Warehousing: Should You Choose an ERP or a WMS?

Oct 05, 2005 9:09 PM  By

As distribution/fulfillment systems become more powerful and offer more features, it’s harder to distinguish among them—and therefore tougher to figure out just which application is appropriate for managing your operation. Take your enterprise planning (ERP) system, for instance: It comes with a “free” warehouse module. Why, then, should you invest in a separate warehouse management system (WMS)? Unfortunately, the issue isn’t quite that simple, as a new white paper from HighJump Software, a 3M Company, and TKR Associates points out. There are numerous factors to consider, such as each system’s total cost of ownership and competitive advantages, before you can select one that is truly beneficial and cost-effective.

The report cautions against giving in to the “significant pressure to use the warehouse module from your ERP vendor because its price is usually heavily discounted as part of the original ERP license or the cost of integration is presumed to be lower.” In fact, it is best to begin not with a software assessment but with a business assessment that takes into account such considerations as operational strategy, application functionality, architecture, product maturity, and even company culture—both the vendor’s and your own. Among the questions you should ask are the following:

• What are your operation’s long-term objectives?

• How do you measure performance? What are the key measurements?

• How do your customer service requirements affect these objectives?

• What execution capabilities must be supported to meet these objectives?

• What must your business do to differentiate itself in the marketplace?

• What are the logical first steps to accomplish these objectives?

• What are the costs involved that go beyond license fees?

• What specific ROI is each function going to generate?

• What is the overall impact on total ROI as a result of those missing functions, or what are the ongoing costs of workarounds to compensate for functional gaps?

• What are the hidden integration costs associated with the solution’s supported methods for interfacing with trading partners or other disparate applications?

• Is there a disparity in size between your company and the system vendor that could lead to your not getting the attention you require on an ongoing basis?

• Is the vendor able to adapt the software to match your strategic needs where it makes sense? Or does the vendor expect you to change your business to fit the software?

Another important consideration, according to the white paper, is how the application you’re considering supports supply chain visibility, increasingly a must-have to satisfy customer demands, meet higher delivery standards, and manage global distribution networks. For example, supply chain visibility offers instant access to the following:

• The status of an order

• A vendor’s status on a purchase order that is urgently needed for manufacturing

• The customer service representative’s query about inventory availability

• The status of a pick-up in Asia and whether it will make it to the boat on time

“This capability is not just a new feature to hype to prospects,” the report notes. “The geographic breadth of many companies’ supply chains brings with it the complexity of always knowing the whereabouts of orders, shipments and inventories.” If an ERP or WMS vendor does not provide these capabilities, your operation will be at a considerable disadvantage.

For more information and to download the full report, visit http://www.2006rfp.com/sce/OFAdvisor20051108.