The Great Debate

 WMS OR ERPBy Mike Krabbe

Five years ago, choosing a best-of-breed warehouse management system (WMS) over an enterprise resource planning (ERP) WMS was commonplace for companies with multiple sales channels. As the functionality of ERP WMS systems continue to evolve, companies are considering ERP WMS systems. 

In this article, we will analyze each of the areas of an ERP vs. best-of-breed WMS that should be included throughout the WMS evaluation process. These five areas include: 

  • Functionality 
  • Productivity Gain 
  • Technology 
  • Complimentary Software Products 
  • Total Cost of Ownership 

Functionality 

There are three key functionality questions to consider:

1. Will the WMS meet my key operational requirements to run my business? For example, a multi-channel retailer or distributor, depending on its product flow strategies, may need functionality to support each picking for e-commerce, put-to-store functionality for store replenishment, cross-docking functionality for product flow through and strong return functionality to support e-commerce returns.

2. Can the system handle my current throughput and future growth? Understanding what your peak volumes look like today and in the future as well as finding references for companies with similar volume to what you predict, is important. 

3. Is the WMS adaptable as my business changes? Adaptability or configurability is extremely important. Most likely you╒ll find that the best-of-breed system will have broader and deeper functionality that will be able to adapt to business changes quicker either through configuration or quick software enhancements.

Productivity Gain 

With a competitive labor market, we are seeing an increase in levels of automation. When implementing high levels of automation, companies are finding more functionality in the warehouse control system to support their automation. This leaves them less dependent on best-of-breed WMS and opens the door for an ERP WMS solution, integrated with their warehouse control system.

However, if discrete engineered labor standards in a proven labor management system are a requirement, you may want to consider a best-of-breed WMS application. 

Technology 

There are a few considerations within technology criteria that should be mentioned, including integrations, network stacks and cloud vs. on premise vs. SaaS. 

Integration Considerations: The best-of-breed systems have interfaces to integrate with the host ERP. Companies can remove the integration concerns by going with an ERP WMS, which is very attractive from both a level of effort and a total cost of ownership perspective. 

Same Network Stack: Another consideration is supporting multiple network stacks. Is the network stack the same as the ERP? If not, will this increase cost or add risk?

Cloud vs. On premise vs. SaaS: From an IT strategy perspective, many companies prefer on-premise solutions, while others are going to the cloud or a hosted solution. Multi-tenant SaaS solutions provide a lower price point but are often rigid.  Both SaaS and cloud have a quicker time to value in the short-term but prove more costly in the long-term.

Complimentary Products 

Many of the best of breed WMS software providers have complimentary software solutions for complete fulfillment execution that span several channels including retail, wholesale, e-commerce and marketplaces like Jet and/or Amazon. To solve the fulfillment challenges specific to omni-channel, companies are choosing best of breed supply chain execution software vendors with point of sale, order management, labor management, warehouse management and transportation. 

ERP vendors have been slowly replicating best of breed functionality over time. However, companies often find that the value they receive in a best of breed WMS and its complimentary products far outweigh integration and increased license cost.

Total Cost of Ownership 

Don't mistake lower integration costs to mean lower cost of the total implementation. Speak to references concerning their overall implementation costs regarding ERP WMS systems as opposed to best-of-breed systems. While ERP WMS systems are fully integrated with the ERP suite, the lack of autonomy between the two systems can cause unforeseen enhancements to obtain comparable functionality.

Many companies are leveraging third party integrators to help justify the cost and create a total cost of ownership model. The differences between ERP and best of breed options along with cloud vs. SaaS options add a level of complexity to the model than in previous years.

The WMS you select must ultimately align with your short and long-term performance goals while providing a competitive advantage. Whether you select a best-of-breed WMS or ERP WMS, you will most likely have it for the next 7 to 10 years. There are few systems as mission critical and impactful as the WMS on your supply chain execution efforts. 

A different way to think about your WMS systems selection is that a WMS implementation should not be thought of as an IT project. They are operational improvement projects supported by IT. One final thought: don't be focused only on chasing ROI when selecting a WMS. Invest in the WMS that creates a competitive advantage for your supply chain by enabling impactful service and cost benefits.

Mike Krabbe is a senior director in enVista's Supply Chain Solutions practice. He has 20+ years of experience providing supply chain solutions to his customers.

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