In the logistics industry the phrases warehouse management and inventory management are sometimes confused and often misused interchangeably. They can both signify the management systems that a business uses to distribute their products.
Although there are a few similarities between the two, there are also many differences.
In order to track and manage your products, and all the operational tasks that go into managing your products, it is important to understand the different systems available to keep efficiencies high.
Inventory management refers to tracking the goods a company has in stock. It includes such activities as supply chain management, demand forecasting ordering, restocking, storing, and inventory forecasting.
Strategically managing inventory gets more challenging in accordance with growth of units sold. Inventory can grow if new types of products are introduced. The right inventory system can help manage whatever amount of units need to be processed in order to sell and deliver; and it is a crucial part of supply chain management. Many small businesses think that outsourcing order fulfillment and product storage to a third-party logistics (3PL) provider means completely turning over the inventory management process. The reality is, a 3PL can provide valuable tools and data that will allow a seller to successfully manage their inventory, in the most efficient as well as cost effective manner possible. Often the business owner is still in complete control of the inventory numbers.
The extent of inventory management required depends on factors that can vary depending on your industry, but the main concepts remain the same. If you operate a small ecommerce business, inventory management is most effective when you understand all of the tools your system possesses. You should work to make sure you are using best practices which will help reduce investment in unsold inventory, facility rental, reverse logistics as well as shipping costs.
Warehouse management systems (WMS) help control the flow of products and labor within a warehouse or fulfillment center. While basic WMS might coordinate the picking, packing, and shipping operations, there is a large range of tasks it might include. A more robust system might handle inventory receiving, inventory management, demand planning, labor management, supply chain management, and other warehouse operations. A WMS will improve workflow efficiency, reduce errors, save on costs associated with errors, and get faster turn-around time for order fulfillment. Running a WMS can be time consuming and expensive for an ecommerce business; it requires large upfront costs for hardware, extensive training, and additional monthly costs for upkeep. Older warehouse management systems provided simpler functions such as the location where a product is stored. Modern WMS, on the other hand, can be so complex that they require a team to run them and ensure that you are getting the most out of all the functions that they offer.
If you partner with an experienced 3PL to handle your shipping and logistics, chances are they have a WMS and will operate it to optimize how your products are moved through their warehouse. If you are seeking out your own WMS or looking for a third-party logistics (3PL) partner, it’s good to know what type of warehouse management system will work for you.
Similarities Between WMS and Inventory Management Systems
Both WMS and inventory management systems use devices that scan barcodes to facilitate tracking products within the warehouse, monitor stock levels, pick, pack, and ship items. They also allow you to manage various locations, receive orders, and perform cycle counts. Companies that successfully integrate inventory management systems with warehouse management software can benefit from the knowledge that their entire warehouse is being managed properly and you have visibility into all areas of their supply chain operations.
The Differences—How Complex Can You Get?
The biggest difference between inventory management systems and WMS is their level of complexity. Inventory management systems have a simpler and broader approach and usually only tell you the total amount of inventory, or specific SKUs in one specific location. On the other end of the spectrum, a WMS will provide more robust information by dividing a warehouse into multiple zones to allow tracking very specific product movement throughout the entire warehouse, instead of one particular location. Warehouse management systems also allow you to find specific SKUs in the warehouse, while inventory management solutions will only indicate that they are in stock in the warehouse. Inventory management is usually the first step in all of the distribution processes that take place within your warehouse. Warehouse management is more connected to the other aspects of the entire management system. WMS deals with production supply, labor management sales and distribution, and quality management. It is an essential aspect to ongoing operations of your business.
WMS gives companies much more control over their operations as it provides them with more information required to complete other duties. A warehouse management system also offers businesses the opportunity to analyze and make necessary adjustments to inventory and storage as needed while inventory management systems do not provide this feature.
It is important to make the right choices when considering a warehouse management or inventory management system that can scale and grow with your business. Taking the time to change and improve your warehouse and inventory management processes will make the ongoing operations of running your business easier for you and your employees in the long run and will lead to greater efficiency and profitability for your business. You could also work with a 3PL to manage your inventory and warehouse needs so you don’t have to go through the process of figuring out the best one for your needs and getting it set up and running.
At DCL Logistics we can help with all of your inventory and warehouse management needs. If you’re looking for support, we would love to hear from you. You can read DCL’s list of services to learn more, or check out the many companies we work with to ensure great logistics support. Send us a note to connect about how we can help your company grow.