A growing online business often needs to upgrade their technology stack to keep up with their demanding operations. Many turn to Enterprise Resource Planning (ERP) systems to manage their back-office tasks, like order fulfillment and financial reporting.
Evaluating ERP systems though can be intimidating. What does the software help with exactly? Why do they cost so much? Do I really need one? Let’s find out!
What is an ERP?
First, all merchants should understand what an ERP system is capable of.
Enterprise Resource Planning (ERP) systems have been around since the 1990s. They are a comprehensive business management software that helps you run more efficiently and effectively, by integrating applications and automating core processes like:
- Financial tracking
- Order management
- Inventory management
- Pick, pack, and ship
- Lightweight manufacturing needs
- Customer relationship management
Recently, the global ERP software market was projected to reach $78.40 billion by 2026. Across many industries, merchants invest in ERP systems as in an all-in-one solution to help with operational efficiency and data transparency. For eCommerce specifically, ERPs can become the “foundation system” for many critical areas like product catalog management, inventory availability, order fulfillment, financial reporting, and even HR and payroll.
6 Myths about ERP Systems
Because of their broad functionality, ERP systems are often misunderstood among eCommerce businesses. Here’s 6 common myths about ERPs debunked.
- ERP systems are only for Enterprise businesses.
While ERP software includes Enterprises in the name, it’s no longer just for large or B2B organizations. Instead, investing in an ERP could be the software you need to win against bigger brands in a competitive online landscape.
It is true that legacy, on-premise ERP systems lend themselves towards Enterprise businesses as they were time-consuming and costly projects. You had to buy hardware and heavily customize the software to your requirements. This process could take several months, even years. Then, you usually had an internal team or partner that maintained the software over the long run. Because of this experience, these projects could be cost-prohibitive and technically challenging for smaller merchants to implement.
Today, ERP providers have evolved to become accessible for businesses of all sizes. Similar to eCommerce software, there are now cloud-based solutions like NetSuite and Acumatica that focus on affordable and scalable functionality.
Even for older on-premise systems, it’s common to find multiple versions of their ERP tailored to different industries or business sizes. For example, Sage has versions Sage 50, Sage 100, Sage 300 and Sage 500. Sage 50 is comparable to accounting software like Quickbooks, while Sage 100 is more of a traditional ERP for SMBs.
- ERPs are cumbersome software.
Having been around since the 1990s, ERP systems are notorious for clunky and confusing user interfaces. They’re not usually thought of as modern and slick technology.
However, as ERP systems move to cloud-based services, the technology is vastly improving their performance, flexibility, and usability. Cloud-based software lets end users access their ERP software through web browsers and mobile devices. ERP providers are making a point to focus on intuitive user interfaces because they know poor usability shouldn’t hold back a business from being successful.
Check out an ERP system like Paragon by Jonar to see how they’re focused on sleek design, without compromising functionality.
- ERPs aren’t affordable.
Cloud-based and open-source ERP providers can be affordable options for sellers today. They provide reduced IT infrastructures costs, lower upfront investment, and pay-per-user pricing models. Open-source ERPs like Odoo are even free to download and customize.
The modular nature of ERPs also helps control costs. It allows you to invest in your must-have functionality first, and then gradually add more functionality (and costs) as you grow.
It’s important to remember that ERP software can handle a vast array of functionality. If you’re cobbling together a dozen or so more apps, what is your total cost for them all? An ERP could be a single system to replace them, while saving you money in the long run.
- ERPs are just Accounting software.
It’s common to confuse ERPs with accounting software systems. While there is some functionality overlap, ERPs are significantly more sophisticated. Accounting software like Quickbooks or Xero will cover:
- Accounts receivable and payable
- Banking
- Financial reporting
- Revenue tracking
An ERP on the other hand covers those accounting areas plus all the other areas mentioned above like fulfillment and manufacturing. In many cases, a business will start with accounting software and then upgrade to an ERP.
- I don’t need an ERP as an eCommerce business.
ERPs tend to be associated with Enterprises like distributors or big-box retailers who have complex requirements for manufacturing, warehouse management, distributed order management, etc.
However, as eCommerce matures, even SMBs need access to ERP software to manage:
- Selling across multiple online sales channels like web stores and marketplaces
- Accurate and fast shipping
- Enable Buy Online, Pick Up In Store
- Managing drop shipping and 3PLs
- Running flash sales
- Managing product catalog for multiple sales channels
- 360-degree view of customer data
To provide consistent customer experiences across touch points, merchants need the right tools for back-office operations. Efficiency and integrated applications are what powers experiences like same-day shipping and transparent tracking, keeping your brand competitive online. And, the reality is that requirements like these aren’t met by utilizing only your eCommerce platform and a few apps to do it.
- ERP integration never really works.
ERP integration allows merchants to sync data and automate business processes between your ERP and other critical business systems like your eCommerce platform. For example, when someone buys an item online, your inventory levels should decimate in your ERP and then your web store to prevent overselling. System integration is achieved by understanding how each system sends and receives data and then mapping data fields accordingly between them.
While integration into an ERP is challenging, it can be successful. In general, ERPs with open and robust APIs will be easier to integrate into other systems with APIs. A robust API is more feasible when reading and writing data flows between them. This is why a modern ERP system can be easier to integrate than a legacy ERP with no APIs available and/or heavy customizations.
ERP integration also depends on who is doing the work. Successful projects rely on partners that have deep knowledge of how ERPs work and understand your eCommerce business requirements.
How do I know when I’m Ready for an ERP?
The hard question for any merchant to answer is – am I ready for an ERP?
Look at your current core processes. Any merchant with high-volume data (hundreds of orders) or complicated processes (like Buy Online, Pick up In Store) can benefit from an ERP. Common signs that you’re ready are:
- Significant increase in order volume
- Delays in financial reporting
- Shipping products late or wrong due to volume
- Managing multiple suppliers
- Large or complex product catalogs
- Managing multiple B2B customer relationships
- Low employee productivity due to manual tasks
If your customer experience is starting to fail because your operations can’t keep it up, you’re ready to take a serious look at an ERP. The good news is that today’s affordable and intuitive ERP solutions make it even easier for you to implement one.
About nChannel:
nChannel empowers retailers, wholesalers and technologists with integration tools to sync data and automate processes between their eCommerce, ERP, POS and 3PL systems from inventory synchronization and order fulfillment to supply chain management.
