Inventory management and warehouse management are interrelated. They form part of the same supply chain and should cooperate to achieve the effective flow of goods from supplier to customer.
Still, your business may choose one system rather than the other based on the nature and scale of your operations. In this article, we discuss the difference between inventory and warehouse management, their benefits, and the factors to consider when choosing a warehouse management vs. an inventory management system.
Understanding inventory management
Inventories include raw materials, work in progress, finished goods, and maintenance repairs and operations (MRO) stocks. They are often the most valuable asset for businesses like retailers and manufacturers. Inventory forms a buffer between supply and demand, ensuring that items are available for sale when customers want them.
A shortage of inventory can have a negative impact on sales and profitability. Yet, excess inventories are also detrimental because they cost money to maintain. Businesses with excess inventories tie capital into inventory, sacrificing the opportunity to invest it in other assets or business ventures. Surplus inventories carry the risk of obsolescence, pilferage, and damage. They take up valuable space in stores and warehouses and impede agility – the ability to make quick product updates.
Businesses must have systems and procedures to manage inventory efficiently. They must know what to order or produce and when. For this, they need accurate, up-to-date product information and responsive demand forecasts.
Though many large organizations have invested in sophisticated Enterprise Resource Planning (ERP) systems, smaller organizations often track stock levels manually and place orders from spreadsheets, resulting in sub-optimal inventory levels.
Understanding warehouse management
Warehouse management has a much narrower focus than inventory management. It is all about internal warehouse processes, including storage, inventory retrieval, space, and labor use. Warehouse management focuses on efficient order fulfillment, warehouse monitoring, and reporting.
Warehouse managers must coordinate the efficient use of equipment, labor and warehouse space. They must manage and control the fulfillment processes of orders and ensure accurate, on-time deliveries.
Warehouse managers control six primary processes.
- Receiving: Accepting goods inwards, ensuring delivery at the right time and in the right quantities and conditions. Once checked, the goods must be receipted on the system for payment.
- Put away: Locating received goods in the best storage locations.
- Storage: Ensuring that stored goods are safe and easy to locate.
- Picking: Once an order is processed, a team must pick the stock, preparing it for packing and dispatch.
- Packing: Packers must pack goods securely to withstand transport damage.
- Shipping: Goods are dispatched for transport to the customer.
Warehouse Management Systems (WMS) software is designed to enhance warehouse processes. These systems ensure real-time stock and demand forecast visibility. A WMS tracks inventory levels, locations, and workflows in real-time. WMS reporting facilitates warehouse optimization by identifying improvement areas and automating tasks.
Inventory management vs. warehouse management
Together, IMS and WMS play an essential role in effective inventory control. Both aim to optimize stock levels and ensure on-time order fulfillment. IMS ensures stock availability, and WMS manages the picking, packing and shipping processes.
Inventory management vs. warehouse management – the similarities
Both systems support demand forecasting and inventory planning, as well as inventory and sales data. They use automation to streamline operations, reduce errors and enhance productivity.
Integration between the systems enables wide-ranging data analysis. The analysis supports the identification of trends, inefficiencies and improvement opportunities. Both systems are designed to identify risks and proactively ease potential problems. They support enhanced customer service through accurate stock records and efficient warehouse operations.
Inventory management vs. warehouse management – the differences
Despite the many similarities, IMS and WMS also have significant differences.
Different Perspectives
IMS takes a broader view of inventory. It encompasses the business and the supply chain. Modern supply chains are complex systems, often with many channels, warehouses, and suppliers.
WMS focuses only on the operational aspects of warehouse management and control. While IMS looks at inventory throughout the supply chain, WMS provides much more detailed real-time information on warehouse inventories.
Features
IMS includes demand forecasting, order management, supplier management, and inventory optimization.The IMS objective is to balance inventory levels with demand throughout the supply chain.
WMS focuses on optimizing warehouse operations. Labor management, slotting optimization, and dock scheduling are all features of an effective WMS. The idea is to maximize warehouse efficiency and throughput.
Integration
IMS often integrates with enterprise systems, such as Enterprise Resource Planning (ERP) systems and Customer Relationship Management (CRM) software. As a package, they afford managers a complete view of inventory across the business.
WMS integrates with other warehouse technologies, such as material handling equipment like automated guided vehicles and barcode scanners. The result is modern, automated warehouse operations.
Software solutions: IMS vs. WMS
IMS supports strategic decision-making, supplying data about inventory trends, supplier performance, and customer demand across the supply chain.
Businesses implementing Inventory Management Software have discovered its many benefits, which include:
- Automation: IMS automates many manual inventory management tasks, which streamlines operations and frees staff to work on other tasks.
- Real-time visibility: Automation enables real-time inventory tracking. The result is accurate, timely data that supports proactive decisions and better inventory control.
- Lower inventory costs: IMS provides a view of demand patterns and supplier performance. The system uses this data for optimized purchase order placement. Fewer stock-outs reduce expedited shipment costs. Accurate data and better forecasts eliminate excess stocks with the associated expenses.
WMS supports tactical and operational decision-making. It optimizes processes for efficient order fulfillment, lower labor costs, and better space utilization.
Warehouse Management Systems offer many benefits. These include:
- Streamlined goods receiving: WMS streamlines the goods receipt process. It can generate receiving tasks and support efficient unloading and incoming goods inspections.
- Optimized put away: WMS directs warehouse staff to optimal storage locations. SKU dimensions, storage capacity, picking frequency, and proximity to shipping areas inform location decisions.
- Enhanced order fulfillment: WMS optimizes order fulfillment processes to maximize efficiency and accuracy.
- Efficient picking: WMS uses advanced picking strategies, like batch and zone picking, to reduce travel time and maximize warehouse productivity.
- Accurate packing and shipment: WMS ensures accurate order packing and shipping. It verifies contents against orders and automatically generates shipping labels or documents.
- Efficient cycle counting: WMS improves inventory accuracy through regular cycle counting and reconciliation. It schedules cycle counts according to the ABC analysis and usage frequency, so high-value and high-demand items are counted more frequently.
- Intelligent slotting: WMS optimizes warehouse space utilization using intelligent slotting. It analyses SKU dimensions, weight, and velocity to choose the most efficient storage locations. The goal is to reduce travel time and warehouse congestion. It also supports dynamic slotting, adjusting locations for changing demand patterns or seasonality.
- Improved labor productivity: WMS assigns tasks to staff based on their skills, availability, and location. It tracks labor productivity metrics to identify improvement opportunities and optimize labor use.
Which solution should you focus on?
Whether an IMS or WMS is best for your business depends on your needs, operations, and objectives. These are the factors to consider:
Type of operation
If your business manages inventory across many locations, sales channels, and suppliers, you need an IMS. An IMS offers a broader view of inventory levels, trends, and demand patterns across the supply chain.
If, however, your primary focus is managing goods in a warehouse facility, optimizing operations, and fulfilling sales orders, a WMS may suit you better. Such systems provide tools and systems tailored to warehouse management tasks.
Scale and complexity
Consider the scale and complexity of your operations. A WMS will streamline operations in a large warehouse facility with complex needs and provide accurate real-time inventory tracking.
If your business operates across several locations or channels, an IMS may provide the visibility and control you need to manage inventory effectively across the supply chain.
Inventory management requirements
Evaluate your inventory management requirements. An IMS is needed for complex inventory systems. Only an IMS can manage your demand forecasting, order management, supplier management, and inventory optimization needs.
If you want to improve warehouse processes, a WMS will meet your requirements. It has specialized features and systems that streamline these operations to improve efficiency.
Integration with other systems
If you use other systems, such as accounting software, e-commerce platforms, or supply chain management systems, choose a solution that seamlessly integrates with them. Integrated systems facilitate data exchange and streamline workflows.
Both IMS and WMS solutions may offer integration capabilities, but the extent and ease of integration may vary according to the system.
Scalability and future growth
Choose a solution that can grow with your business. Consider system flexibility, customization, and support for extra users, transactions, and inventory volumes over time.
Choosing the best system for your business
Ask yourself…
Can you continue to run your inventory management system on spreadsheets?
Could your business achieve better returns with a more efficient warehouse management system?
IMS and WMS work together to provide real-time and accurate inventory data. An IMS ensures that you have the right amount of stock to fulfill sales orders without carrying any surplus. It can help you release capital to invest more productively.
Consider an IMS and WMS system for efficient warehouse management that pays dividends in operational efficiency, inventory accuracy, better control over assets, and enhanced customer service.
Contact Netstock to discuss how you can optimize your Inventory Management.
