An ERP and inventory management systems are two different types of software for managing various aspects of a business. ERP system manages and integrates all the core business functions of a company, such as order processing, accounting, customer relationship management, and human resources. On the other hand, an inventory management system, or an IMS, manages the physical inventory of a business. For example, monitoring and tracking stock levels, inventory costs, orders, etc.
Both types of systems are crucial components of a business. But, they differ from each other in many aspects. Let’s delve into them the differences between ERP vs inventory management.
What is ERP?
Typically, businesses adopt enterprise resource planning systems to plan their whole supply chain. Since they are massive in scope and size, you may have many capabilities you don’t need. For instance, business owners who do white-label product shipping don’t care where their manufacturers get the raw materials. In simple words, ERP systems are reserved for large businesses with multiple unique verticals. On the other hand, small or medium-sized companies that only produce and sell a specific product or run a simple business may not require a full-stack system.
What is an IMS?
An inventory management system keeps track of your inventory by maintaining updated records. Such a system records the precise location of all goods, their sources, and their delivery. However, businesses and companies that prefer maintaining manual records instead of switching to an inventory management system can be at risk for incorrect shipping/picking, overstocks, and stockouts.
The latest inventory management systems synchronize with digital stores to assist your warehouse staff in tracking all inventory items. That includes all goods received for returns processing, as well as those which are scheduled to ship out.
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ERP vs. Inventory Management System
Are you starting a new business for the first time? Ultimately, you will have to face a dilemma most new business owners fear: organizing and tracking inventory. Typically, most of them first choose a popular ERP system that offers hundreds of features under a single umbrella. However, that’s not always the wisest option, especially if you are focusing on inventory management only.
Tracking consumption can help a business understand how stock consumption works. That can play a critical role in managing current stocks and planning. However, monitoring the same through ERP systems is complicated since it can only evaluate a final number, not everyday trends.
Knowing the actual consumption allows the management to predict exact monthly orders and future requirements costs. In addition, an accurate picture of the daily usage trends significantly helps forecast the future needs for normal testing numbers and for days with decreased or increased volumes of tests.
Managing all inventory-related tasks becomes easier with improved stock management. That reduces a company’s time spent on entry work, giving more opportunities for optimizing inventory activities. In addition, a business can better tackle actual inventory challenges instead of focusing on data management. Consequently, the productivity of inventory managers and the staff increases, which means they can handle the entire staff better.
Decades ago, ERPs were magical solutions to all problems since they were a collection of ‘all-in-one’ platforms for providing different functionalities. However, today’s businesses may contain a bit of everything but focus on something other than delivering a comprehensive solution for a single problem.
Another challenge with ERPs is that they are expensive and fail to offer customized solutions. Even if some systems cater to a company’s unique problems, they come at an added price. Businesses that choose to invest in popular ERP systems may eventually scratch their heads later down the road. Implementing an ERP system can take anywhere from hundreds to thousands of dollars, depending on the scope and size of the project. Much goes into this cost, including training, hardware, and software expenses.
In addition, implementing an ERP system can be time-consuming. Once an ERP system is implemented, it can be challenging to make changes to the system, which can be a problem if there is a need to add new features or processes. Nonetheless, they are also beneficial for a few critical reasons. ERP systems can streamline and automate many daily tasks that support business operations, saving time and money. These systems also help businesses improve efficiency by eliminating time-consuming and redundant processes. Lastly, ERP systems provide robust security features to businesses for protecting data from malicious attacks and unauthorized access.
Inventory Management Analysis
When we consider the benefits of an Inventory Management System, we note that this system focuses on inventory accounting data and warehouse management. Cloud-based inventory management systems provide flexible options and are available at a much lower price point than ERPs.
Since ERP systems offer a ‘one-size-fits-all’ solution for e-commerce businesses, they can be more complex than inventory management systems. Users can benefit from IMS at a much lower price and get the features they want to scale their business. There are many inventory management systems available, but they are all different. Hence, it’s essential to choose the right system that can
IMS systems are out there, and no two are the same. So when going to purchase an IMS system, pick one that suits your business model. For example, you need an efficient online ordering system for business if you are running a restaurant or a food truck business. The inventory management system will help you track customer orders in real-time and improve customer data.
Final Thoughts: ERP vs. Inventory Management System
An ERP provides a comprehensive view of an enterprise, while inventory management is focused on tracking and managing inventory. When starting a business, choosing an effective inventory management system can give you a good start because you may need more money to invest in an ERP system. In addition, the right IMS can provide numerous benefits and allow you to accomplish goals for scaling your business.
Rosie Charles is a professional content writer at ISP Supplies with 7+ years of experience in the industry. She has a passion for producing high-quality content for websites, Ecommerce solutions, Networking equipment and other marketing material across a variety of niches. Her favorite pastimes include reading, hiking, and spending time with family.