Everything You Need To Know About Differences Between ERP vs Inventory Management System (2024)

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.

* apply

ERP vs. Inventory Management System

ERP Analysis

Are you starting a new business for the first time? Eventually, you will encounter a common challenge that many new business owners fear: organizing and tracking inventory. Often, the initial instinct is to opt for a popular ERP system that promises a multitude of features in a single package. However, this may not always be the most prudent choice, especially if your primary focus is inventory management. Understanding consumption patterns becomes crucial as it helps in comprehending stock usage and plays a vital role in effective stock management and planning.

ERP Systems Challenges

There are several challenges associated with utilizing ERP systems for this purpose, including:

• Complicated tracking: ERP systems can only evaluate final numbers and lack the ability to analyze everyday consumption trends.
• Lack of customization: ERP systems can be expensive and often fail to offer tailored solutions, requiring additional costs for customized functionalities.
• Implementation complexities: Implementing an ERP system can be time-consuming, and making system changes can be challenging once it is in place.
• Mismatch with business focus: While ERPs offer comprehensive functionalities, businesses today may require solutions focused on specific problems rather than all-in-one platforms.

Despite these challenges, tracking actual consumption enables accurate prediction of monthly orders, future cost requirements, and effective forecasting of testing needs. Improved stock management reduces entry work, optimizes inventory activities, and enhances productivity among inventory managers and staff. While ERPs were once considered all-encompassing solutions, businesses now seek customized approaches to address their unique requirements.

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.

However, users can benefit from inventory management systems (IMS), such as:

• Lower cost compared to ERP systems
• Ability to obtain specific features tailored to business needs
• Supports scalability for business growth

Numerous IMS options are available, and each system is unique. Therefore, it is crucial to choose the appropriate system that aligns with your business model when considering the purchase of an IMS system.

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.

Author Bio:

Rosie Charles is a professional content writer atISP Supplieswith 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.