Warehouse and inventory management are commonly thought to be synonymous terms for the same important business function. Whilst the two systems do share many similarities, knowing the differences between the two materials management systems can have a big impact on the overall performance of a business. Both inventory management systems and warehouse management systems are geared toward providing integrated and effective solutions for how a business controls raw materials, production materials and finished goods across the supply chain. The greatest area of distinction however lies in the scope and intricacy of control each system provides.
Typically, inventory management systems track, trace and account for the flow of inventory along the entire supply chain – from purchasing through to point of sale. Warehouse management systems, on the other hand, are primarily geared toward materials handling and control within the warehouse, and are therefore more narrow in focus but more complex and detailed in the functions they perform.
To gain a more detailed understanding of how these two systems differ let’s take a look at the main functions and key features of each management system:
Inventory management systems – functions and features
In a broad sense, inventory management systems are focused on tracking, tracing and accounting for the quantity and value of materials as they progress along the supply chain. Inventory is controlled and managed from a location-specific rather than a systems centered approach. This means that inventory management is primarily responsible for telling a process manager in which storage location stock is stored, but not necessarily where or in which storage bin within the location it is stored. (In Unleashed all stock locations are referred to as a ‘warehouse’).
Inventory management relies on managing stock within a warehouse by adopting a broader, sections-based approach to detailing where inventory is stored within a particular location. This gives the inventory manager a basic idea on in which location (warehouse) inventory is kept, as well within which logical area within the warehouse itself the inventory is stored – raw materials, production or finished goods.
Inventory management systems are highly effective at managing the purchasing, transportation, storage and sale of the essential kinds of stock that comprise a business’ overall inventory – this includes safety stock, sales order stock and consignment stock.
Typically, inventory management systems are user friendly. They need to be because they are generally relied upon across many different branches of the supply chain by staff of varying degrees of technical competency.
Warehouse management systems – Functions and features
Warehouse management is concerned with setting up and managing stock handling systems that provide customizable support with regards to the movement, picking, packing and storing of stock within the warehouse.
Warehouse management solutions provide crucial support for handling the core system functions of any warehouse. These include fixed bin replenishment, storage and picking protocols, the management of storage units, the management of hazardous materials (HAZMAT), inbound and outbound materials processing as well as physical inventory or stocktaking.
Point-to-point inventory control within the warehouse
These systems are dedicated to managing raw materials, production materials and finished goods so that they can be located at their exact location within the warehouse – at bin level.
The movement of goods through the warehouse is also tracked in far more detail than with an inventory management system. Warehouse management systems are able to track the movement of each stock item from point to point within the warehouse. In other words, each specific inventory item can be tracked from dock to bin, from bin to supply area and so on.
Warehouse space management and optimization
A key differential between inventory management systems and warehouse management systems is also found in the assistance warehouse management systems provide in managing and optimizing space within the warehouse itself. This is accomplished primarily through capacity and volume assist capabilities, and is essential for efficient warehouse layout and management.
Which management system is best suited for your business?
Many small to medium sized businesses, for example a small brewery, do not necessarily need to invest in both an inventory as well as a warehouse management system. Of course, for large and complex warehouse operations it is advised to put a capable warehouse management system in place, but for businesses unsure of whether that is required it may be worth considering what each system is best suited for:
Inventory management solutions (IMS)
Inventory management systems are sufficient in situations where a business runs a small facility with a clean, simple layout that handles relatively low levels of total inventory. Materials handling operations – movement, picking, packing and storage – are simple and there is no requirement for constant use of heavy and dangerous warehouse machinery such as forklift trucks or mechanized stackers.
Warehouse management solutions (WMS)
Conversely, if your business operates a more complex sorting, picking and packing environment or deals with hazardous materials, it is advised to invest in a warehouse management system. This is because these types of facilities require multiple types of storage – rack, bulk, fixed bin and so on – and therefore demand detailed layout and dedicated picking and packing paths. Also, if there is a need for more intensive labor management within the warehouse, it is advised to utilize a WMS.
Before deciding upon which inventory management solution is best for your business it is recommended that you learn as much as you can about the specific stock management requirements of your business and map out the processes required before selecting the ideal solution for your particular needs.
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.