Inventory management and warehouse management are similar functions, and sometimes are used synonymously in practice. However, they are distinct concepts, and it’s important for a business to know the difference. This is especially so if they are considering buying specific software packages, that are becoming more commonly used and vital to business success in the current decade.
Similarities between warehouse management and inventory management
Before going into the differences between inventory management and warehouse management, it’s first useful to point out their similarities. Both involve monitoring product levels – tracking parts and products with barcodes, cycle counting, picking, packing, and shipping items, and receiving orders into existing inventory.
One commonly noted difference between them is that warehouse management is more complex. This is true to the extent that it’s a more focused and detailed system for the operations in a business’s warehouses. Management systems will typically divide warehouses into many compartments and bins, allowing specific items to be located in a specific area of the warehouse when needed – as such it’s a key function of your inventory control. By contrast, inventory management is more product-detail oriented, and not simply focused on what is in the warehouse. So for example, where a warehouse management system can give the precise location of an item within a warehouse, an inventory management system will typically tell the user which warehouse an item is located in.
Warehouse management is not just about locating items, however, it also precisely controls what happens in the warehouse. For example what actions warehouse staff take and when, how items are stored and treated, and what processes are to be used for different items in the warehouse. Some systems integrate warehouse management software with equipment such as forklifts, packaging machines, and conveyor systems, making the warehouse even more streamlined and efficient.
Inventory management is less equipment-specific than warehouse management, but depending on the inventory management system used by a business it can be equally complex and connected to the business’s operations – assisting in multiple facets of operations. It can track key performance drivers like sales, average mark-up, and profit margins, which decision-makers can then analyse. It can assist with the purchase of new inventory, allowing the user to plan how much to buy, from whom, and in what currency. It can track inventory as it’s moved between locations. It can also provide integration across segments of the business, for example when the retailer needs an item, it can directly let the manufacturer know that more stock is required. Inventory management can be deeply complex if the system used by the business allows these functions to be performed.
The difference summed up
While inventory management and warehouse management have overlapping functions, they are two distinct parts of business management. The essential difference is that one is focused (often in detail) on everything that goes on in the warehouse, whereas inventory management provides broader oversight of business functions concerned with inventory. Neither function is necessarily more integral to operations than the other; ultimately this will depend on the exact system used by a business.
Article by Melanie Chan in collaboration with our team of Unleashed Software inventory and business specialists. Melanie has been writing about inventory management for the past three years. When not writing about inventory management, you can find her eating her way through Auckland.