ERP systems: what you need to know as a business owner

Published on April 09, 2019
Last modified on December 08, 2022

ERP systems: what you need to know as a business owner

Estimated reading time: 14 minutes

An Enterprise Resource Planning (ERP) system is a technology solution that brings together the various processes and resources of an organization into a single platform.

For a typical ecommerce business, these resources usually include the products that you sell online, the money that you make from selling, and the data that you gather from and about these transactions.

This list only grows more complex as other factors are thrown into the mix, such as having physical stores alongside online ones, selling on multiple webshops, or implementing and maintaining an omnichannel strategy.

Traditionally, these resources were managed separately, with different processes scattered throughout the organization in different systems: orders in the webshop’s backend, physical purchases in the store’s local point-of-sale, financial data in a standalone accounting system, client information in a separate CRM, and so on.

While these systems correspond to distinct aspects of the business, they still have to be connected in some way to ensure that data is up-to-date across all business functions.

For example, when an order is placed on the webshop, the item purchased must be taken off the current inventory and the new stock count must be updated in other channels where the item is sold to avoid overselling.

When the systems keeping track of these things are not integrated, the data will have to be manually entered into each and every system. This highly requires a lot of human hours to complete, increasing turnaround time for tasks—and also raises the risk of errors in your data.

Disconnected and unsynchronized processes are inconvenient at best, but at worst, can result to expensive mistakes and even cause a significant setback in your business’ growth.

This is where an ERP solution comes in.

In this guide:

What can you do with an ERP?

At its core, ERP integrates your disconnected processes into one system.

Instead of keeping track of your business resources through separate systems, you get a single platform that enables you to:

1. Perform interrelated business functions.

Every individual aspect of a business relates in one way or another, which is why keeping them connected is important if you want your business to run like a well-oiled machine.

Virtually all the essential functionalities needed for running your business can be managed in the ERP. Typical ERP plugins include:

  • Order management
  • Accounting
  • Human resources and payroll
  • Production
  • Inventory and warehouse management
  • Logistics and fulfillment
  • Customer relationship management (CRM)
  • Project management
  • Sales
  • Marketing
  • Business intelligence and analytics

Though these functions can just as well be handled through individual systems, ERP makes the process easier by enabling these plugins to share a single source of data (also stored in the ERP) and simplifying the workflow by providing a consistent look and feel of the user interface across different functions.

2. Integrate your processes and streamline your workflow.

ERP eliminates the hassle of repetitive manual tasks by having the key components of your business’ operation integrated into one central platform.

With your business functions well connected within the ERP system, there is no need for manual re-entry of data just to keep individual systems synchronized.

This leads to a more streamlined flow of information across your business—orders that come in from the webshop can reflect in or near real time in the inventory, accounting, CRM, or other functions as needed.

3. Save long-term with increased efficiency and reduced errors.

The risk of errors that come from manually copying and re-keying data on separate systems decreases as you automate your data flow. And with manual, low-value tasks out of the way, you get to focus your resources into optimizing your business practices and driving it towards growth.

4. Get reliable business insights.

When you manage your processes in separate systems, it can be hard to get a complete overview of your business.

ERP enables you to have an up-to-date perspective on data concerning the various aspects of your business. Since such data are also conveniently located in one place, you get to see the complete picture, which lets you identify opportunities more easily and be more proactive in addressing potential issues within your operation.

5. Enhance customer experience.

There are so many things that factor into a great customer experience.

There’s not only the quality of your product or service, or how well you provide customer service, but also all the other various touchpoints in a customer’s journey, including the way they get exposed to your brand, the ease of shopping within your ecommerce site, or how fast it takes to get an order processed and delivered.

ERP helps you improve the parts of your business affecting these factors.

With automated processes, you get to shorten the order cycle, and with a standard source of data, errors are minimized so that your customers see consistent and up-to-date information throughout your different channels.

You can also utilize how your systems are connected to one another.

For example: aside from the basic pricing setup per product, you can further enhance your strategy by segmenting your customers based on the data and insights you’ve gathered, and configure specific pricing structures and discounts according to these segments.

With ERP integrated with your webshop, these customizations are then displayed according to the specific customer shopping on your site, giving them a personalized and more valuable shopping experience.

What are the signs that your business needs ERP?

Any business can benefit from using ERP, but for some businesses more than others, ERP can mean more than just a more convenient option and rather an indispensable tool in the operation.

The necessity of ERP for a business presents itself in different forms—whether it’s the strain from inefficient practices, i.e.

  • Does your business suffer from having to juggle multiple systems and spending too much time on manual data entries just to get such systems synchronized?
  • Are mistakes recurrent in the data that flows in and out of your organization because your processes are not automated?

Or the desire for better management of business processes:

  • Do you want to divert the time and resources you spend on manual processes to higher-value tasks?
  • Are you looking for ways to enhance both your employee and customer experience?
  • Even though you’re still getting by with unintegrated systems, is business growth and expansion in your future?

Ultimately, you will have to have a thorough look at your specific current business situation to establish whether or not you need an ERP solution.

What do you need to know before implementing an ERP system?

1. ‘Enterprise Resource Planning' is not just for large enterprises (anymore).

Smaller sized businesses from every industry are now increasingly adapting ERP with the realization that systems integration is an important business move in this digital economy.

While ERP had its origins from managing and automating processes of large enterprises (mostly in the manufacturing industry), ERP vendors have released a wide range of solutions over the years to cater to virtually every type of business there is.

So even if you’re a small business, you’re bound to find a solution fit for your specific needs.

2. Implementing ERP can be a costly investment.

Although ERP solutions tailor-made for small businesses are now commonplace, it doesn’t change the fact that investing in an ERP system can be considerably expensive.

It’s not just the cost of the software itself, but hosting, integration, maintenance, and staff training costs all contribute to a substantial amount that you need to allot for in order to complete your implementation.

3. You can have your ERP in-house or in the cloud.

ERP solutions typically fall into one of two categories: on-premises or cloud-based.

Each of these two options carries its own set of benefits and drawbacks—and as with deciding whether or not you need ERP in the first place, the choice between an on-premises and a cloud-based implementation largely depends on your specific business needs.

On-premises ERP

Essentially, on-premises ERP means that the system is deployed and hosted locally on your own servers. This means that you have more control over the system, and any sensitive data contained within it is safely on-site.

However, having your ERP in-house will require you to have dedicated personnel to take care of its maintenance. You will also need to supply the hardware and servers needed on top of the fees for the software itself, making this typically the more expensive option.

Cloud-based ERP

A cloud-based ERP implementation means that deployment and hosting are handled by your ERP provider or by another third party.

For companies that may not have the proper resources to maintain the ERP system on their own servers, this is obviously the better alternative.

If you don’t have a full-time staff, having your ERP in the cloud also means that a relatively more technically equipped partner manages the hosting of your ERP solution.

Meanwhile, some disadvantages of this option include the complete reliance on your ERP provider and the subscription-based pricing, as opposed to most on-premises deployments.

4. Your chosen ERP solution should be able to work with your current processes.

It should go without saying, but whatever ERP solution you end up choosing should be able to adapt to the systems and processes that you currently have, and not the other way around (unless your processes really do need some revamping).

The implementation of the software itself will take considerable time, and you don’t want to extend this period and your expenses by choosing a software that will require you to rebuild your current practices around it.

With that being said, take note that your ERP shouldn’t be too exclusive with your current practices either. Scalability is still an important factor to consider, especially as your business is bound to grow at one point or another.

How does ERP relate to a Product Information Management (PIM) system?

ERP and PIM work hand-in-hand to improve your workflow and information management.

ERP typically contains the basic data concerning your products, including prices and inventory—but while important, such data does not do much to help you sell your product.

It’s the enriched marketing information, images, product stories, and other assets, that enable you to offer customers much more than basic product information—all of which you can manage within PIM.

A PIM system supports your ecommerce strategy in a lot of ways that ERP may not. For instance, you can:

  • Collect the necessary product information from your suppliers and consolidate them in one place, so you don’t have to look through different files just to complete a product profile on your webshop/s.
  • Write your product information in ways that sell, not just tell.
  • Create product copies tailored for different segments of your market, whether it’s for desktop vs mobile users, local customer groups, or different buyer personas.
  • Distribute consistent product information across your different channels, and lessen the risk of errors by doing this from a single source.

Read our guide on PIM systems here to learn more about how it can help your business.

How do you integrate ERP with other parts of your company?

Once you have successfully implemented your ERP system, the next step is making sure that it’s well connected with other parts of your business so that you really get the smooth and streamlined workflow that you wanted.

Workflows vary from one business to another and the more complex it is, the more complicated the integration can be.

There are usually two aspects to consider—the number of systems that need to be connected with the ERP, and the various ways that such systems need to be connected with each other.

Here are three common ways to integrate your ERP with the other systems you have in your company:

1. Pre-built integrations or connectors.

There are different third-party modules available in the market that offer pre-built connectors between an ERP and another system, either through a one-time purchase or subscription-type payments.

Some examples:

This option best fits companies who are only looking to integrate their ERP with one other system, such as an ecommerce site.

It could also work with linear workflows that consist of chronological processes and not much crisscrossing between different systems.

2. Custom integrations.

If you have very specific requirements for the integration that the typical connector module doesn’t offer, then you can build your own custom integration.

For this, you will need certified developers for your chosen ERP system to work with the application programming interface (API) available for your ERP, as well as the one available for your ecommerce platform or other systems.

3. Multi-channel connectors or integration platforms.

A multi-channel connector or integration platform acts as the central hub where all of your systems are connected, enabling you to get your different systems synchronized without worrying about too many connection points.

With this type of integration, you only need to have connectors between the integration platform and your different systems, while the integration platform will take care of the synchronization of data across all the interconnected systems.

This is the most efficient way to go if you have various systems that need to be connected—a webshop (or multiple webshops hosted in different platforms), ERP, PIM, inventory and warehouse, etc.

How can we help?

At 1902 Software, we have dedicated teams of developers with extensive experience in building custom integrations between webshops (Magento, WordPress, Umbraco) and ERP systems, as well as any other systems within your company that it may need to connect to.

We work together with ERP integrators or developers that our clients use to help them achieve a synchronized and connected workflow in their businesses.

We have also built our own multi-channel connector that helps clients juggling complicated processes within their company.

Get in touch with us today, and our project managers will be happy to help with any questions you have about implementing an ERP system.

AUTHOR

Peter Skouhus

Peter Skouhus

A Danish entrepreneur who owns 1902 Software Development, an IT company in the Philippines where he has lived since 1998. Peter has extensive experience in the business side of IT development, strategic IT management, and sales.