What is the Difference Between Warehouse and Inventory Management
What’s the clear-cut difference?
For some businesses, “Inventory Management” and “Warehouse Management” are interchangeable terms and mean the same thing. For others, inventory management just doesn’t cut the mustard when it comes to optimising a warehouse’s resources.
Inventory management primarily focuses on optimising the availability of inventory or stock within the supply chain, whether for internal or for external consumption. ERP systems are typically deployed to manage this process to make sure the right product is in the right place, at the right time in the right quantity.
Warehouse management primarily focuses on optimising the resources to support the inventory plan physically. The deployment of ERP systems is not typically to streamline these processes, although some systems do have capabilities in this area.
The purpose of the systems
When planning systems like MRP and MRPII were making inroads into manufacturing organisations, Warehouse Management Systems (WMS) were making inroads into the extended supply chain. WMS systems bridged the gap between the inventory plan and the physical fulfilment process, especially in “distribution” type companies who perhaps had little if any manufacturing.
As MRP and MRPII systems morphed into ERP systems, and WMS systems evolved to accommodate changing fulfilment requirements within the warehouse between planning cycles (i.e. “MRP” runs). They each introduced new capabilities which overlapped into each other’s domain. An example would be the replenishment of stock from bulk locations and bulk packaging to individual packs in pick face locations.
Modern ERP systems can now carry out net change MRP runs within a day, these tend to be the exception rather than the rule. Although initial order batching and pick consolidation routines can incorporate within an order fulfilment cycle, warehousing operations typically need additional capabilities in areas where even the best of ERP systems struggle to provide those capabilities. An example would be task-oriented directed RF and interleaving of pick and put-away actions.
What can each system do?
Most systems will manage and segregate the inbound and outbound processes. However, from a warehouse operational perspective, and depending on warehouse layout, personnel and machinery capabilities, it can often be more efficient in other means. For example, an operator is to be assigned to put-away a product in location A, and then be directed to pick another product in adjacent location B. Why send two people to the same part of the warehouse when one will do? This is the purview of the WMS.
WMS are product sector agnostic, and even company agnostic where 3PL companies are concerned. ERP systems can be multi-company, multi-plant, multi-site, multi-warehouse and multi-location, but in all instances, any product within a “company” is owned by that company – with perhaps the exception of consignment stock. However, that in itself can provide a challenge for inventory management within a warehouse in the MRP system as it needs to be identified differently from a cost perspective, invoicing may be handled differently and is usually ring-fenced from an inventory planning perspective. Also, from a warehouse management perspective, the stock is taking up a physical location which cannot be used by other inventory in the “other warehouses”.
This point is exemplified further in the case where a company may have a centralised warehouse operation for more than one of its family of companies. For planning, each company’s stock needs to be in each companies planning system, and yet from a warehouse perspective, it is unworkable to have each company nominally “managing” the same physical warehouse/location. Hence the role of a WMS system (as a middleware if you will) which doesn’t care what product belongs to whom.
Bridging the gap
In these circumstances, the ERP will typically be set up to manage and plan at a warehouse level only, and the “locations” detail product movements and often detail pick handling to despatch, led by a WMS. The instructions from the ERP to the WMS will be either the order quantity on a sales order or the amount allocated and, much can depend on the needs of the company concerning allocation rules like expiry date, lot or serial numbers. Policies then need to be agreed for backorder fulfilment should the WMS manage the allocation of available stock to an order. Either way, what is needed is a robust, seamless and appropriate interface between the ERP system(s) and the WMS system.
WMS is designed to optimise the management of space (and the use of warehouse resources), not product, which is the domain of inventory management systems. The challenge is understanding and deciding what your needs are and whether these would influence the deployment of an ERP with some WMS capabilities in your business or the implementation of a WMS system alongside your existing ERP system or a new ERP system.
We can help you in deciding what is best for your business. We are an independent company with over 20 years of experience in helping businesses select and implement the best software for their current and future needs.
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