What is the difference between inventory management and warehouse management?

Published on 22/01/2023 by Andrew Blair

On the surface, warehouse and inventory management appear similar, but though they may seem similar, they have contrasting uses for an organisation. Here, we evaluate their differences and how each can apply to your organisation. 

Two professionals evaluating the difference between inventory management and warehouse management tools

In today’s fast-paced business environment, it's even easier for consumers to buy products and have them delivered the next day. However, this has created complexity for businesses to manage their stock and keep their supply chain running smoothly. Production centres and distribution channels are often volatile, thus disrupting supply chains. According to Gartner, supply chain disruption is neither an “if” nor a “when” since it’s both simultaneously omnipresent and unpredictable. Organisations can mitigate disruptions and risks by developing a resilience strategy with effective inventory management software and warehouse management systems.

Which management software suits your business, and what is the difference? 

What is inventory management software?

Inventory management software (IMS) is the name given to software applications that focuses on managing the inventory levels of a business. The design of IMS allows users to monitor inventory levels to optimise supply chain-related functions, identify changes in demand, and respond to those changes to maintain order fulfilment. 

Furthermore, IMS assists businesses with field inventory tasks such as tracking stock levels for optimal production and distribution of goods for wholesale or retail. Through its ability to ensure accurate real-time inventory reporting, IMS can distribute this information across multiple locations and throughout an organisation. 

IMS can be valuable for any business holding goods or materials for future use. Effectively managing inventory can be essential for achieving greater supply chain efficiency and maximising short- and long-term financial results. It also helps businesses to plan and forecast demand, such as seasonal fluctuations or changes in consumer preferences which avoids stockouts or overstocking. IMS helps companies understand demands in stock and what is needed to remain as productive and profitable as possible. 

What is a warehouse management system?

A warehouse management system (WMS) is a software solution specifically designed for warehouse operations management that enables the movement, tracking and storage of materials throughout the warehouse. It helps manage inventory tracking, warehouse designing, picking and packaging goods, shipping, managing yards and docks, and stacking. A WMS can share critical data throughout an organisation, increasing efficiency and reducing costs. 

For businesses, a WMS allows organisations to control the movement and storage of goods within warehouses and assists in handling inbounds and outbound operations by streamlining most manual processes. WMS solutions optimise warehouse space by leveraging expected inbound and outbound delivery data. It also enhances inventory visibility with radio-frequency identification (RFID) devices and barcode scanners.

Furthermore, WMS- RFID/barcode integrations can also support warehouses’ financial operations, which use data captured by RFID/barcode devices to generate billing that identifies how long a shipment has been in the warehouse. A WMS can also automatically store the historical data of that billing information to give organisations deeper insight into the costs and efficiency of their business. 

Additionally, warehouse management in logistics is also important as it helps companies to track the goods and materials that are moving through their supply chain, which is essential for the timely delivery of goods to customers.

Functionality difference between inventory management and warehouse management 

One of the critical differences between IMS and WMS is the scope of their functionality. While WMS manages the physical movement of goods within a warehouse, IMS is used to manage the inventory levels of a business across the entire supply chain. As a result, WMS is typically used by warehouse and logistics professionals, while a broader range of business professionals, including purchasing managers, sales managers, and financial analysts, use IMS.

Another critical difference between IMS and WMS is the data each collects and the insights each provides. While a WMS offers visibility into the movement of goods within the warehouse and allows warehouse managers to optimise space and resources, an IMS provides insights into inventory levels and demand patterns across the supply chain. Data-driven insights can help businesses identify trends and improvement opportunities by reducing inventory costs or improving supplier relationships.

Optimise operations and enhance efficiency

Warehouse and inventory management are essential components of the supply chain and logistics operations. The design of both IMS and WMS helps businesses track and manage the movement and storage of goods. However, while both IMS and WMS streamline operations and improve efficiency, the way they do so for a business greatly depends on the nature of that business.

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This article may refer to products, programs or services that are not available in your country, or that may be restricted under the laws or regulations of your country. We suggest that you consult the software provider directly for information regarding product availability and compliance with local laws.

About the author

Andrew is a Content Analyst for Software Advice, giving SMEs insights into tech, software and business trends. Interest in entrepreneurship, furthering projects and startups.

Andrew is a Content Analyst for Software Advice, giving SMEs insights into tech, software and business trends. Interest in entrepreneurship, furthering projects and startups.