Warehouse Management: ERP or Best of Breed Software?

Monica Orrigo
August 6, 2015

Wholesale businesses and other companies that focus on customer service and sales can sometimes think of what happens in their warehouse as an afterthought. Your warehouse, however, is as critical to your customer satisfaction as the activities of your sales or customer service departments––even if the individuals working there never speak to a customer. When things are running well in the warehouse (inventory levels able to meet demand, stock in the right location to be picked), customers will be able to receive the right order at the right time. But when things aren’t running smoothly, customer relationships can be negatively impacted. Many companies utilize technology to help them efficiently manage their warehouses. Choosing a warehouse management tool, however, can be difficult. You may already have an ERP system that offers a warehouse management tool. Or perhaps you’ve found several dedicated warehouse management software vendors to choose from. So which is better? Choosing an ERP add-on or “best of breed software” approach to warehouse management is not a one-size-fits-all decision. In this article, we will discuss how warehouse management software may be able to help you better manage your warehouses, the differences between ERP and best of breed for warehouse management, and the most important questions to ask when trying to decide between these two approaches.

What is Warehouse Management?

A warehouse management system provides the insight needed to better understand inventory levels and stock locations, ensuring that your warehouse operations can scale to meet customer demand without sacrificing service levels to your customers. Warehouse management applications often share data about vendors, customers, payments, etc. with the ERP system that manages the rest of your business. Because there are so many touchpoints, many ERP vendors also offer their own warehouse management solutions. Best of breed solutions that only do warehouse management are available as well; these usually communicate with your ERP through software integration.

What is ERP Warehouse Management?

ERP applications bring much of the data that a company needs to run its business together in one, centralized database, creating a single source of information about your past business transactions. Most ERP vendors started out with a focus on Financials or HR, and do those functions very well. Over time, ERP vendors have added functionality to provide their clients with increased visibility and control over more aspects of their business, such as warehouse management. The biggest advantage of ERP solutions are that they come “pre-integrated.” However, there is some trade-off in functionality as ERP warehouse management systems are sometimes not as robust as dedicated warehouse management solutions.

What is Best of Breed Warehouse Management?

Best of breed warehouse management solutions are usually industry- or function-specific solutions that are provided by a company other than an ERP vendor. These solutions are usually focused on business functions or requirements that the ERP vendors can’t handle especially well, including customer-facing functions like sales and customer service. In the past, warehouse management also fell into this category; in certain situations, it still does. Best of breed solutions are usually very robust; they can be integrated with an ERP to provide a comparable level of visibility into how specific business functions are operating. For this reason, they are also sometimes also referred to as a “bolt-on” solution.

How to Choose a Warehouse Management System

Choosing between an ERP and best of breed warehouse management solution depends on a number of factors, which is why most companies follow a rigorous selection process to make this decision. Some questions you will need to consider include:

1. What are our business objectives?

What are your business goals for the implementation of a Warehouse Management solution? Which business metrics (often referred to as key performance indicators or KPIs) are you hoping to improve? How important is it to your company to have a “one-stop-shop” for your software vendor?

2. What is the cost, long-term and short-term?

Over the long term, choosing best of breed for warehouse management means an ongoing commitment to having two integrated systems. But the good news is, if choosing a SaaS provider, you will not have to pay to maintain and update that software, and it will often be a lower up-front investment. ERP solutions for warehouse management can sometimes be easier to set up in that it doesn’t require integration, but there are some functionality disadvantages that offset this.

3. Does the functionality fit?

How well does the functionality offered by the solution fit your stated business objectives? For companies with large, complex warehouse operations, ERP warehouse modules may not offer all the functionality that is needed, forcing significant compromises to be made.

4. Does the vendor focus on our industry?

Is the software vendor focused on your industry? Do they work with other companies in your space? This can be a huge plus or minus, depending on the answer.

5. Is support available?

What kind of support is available to implement, upgrade, and maintain the solution over the long term? There are many other factors to consider in this decision, but these questions demonstrate that your decision will really depend on the specific needs of your business. Got a specific question about deciding between ERP and best of breed for your warehouse management solution? Ask us in the comments!