ERP vs WMS: What’s the difference and which do you need?

So, what is the difference between ERP and WMS? Let’s explain the purpose and capabilities of ERP and WMS systems in high-level terms.

What is ERP and WMS?

A warehouse management system (WMS) is software that helps fulfilment businesses manage the full spectrum of warehouse operations, from receiving and putting away stock, to picking, packing, shipping and returns.

A modern cloud-based WMS can help businesses automate manual processes and gain more control of inventory and operations. It also boasts features to enhance space and storage utilisation as well as manage multiple warehouses.

Meanwhile, an enterprise resource planning (ERP) system provides more holistic control and visibility over a range of core business processes. It typically includes features for managing finance and accounting, supply chains, HR, sales, marketing, projects and global entities.

An ERP is used organisation-wide, providing integrated applications, workflows and data to different teams or entities. Some ERPs can offer warehouse management capabilities, however they’re typically less advanced than those of a dedicated WMS.

Warehouse management system (WMS): What it does best and who it suits

A key difference between ERP and WMS systems is their focus. A warehouse management system is specifically designed to help businesses improve the efficiency, accuracy and cost-effectiveness of warehouse operations.

It provides real-time control and visibility of all fulfilment activities conducted within a warehouse. What it does best is help businesses save time, reduce manual work and continually enhance operations via automation.

For instance, a WMS can suggest optimal storage locations to better utilise space and make it easier for pickers to pick items. It can also suggest optimal picking routes and facilitate the use of different picking strategies. Meanwhile, real-time analytics allow businesses to track key warehouse KPIs.

A WMS is suited for businesses that operate fulfilment locations – whether a warehouse or distribution centre. This includes those that engage in eCommerce, wholesale activities or 3PL warehouse management.

Enterprise resource planning (ERP): What it does best and who it suits

An ERP is ideally suited to medium and large-sized businesses that require visibility and control of core business applications in one platform.

The key reason why businesses need an ERP is that it provides organisation-wide access to applications for managing finance and accounting, payroll, HR management, logistics, inventory, customers and projects.

Data is consolidated and workflows are seamlessly connected across the business. This means different teams don’t need to switch between separate platforms, transfer data between them or deal with inconsistent, siloed data.

Let’s break down the key differences of ERP vs WMS systems in terms of their core capabilities.

WMS core features and scope

A WMS provides advanced features for the following warehouse needs:

Inventory: Conducts replenishment, receipt and putaway according to pre-defined rules, with the ability to automatically allocate stock via strategies like FIFO (first in first out). 

Fulfilment: Suggests optimal picking routes, generates pick lists, facilitates barcode scanning and use of picking strategies, and facilitates quality control.

Location management: Optimises space utilisation and warehouse layout, and automatically allocates stock to optimal storage locations.

Reporting: Real-time dashboards allow you to track warehouse KPIs, orders, inventory and shipments.

For a more detailed breakdown, you can read our article that explains the 10 core capabilities of a warehouse management system.

ERP core features and scope

There’s a small amount of overlap between WMS and ERP systems, but the latter offers a far broader range of capabilities. These include:

Accounting: General ledger, tax and cash flow management

Finance: A real-time view of financial performance and features for managing billing, budgeting, consolidations and financial close  

Fulfilment: Visibility of stock levels and features to manage storage, replenishment, and customer orders

Global business: Management of global operations in multiple currencies and according to regional tax requirements

HR: Payroll, time tracking, rosters and staff leave processing

Risk management: Transaction controls, business continuity planning and audit management

Sales and marketing: Management of leads, sales and customer interactions.

Cost, setup and implementation effort

This is a key difference between ERP vs WMS systems. A WMS implementation is far easier and quicker. For instance, our solution Access Mintsoft can be implemented in as little as three to six weeks.

Meanwhile, an ERP costs significantly more and requires a longer and more complex implementation. This is because it offers capabilities for a wide range of business functions and supports more users across different teams.

An ERP typically requires configurations for different business units, multiple integrations with existing software, complex data migrations and extensive training across teams or entities.

Scalability and growth readiness

Cloud-based WMS and ERP systems are built with scalability in mind, with the ability to add more users, locations and data as your business grows.

An ERP provides the financial and operational backbone of a business. Because it offers a wide range of capabilities (like for finance, sales, HR etc.), the system is designed to grow with a business to add new entities, departments, products or regional offices.

A WMS scales differently; it grows with your business as order volumes and warehouse complexity increase. For instance, it allows you to leverage new picking strategies, optimise warehouse space or manage additional warehouses.

Data visibility and control

A WMS gives you real-time visibility of warehouse execution, from the moment goods arrive to when they’re dispatched to the customer. It allows you to control and automate stock levels, storage locations, picking accuracy and stock movements. A WMS also provides real-time visibility of KPIs.

A key difference between ERP and WMS systems is that the former provides a much broader, strategic view of business-wide functions. It’s designed to be the ‘single source of truth,’ pulling data from different departments and unifying it in one platform. 

Let’s look at the key difference between ERP and WMS systems to see what they do best and their respective drawbacks.

WMS: Strengths and limitations

The key strength of a WMS is that it focuses purely on warehouse operations and therefore offers more advanced capabilities to enhance efficiency.

For instance, Access Mintsoft automates pallet and carton handling, stock counting and cycling. It also allows you to implement picking strategies like single order, multi-tote batch picking and bulk batch picking.

Mintsoft offers native integrations with marketplace, shopping cart and courier platforms, which is something an ERP lacks and can save you from a lot of complexity.

Where a WMS falls short, however, is in its scope. Because it’s purely focused on warehouse operations, it requires integration with other platforms (e.g. an ERP or accounting software) to get a full picture of the business.

ERP: Strengths and limitations

An ERP is especially valuable to businesses as it provides all the tools they need for key financial and operational functions. It integrates multiple applications and data in one platform, providing a single source of truth for the entire business, not just individual teams.

But because an ERP is an all-in-one platform, its functionality (most notably its WMS features) is often limited. Another big downside is that the implementation process is far more complex and costly.

An ERP vs WMS combination can provide businesses with all the tools they need to manage their people, finances, sales and fulfilment.

How the two systems complement each other

The ERP can handle procurement of stock, financial transactions and customer orders. Meanwhile, the WMS handles the tactical execution to determine where to store stock, optimal picking strategies and how orders are shipped.

Here’s how data flows between ERP vs WMS systems:

• The customer order is received in the ERP, which then sends a fulfilment request to the WMS. This includes details of the type and quantity of items ordered.
• The WMS reserves the ordered items and updates stock levels to prevent overselling. It then sends the ERP real-time updates on inventory movements, completed shipments and confirmation of goods received.

WMS and ERP integration strategies

WMS and ERP integrations are achieved via two main methods:

Native ERP module: This is when an ERP has built-in warehouse management capabilities. The WMS module is fully integrated within the ERP, allowing for immediate data synchronisation.

API: A standalone WMS and ERP are connected via an application programming interface, which allows for data transfer. 

When a WMS is the better choice

It’s best to choose a WMS when your business has high order volumes or complex fulfilment needs. Or, if you’re relying on an ERP but facing warehouse performance issues like high picking errors, poor inventory accuracy or poor space utilisation.

The system can automatically monitor inventory levels and sales data as you add new items to your warehouse. It can facilitate quality checks for pickers so that when they scan order items, they’re instantly notified if they’ve packed the right items at the right quantity.

If your business’s order fulfilment is slow or shipping deadlines are consistently missed, a WMS allows you to utilise different picking methods to increase fulfilment speed.

When an ERP fits best

An ERP makes more sense if your chief need is to create centralised control of core business functions, and you don’t need more advanced WMS capabilities.

Because it provides a unified platform accessible organisation-wide, an ERP solves the problem of different teams using different, unintegrated software platforms.

When reviewing different options, make sure to check out Gartner’s cloud ERP for product-centric enterprises page that lists the top-rated solutions.

When to combine both for efficiency and scale

A business may start with an ERP to set up an operational foundation for core functions like finance, HR, procurement, order sales and basic inventory. As the business grows, order volumes and complexity will rapidly outgrow the ERP’s basic warehouse capabilities.

This is when a WMS and ERP integration makes sense. The ERP acts as the financial and operational backbone of the business, while the WMS controls and optimises execution of warehouse activities.

Stage 1 - ERP as the operational foundation

A business starts with an ERP to centralise core functions including accounting, sales order processing, purchasing and basic inventory tracking. This provides managerial and financial oversight.

Stage 2 -Streamline warehouse performance with WMS

As the business’s order volumes grow or warehouse operations become more complex, the ERP’s basic WMS capabilities become a bottleneck. The business then implements a dedicated WMS with advanced capabilities.

Stage 3 -Integrate both for unified insights

A WMS and ERP integration allows for seamless data flow between the two. The ERP receives customer orders and relays them to the WMS, which triggers actions in the warehouse.

Once an order is dispatched, the WMS sends an update to the ERP. This ensures financial and sales data in the ERP accurately reflect the inventory levels and fulfilment status managed by the WMS.

With this integration, the ERP provides a single source of truth for business-wide operations, including those in the warehouse. 

Let’s recap what you should consider when choosing between an ERP and WMS, or when it makes sense to integrate the two.

Assess business size, complexity and goals

Does your business have high order volumes, complex logistics chains and multiple warehouses? If so, it makes sense to integrate an ERP with a dedicated WMS that boasts advanced capabilities.

Meanwhile, businesses with simple inventory processes and orders may be best suited to an ERP with basic warehouse management capabilities.

Compare vendor support and ROI potential

When speaking to sales reps, make sure to ask what kind of implementation and ongoing technical support they offer.

Also, think about ERP vs WMS systems in terms of the return on investment they each offer.

For instance, the advanced capabilities of a WMS can help reduce picking errors, improve labour productivity and optimise storage. Over time, this can add up to huge cost savings.

Plan implementation and change management

Any software implementation requires significant planning and preparation. It requires creating an implementation team, providing team training and new processes to manage change, and preparing data for migration, to name just a few things.

For more guidance, you can read our WMS implementation guide with 11 critical steps.