Inventory Management Vs Warehouse Management

In today’s fast-paced globally connected markets material and cargo move across locations and boundaries all the time. Global markets also mean that companies have to a tight ship in terms of operations to be competitive and profitable. Supply chain management deals in the processes, systems, and protocols that enable companies with automation with logistics.

In this landscape of enterprise software resources, two terms are thrown around a lot ie, inventory management (IM) and warehouse management (WM).

IM and WM are similar concepts in the space of materials management but have vastly different applications. This post discusses the different aspects of IM and WM that set them apart. This post will help you ascertain which of these systems are more suited for your organization.

Inventory Management

Inventory management encompasses elements of demand forecasting, inventory control, and elements of reverse logistics (reuse of products and materials).IMs traditionally don't concern themselves with the functional hardware,machinery as they deal more with data such as information about SKU availability at a particular location, the financial value of the inventory along with details metrics that give critical information to management about profitability, like batch wise margins, projected demands, supplier details, auto-reordering, etc. IM is more to do with the high-level, operational/financial overview. Think of an IM as a top-level view of materials that you hold. Also, it's important to note that IMs almost always deal with finished goods. Finished goods are sale ready goods that have crossed the process of manufacturing.

IMs job has more to do with the availability of the right amount of stock at the right place at the right time. IM software gives businesses the flexibility to use one of many delivery strategies like Lean manufacturing, ABC stocking Dropshipping and cross-docking. As much as I’d like to deliberate on these, these require their own posts and that is what we will do.

Warehouse Management

Warehouse Management (WM) as a system is all about the storage of stock. WM cover the storage of materials from all phases of the production cycle, this probably is one of the most glaring differences between an IM system and a WM system. WM deals with items such as:

• Ready Components: Items used for the manufacture of the final finished product.
• Raw materials: Unfinished components what will be processed to become the final product.
• Under process material: Stuff that is under various phases of production towards becoming the final finished products.
• Products: (Common with IMs) these are items that have gone through all phases of production and are now sales-ready.

From the above, it is clear that warehouses play an integral role in all aspects of the manufacturing cycle. Keeping the operational criticality in mind, WMs have to have complete and precise control on what is in the warehouse, what happens to it and the time frame within which it happens.

Where an IMs keep track of what item is in which location, the WMs goes into the details of not only what item is in which location but also where it is physically inside the warehouse precisely. Having all this information means that item retrievals are optimally timed. You can well imagine from here on how critical this is for lean processes. Owing to special temporal and spatial attribute to their performance, WMs keep track of the layout (mostly tightly packed aisles) and the equipment (like forklifts/crane) that operate inside a warehouse to facilitate accessibility to stored items.

So which of these two systems is the right fit for your organization?

Simply put, Inventory systems on their own are enough for small/medium enterprises, ie for businesses that do not have a huge SKU list and are limited to local delivery operations. Warehouse management system, on the other hand, are more complex in nature due to the features and capabilities that come with it and hence fit organizations with large SKUs and multi-located operations.

Selecting a software suite for your organization is a process that requires due diligence and proper planning. It is like a coordinated dance that has to be choreographed keeping in mind the various other departments involved, other systems deployed in the organization and the end goals that are being targeted.

Evomatiq Business Solutions LLC is a boutique software solutions advisory based out of Dubai, UAE. Evomatiq excels in helping businesses understand the emergent requirements and match them with long term and scalable solutions.