), is to understand which system best aligns with your overall business goals.

How to tell which system best suits your business needs

When trying to choose between ERP software and a WMS, there are three main considerations:

  1. What are your long-term business goals?
  2. What existing processes and systems do you have in place which will need to integrated with your ERP or WMS?
  3. What ROI will your ERP or WMS deliver?

The pros and cons of ERP software vs. WMS

Let’s compare the capabilities and applications of ERP software and WMS, in order to help you understand which one is better suited to your needs.

ERP

WMS

PROS

An ERP helps you to streamline your entire business.

Fit for a specific purpose. A WMS’ sole purpose is to increase productivity and profitability in your warehouse.

ERPs are an all-in-one solution for your entire business (which is great for small businesses who lack the budget and complexity to invest in various specialised systems for each department).

A WMS is an end-to end warehouse management solution, automating the entire process from receiving stock to fulfilling your customer orders.

ERPs are easily scalable. The software is modular by design allowing you to upscale and include more products as your business grows.

Speed to Implement and ROI.

A WMS will typically take 6-8 months to implement and should deliver an ROI in approximately 2 years.

ERPs offer a centralised solution, so anyone in your business can access your business information depending on the modules deployed.

Advanced features are often specific to  a WMS (such as waving and cycle counting, automation, labour allocation and optimisation, carrier management, and so on).

 

A WMS can be integrated into your ERP to provide the required functional and operational depth often lacking in the ERP

CONS

ERPs can get expensive. As your company grows, and you start adding on additional modules to your ERP, it drives your costs up. In addition ERP implementations can last several years

A WMS is a standalone solution, isolating your warehouse from other departments in your company. Whilst this initially may seem like a potential issue, pretty much all WMS' integrate into an ERP using APIs which provides the necessary visibility

Static (lacks flexibility). It’s difficult to change your business’ goals and priorities once you have an ERP in place (this is because the entire business works with a single system that doesnt necessarily have deep functional depth in all modules).  

It can be difficult to integrate entry level WMS solutions with existing systems in your business (which can lead to data loss). However, this isnt a problem with best-of-breed WMS solutions.

The WMS module of an ERP is far less sophisticated than a best-of-breed, standalone WMS, so you won’t enjoy the same level of insight into the operational health of your warehouse.

The initial implementation of a WMS will require significant change management.


As you can see, both systems were designed with completely different purposes in mind. If you’ve conducted a needs analysis, and think a WMS is the best fit for your business, then you can begin looking at the different WMS options available to you.


 

Read our article, How to know if your warehouse management software is a good fit for your business, to help you find a system that aligns with your business goals and delivers maximum ROI.

 


 

Find out how an order management layer can prevent your “good old” ERP from sinking your omni-channel aspirations. Download our guide to order management and ERP in tandem.

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