This post was updated in August 2023.
Inventory is the bread and butter of manufacturing and distribution businesses. Proper inventory management is crucial because it affects everything from warehouse operations and on-shelf availability to loss prevention, financial audits, and customer satisfaction. And as you add more product SKUs and warehouse locations, inventory management can get tricky.
Many people think inventory management and warehouse management are the same. And they’re kind of right. Both are about getting your customers the perfect order: the right product in the right quantity in the right condition at the right address.Both also entail the storing, shipping, and reordering of stock. Software and sometimes barcoding are required for inventory management and warehouse management, and either can provide a snapshot of stock for one warehouse or the entire business.
But there are critical differences between inventory management and warehouse management, and it’s essential to understand them so you can optimize your technology stack to make your operations productive and profitable—especially with disruptions to the supply chain and the rapid acceleration of eCommerce.
What Is Inventory Management?
Think of inventory management as the “10,000-foot view” of the items in your warehouse locations. Inventory management includes forecasting, overseeing purchases from suppliers, maintaining stock storage, controlling the amount of stock to sell, and order fulfillment. This can include raw materials, parts, and finished products.
What is Warehouse Management?
Warehouse management is the path individual items take as they move through a warehouse from receipt to shipment. It involves people, equipment, processes, and how they work in unison. If inventory management is the 10,000-foot view, warehouse management is the details. Quality management, picking and packing, and stock placement come into play here.
What Is an Inventory Management Solution?
Inventory management software shows you the amount of stock at a specific location, but not precisely where it is within that location. Enterprise resource planning (ERP) solutions like SAP Business One have built-in inventory management capabilities and can serve as the hub to a complete warehouse management system.
Many small to midsized manufacturing and distribution businesses use entry-level software like QuickBooks and supplemental spreadsheets to manage inventory. This is an inefficient and error-prone process that forces repetitive data entry, wastes time, and can’t provide an accurate, real-time view of inventory.
What Is a Warehouse Management System?
A warehouse management system (WMS) shows you the exact locations of your inventory. The software divides your warehouse into precise compartments and bins to reduce picking time and distance, improve the restocking process, and give you greater control over your operations.
Additional benefits of a WMS include:
- Bar codes to improve accuracy and speed activities
- Advanced picking schemes for higher worker productivity
- Integrated shipping for faster order cycle times
- Radio-frequency identification (RFID) technology for compliance with customer-specific labeling and shipping requirements
- Container tracking for updated location knowledge and customs status
- Direct-to-consumer (D2C) features to get manufacturers closer to customers
Why Integrate ERP and WMS?
ERP and WMS are different but complementary solutions. A WMS adds more sophisticated functionality to an ERP solution, so businesses can continuously monitor inventory as it moves into, through, and out of the warehouse and use real-time data to optimize product location and shelf duration.
Other departments, such as purchasing and customer service, need to access warehouse data for decision-making. Integrating your ERP solution and WMS is critical so the technology can “talk” to each other. With full integration, you have a powerful, unified system that covers all bases for visibility and control to enable fast, confident decisions.
Learn More
Download our Warehouse Management 4.0 Guide to learn more about inventory management and warehouse management and how the right technology will keep you competitive.
