Warehouse Management Software (WMS) vs. ERP Software

March 29, 2012

warehouse-management-softwareI spend a considerable portion of my day chatting with business managers from various walks of life, who run many types of businesses. One thing that I have learned from experience is that different people use business and software terminology differently. Two businesses that are virtually identical, for example, may consider themselves in completely separate industries (such as “manufacturers” who really operate as distributors). Today we’ll examine the difference between Warehouse Management Software (WMS) and Enterprise Resource Planning (ERP) Software.

Warehouse Management Software is defined as “a key part of the supply chain and primarily aims to control the movement and storage of materials within a warehouse and process the associated transactions, including shipping, receiving, putaway and picking. The systems also direct and optimize stock putaway based on real-time information about the status of bin utilization”[1]. WMS typically lacks accounting, contact management and other functionality associated with an ERP system – thus WMS typically integrates with an ERP system.

Warehouse Management Software (WMS)

Enterprise Resource Planning (ERP) Software

  •   Picking, packing, receiving, shipping
  •   Bar code scanning
  •   Inventory location   recommendations
  •   Warehouse layout planning
  •   Radio-frequency   identification for monitoring product flow
  •   Price: As high as $100,000 or   more

 

  •   Picking, packing, receiving, shipping
  •   Bar code scanning
  •   Inventory location tracking
  •   Accounting (AR, AP, GL)
  •   Order Entry & Invoicing
  •   Purchase Orders
  •   Contact management
  •   Inventory management
  •   Price: from tens of thousands

What begins to become confusing is that many ERP systems also contain various levels of inventory management and some warehouse management features. For example, an ERP system may be able to track inventory locations but a distinction may be in the ERP software’s ability to make warehouse layout recommendations. If your business requires inventory management along with accounting, order entry and contact management, chances are you are looking for ERP software. If, instead, you require warehouse layout planning or in-depth product tracking with RFIDs you require warehouse management software. Many ERP systems can accommodate WMS features such as bar code scanning and warehouse shipping.

One thing to be wary of is the added cost of WMS. Warehouse management software can be several times more expensive than ERP software and is usually only required for larger businesses with substantial warehouses. A proper ERP system should be able to accommodate most inventory requirements including basic warehouse management at a far more affordable price. The “Amazons” and “eBays” of the world most certainly require WMS, however, many small and medium businesses will find that a modern ERP system provides all the functionality they require.



Wholesale Inventory Software – What To Look For

March 23, 2012

This post outlines functionality wholesalers should expect from their Wholesale Inventory Software.

wholesale-inventory-softwareThe term “wholesale” is a broad industry definition; it includes wholesalers across a variety of industries including: food & beverage, consumer goods, industrial products, apparel, pharmaceuticals and many more. With so many sub-industries, what could these businesses possibly have in common? The answer is: surprisingly a lot – especially when it comes to wholesale inventory software.

Across the broad “umbrella” that is wholesale, we see a number of common requirements from an accounting and inventory management perspective. At the very least, a proper software search should ensure that the following functionality is available in a system being considered:

____

Inventory Management

Due to the wide range of products many wholesalers carry, robust and flexible inventory management is very important. The system should be able to classify or categorize items in various ways, specify multiple Units of Measure (UOM) and allow for kitting with a Bill of Materials (BOM). Lot (or batch) tracking is also important for many wholesalers, including food and pharmaceuticals, to allow for appropriate levels of inventory traceability and product recalls.

Businesses with multiple locations may require inter-warehouse transfers, while the ability to manage drop shipments has becoem increasingly important for many businesses. Landed cost tracking is important for those that purchase products internationally – allowing decision makers to get a better feel of true product costs including brokerage, duty and freight.

Bonus inventory software features include warehouse automation (including bar code scanning) and shipping integration, as well as online ordering systems (eCommerce). Other areas that may be important to your business include: product/size matrix, backorder fulfillment, catch weight, EDI integration, Point of Sales (POS) and scheduling/service management.

____

As you can see, there is an multitude of business processes that may need to be accommodated for a typical wholesaler. A proper system designed for wholesale should be able to accommodate most, if not all, of the features mentioned above, while also offering complete and robust accounting modules.


Finding a Respected Software Vendor [Testimonials]

March 19, 2012

TestimonialSelecting a new software system to run your business can be an involved process. There are many things to consider in a new system including: its functionality, support, price, business fit and others. While these areas are extremely important, the process is not complete without a thorough evaluation of their customer satisfaction (testimonials).

Customer testimonials are not usually hard to locate on a vendor’s website but there are a couple specific things to look for in evaluating the quality of their testimonials:

1.       Do the testimonials seem sincere?

Some customer testimonials are pre-written pieces of marketing with little value. Look instead for honest and detailed testimonials – video testimonials when possible. True customer testimonials will not be expertly polished and shouldn’t be pre-rehearsed.

2.       How many are there?

Quality over quantity almost always holds true, however, quality and quantity says a lot about the business in question. All but the worst businesses can produce some happy clients – look out for those with a large number of customers waving the vendor’s flag.

3.       How similar are they to you?

Software systems are available in a variety of flavours, so a system that works well for one person may not work well for you. Try to identify customers of theirs that are similar to you – whether it is in size, type of business etc.

Customer testimonials may make the process of narrowing down vendors for consideration much easier since many of your questions and concerns may be answered by their current customers. Some vendors may make the process easier for you by laying out what it is that makes them stand out – often found on a why us page.

On-page testimonials, whether they are video are otherwise, should never replace several phone calls to customer references, however, they can be a great start to narrowing down vendors.


Lot Tracking – who decides which lot to pick?

March 13, 2012

lot-tracking-allocate-lotsPharmaceutical, medical and food distributors, amongst others, need to implement proper lot tracking in order to be able to deal with regulatory issues, such as product recalls. For many, that’s the main driver behind implementing a lot tracking system. I also see many smaller distributors (particularly in the food business) resist this, because ERP Software systems that facilitate lot tracking are more expensive than the entry-level accounting software they may be using. So its fair to say that for many, implementing lot tracking is seen as a net cost, incurred just to provide compliance with rules and regulations.

There is however a measurable benefit to a properly implemented lot tracking system: you can reduce obsolete and expired inventory, by ensuring that older products are shipped out first. Food, medical and pharmaceutical products all have expiry dates, yet many distributors rely on the pickers in the warehouse to hopefully pick older product first for shipping. It does not work out that way in practice, and many companies end up losing more in expired products every year than the investment in a system that would eliminate this. Once you realize this, then it should be a no-brainer – just implement a lot tracking and allocation system and away you go – right?

Well, there are two main obstacles for the small / medium-sized distributor to overcome here:

  1. Software that can pre-allocate lots: at the more affordable end of the ERP software spectrum, those system that do offer lot tracking frequently require users to manually enter the lots being shipped.  It may be more difficult to find affordable lot tracking software that can pre-allocate lot numbers to be picked, based on FIFO or expiry date, and display those on picking slips or handheld devices, but they do exist.
  2. Warehouse pickers being able to find the pre-allocated lots: you’ll probably need to rethink your warehouse layout and flow. If you set up such that new shipments are loaded at the back of a shelf / row, and pickers pick from the front, with a procedure to shift products forward (for smaller items, perhaps flow racks), then your pickers should have little problem finding the pre-allocated lot numbers.

There are other building blocks which may help – such as barcode scanning and even RFID in certain cases. Yes, you will incur costs to implement this. But your measurable inventory savings on an ongoing basis should ensure a swift payback. Now compliance with regulations becomes a by-product of a wise investment, rather than a pain-in-the-neck cost.


When Should You Replace Your ERP Software?

March 9, 2012

How Old is Too Old?

According to research performed by the Aberdeen Group, an ERP system reaches its maximum usefulness after approximately 7 years. At this point, the system is being well utilized and begins to show significant returns on investment. Now this assumes, of course, that the system was well-maintained over the 7 year period including incremental upgrades.

Unfortunately, after reaching peak efficiency at 7 years, the usefulness of the system begins to decline. Regular upgrades to your system can ensure that you never hit that period of decline, should you have chosen a constantly innovating, forward-facing software system. Unfortunately, many businesses, especially small businesses, are running on archaic systems that date back 15 or even 20 years. Unless these systems have made remarkable progress, chances are the software available today will blow it out of the water.

when-to-replace-erp-software-how-old-too-old

Thankfully, only a small fraction of businesses are running on systems that are over 15 years old – approximately 7% of businesses according to Aberdeen Group. While it is good news that a small percentage of businesses are running on archaic systems, it is not good news for those that still are. Failing to make strategic IT investments on a timely basis can hurt even the smallest businesses. Many managers are beginning to understand the importance of employing up-to-date software, but many remain in the dark.

Our advice: think hard about your current productivity with your software system. Are there any pitfalls? Are you losing hundreds of hours of productivity a year? Have you hired someone new to keep up with the demands of the business whose job could otherwise be replaced by a proper software system? Are your customers looking elsewhere to get quicker answers or faster service? If the answer to any of these questions is “yes” then a new software system will pay for itself.

What are you doing to avoid becoming part of the 7%?


ERP Software salespeople – here’s the deal

March 6, 2012

erp-salesperson-discountI’ve always thought that selecting an ERP Software system was quite a serious and important task. Given that the entire business fundamentally depends on the ERP system, you’d probably not want to make this decision lightly. It’s not the same as, say, buying clothing or home electronics.

So I find it quite odd when ERP software salespeople try to coerce a quick decision from a prospective customer using very short-term, limited time discounts – particularly when the reason they give for the time limitation is (to me) quite transparent. You’ll usually find these “amazing” deals are available at month-end (or quarter-end) – the sign of a salesperson who needs to make quota.

From the buyer’s perspective, the most important decision point is not money (or at least it shouldn’t be), but is in fact suitability to their business of both the software and the company providing implementation services. So you would think that putting pressure on the decision maker to act quickly in order to lock in a discount would not generally be a successful tactic (unless the vendor has already in fact won the business in principle and is just trying to nudge the prospect to sign the contract). And happily, for the most part, you’d be correct. Most rational business decision makers will not be swayed to a product or vendor by limited time pricing pressure tactics.

And yet…we still see these “sign up quick for this discount” tactics time and time again. The sad reality is that when they do occasionally work, the result is almost always an unhappy customer, or an unprofitable sale for the vendor, or both.

Sales folks, it’s not your fault. You’re put under pressure by your sales manager to meet quotas, and what else are you gonna do? The real culprit here is the quarterly reporting cycle and the sales remuneration structure. Be honest: as a salesperson, would you rather close a “bad” sale and make target, or walk away from it and miss target? The latter will get you fired, so it’s  a non-starter. So you’ll hold your nose and close the bad sale.

I’m glad I work at an ERP Software company where we’d rather walk away from sales that are not a good fit, and focus on working with companies where we can and do add value. And sign them up when they’re ready.


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