Do you need warehouse management or inventory management? Knowing the difference will save you a major headache and a lot of money.

Customers often ask our advisors to explain the difference between the two. It’s not surprising since both solutions share similar features and are closely related. However, there is a marked difference between inventory management and warehouse management systems. This article outlines those differences, noting the purpose and features typically found in both.

But first, let’s test your knowledge. Which system…

• Is most complex?
• Divides warehouses into multiple zones and bins?
• Manages the entire storage system?
• Is integral to the ongoing operations of other departments?

If you answered ‘warehouse management system’ to the questions above, you’re correct.

Warehouse management systems provide complete control.

Warehouse management systems monitor, control, and optimize internal warehouse operations, delivering a comprehensive view of the overall logistics such as production supply, sales and distribution, and quality management. Typically, WMSs are complex solutions that divide warehouses into multiple zones, locations, and bins, which allow you to effortlessly manage the entire storage system by easily locating specific items. According to Supply Chain Management, organizations can expect their WMSs to last between 8 and 10 years.

Because WMSs are integrated with other internal systems—such as materials requirement planning (MRP) and enterprise resource planning (ERP)—they are critical to lean organizations. Using warehouse management systems, leaders can assess their organizations’ operational health at any time, from any location, allowing them to facilitate changes that streamline processing for superior performance and productivity.

Inventory management systems manage quantities and availability.

Inventory management systems, which are also referred to as inventory control systems, primarily track stock quantities and their availability. Less complex and more broad than WMSs, inventory management systems also inform you of an item’s location within a warehouse. They also enable you to:

• Stop overstocks that lead to costly write-offs
• Ensure accurate inventory levels, which prevents stock-outs and increases sales and customer satisfaction
• Eliminate unnecessary replacement expenses and time spent searching for lost or missing inventory

Inventory management plays an important role in warehouse management. Actually, it is often the first step to implementing a warehouse management system. After all, inventory is expensive to acquire—and to keep—as organizational leaders know.

According to R. Michael Donovan, a recent survey by his company revealed that 82 percent of senior executives see inventory reduction as a “major concern” and that they believe “high inventories are an indication of other serious problems.”

And, they’re right. Money tied up in excessive inventory diminishes working capital, which limits improvements in other areas, such as product development, debt reduction, and upgrades of outdated equipment. That’s why gaining control with the right inventory system and monitoring key inventory metrics are critical to companies’ success.

Which system is right for you?

Warehouse management and inventory management systems can share similar features, but deliver different results. Nevertheless, warehouse management systems aren’t for everyone. Some companies—especially small- or medium-sized ones—may not have the budget or time to fully implement a WMS. And those that do aren’t always successful.

Rene Jones, founder of Total Logistics Solutions, says that “more than 30 percent of all WMS implementations fail.” He attributes this to installation times of 9 – 12 months, a cost of anywhere from $100,000 to $500,000 or more, and an ROI of 4 years or more.

“Some companies simply don’t understand which solution is best for them,” explains Lynn Lee, Wasp Barcode Technologies CEO. “They hear ‘warehouse management’ and immediately think that’s what they need. While WMSs certainly play an integral role in many successful operations, they aren’t the best option for some organizations. In some cases, a company’s WMS does a poor job of managing inventory and its related operational tasks.”

Lee says that understanding inventory management and warehouse management is the first step to selecting the right solution. “Inventory management systems, like InventoryCloud, accurately track inventory, which is a key component of warehouse management. Without it, WMSs would not perform optimally.”

“However,” he continues, “growing companies may not be ready for a full-blown WMS, yet they need to properly manage their inventory. That’s when inventory management systems are a perfect fit. They deliver all the benefits of inventory management without the added expense.”