Ecommerce ERP: a must-have for online retail

Ecommerce ERP: a must-have for online retail

March 3, 2021


Ecommerce ERP: a must-have for online retail

Digital Enterprise Researcher

Originated in the manufacturing industry, enterprise resource planning systems, or ERPs, gained wide recognition in the 1990s. Valued for their beneficial impact on operational visibility, efficiency, and business growth, ERP systems have become a staple in such industries as IT, finance, wholesale, and, historically, manufacturing. However, they are only starting to make waves in retail.

ERP adoption by industry, 2020

To show how these tools can be useful for digital retailers, we will look under the hood of ecommerce ERPs and outline the transformational value this technology is poised to bring to its adopters down the line.

Ecommerce ERP at a glance

Ecommerce ERP is a platform that consolidates data from core business processes across departments — finances, procurement, customer service, supply chain, etc. — in a single place and facilitates real-time visibility and comprehensive data-driven management of operations.

Previously, retailers who wanted to adopt ERP took pains to customize general-use software for their needs. But today, large ERP providers like Microsoft, Acumatica, SAP, and Oracle offer ERP suits geared towards ecommerce, while smaller software vendors build solutions tailored solely to online retail needs.  

What’s inside an ecommerce ERP platform

What ERP vendors have learned well over the years is that one size can’t fit all. B2B or B2C, independent or chain stores, pure-play online or click-and-mortar models — each business has its unique goals, needs, and requirements, so to cater for the gamut of them, ERPs are made highly flexible. 

Relying on ERP consulting services, companies can also integrate third-party features into their platforms or scale them up and down to fit their business strategies. Some front-rank platforms even offer built-in innovative technologies like IoT, data analytics, or retail-specific machine learning.  

Regardless of the provider, the following core functionality can always be found in ecommerce ERPs: 

  • Order management
  • Inventory control
  • Warehouse management
  • Accounting
  • Customer management

To top it off, most ERPs integrate easily with common business applications like CRMs, marketing tools, analytics, and databases, and can be fitted well even into tangled digital enterprise ecosystems through ecommerce software development.  

Ecommerce ERP deployment models

Ecommerce ERPs come in a wealth of deployment options: from traditional on-premises to cloud-based ones and everything in between. Today, with cloud software becoming a go-to option for the global business community, around 63% of ERP adopters opt for a cloud-based solution, according to the 2020 ERP Report by Panorama Consulting:

Types of ERP software

For a fixed monthly fee, cloud ERPs offer their adopters the ease of implementation and use, flexible data storages, scalable infrastructures, guaranteed security, and regulatory compliance, along with an ‘anytime, anywhere’ access to the system, which is particularly important amid today's shift to remote work and enterprise mobility. SaaS platforms, preferred to hosted environments in 86% of cases as per Panorama Consulting’s report cited above, are managed and updated by their vendors, which minimizes maintenance costs and efforts for the adopters. 

On the other hand, the cloud deployment model implies limited customization opportunities and cybersecurity risks, and these considerations prove critical enough for a fair share of enterprises to decide in favor of on-premises ERPs. The complete control over the infrastructure and its security, however, entails significant investments in software licensing, its implementation, and ongoing maintenance further on.  

To get the best of the two worlds, retailers today are pivoting towards hybrid ERPs. A hybrid environment gives greater freedom of action: they can choose to move some operations and data to the cloud while keeping the most sensitive information and workflows on-premises. This way, companies can remain flexible in the face of the shifting business landscape and their own agenda and save a portion of maintenance costs at the same time.

Addressing 5 ecommerce challenges with ERP

In addition to bringing in positive change into the performance of multiple departments, a properly implemented ecommerce ERP can also prove instrumental in overcoming some pervasive operational challenges that tend to hold back retailers’ growth and development.

#1: Tearing down data silos

Data silos, or the practice of one party keeping business data inaccessible to other employees, is a regretfully common occurrence at online retail companies, large and small. Arising naturally from a typical corporate structure where data sets belong to their respective departments that gather, process, and share it as they see fit, data silos inhibit productivity and evidence-based decision-making while eating up storage space. 

Ecommerce stakeholders are used to taking actions in the absence of a big picture. The 2019 State of the Customer Journey survey by Treasure Data found that 47% of retail marketers cited data silos as the major deterrent to gaining customer insights. But this is a counterproductive practice, especially today, amid the modern economic uncertainty and dramatically changing consumer behaviors, when executives need real-time operational, customer and sales data to make smart growth-fueling decisions.

The first crucial step to breaking down the ingrained data silos is creating an ultimate “source of truth'' where all the data can be centralized. ERP can become the one-and-only data repository, replacing incompatible legacy tools adopted by each department for managing their data. Connected to all of the company’s data endpoints, from the warehouse management systems to social network analytics, the platform will accumulate the data sets in a single secure location and a standardized format. 

With ERP, teams will retain full ownership of their operational data but also have full access to other departments’ reports and metrics, which will significantly simplify collaboration, save employees’ time on requesting or searching accurate information, and minimize the risk of miscommunication. Following the ERP implementation, the company can alter data management policies to cement data democratization in the corporate culture.

#2: Automating manual processes

Keeping an ecommerce store up and running is not just a lot of work — it’s a lot of manual work. In contrast to the well-oiled, highly convenient and frictionless mechanism an online brand appears to the customer, many companies still have a fair share of back-office operations performed by employees manually even today, when online retail is booming and there is no room for inefficiencies and human errors.    

Contrary to popular business owners’ apprehensions, business process automation should neither be prohibitively expensive nor demand ground-breaking solutions. ERPs have ranging capacities for streamlining straightforward but routine and time-consuming tasks, so a platform properly matched with your needs can become a stepping stone towards building more efficient workflows. 

Sales operations have high but largely untapped automation potential reaching over 40% for order management, pricing, and post-sales activities, found the McKinsey Global Institute in their cross-functional research:

Highly automatable sales-related activities

The Acumatica Cloud ERP offers a sales automation toolkit that draws on CRM and financial data to facilitate revenue reports and forecast generation, contact and lead management, and document flows. A more advanced module, Microsoft Dynamic 365 Sales, allows employees to not only automate routine tasks and data entry, sales activities, and customer engagement but, with the help of an AI engine, also streamline performance reporting and forecasting as well.

Labor-intensive, decentralized, and error-prone, inventory management is another ecommerce operation high on stakeholders’ list of optimization priorities. Although traditional inventory and warehouse management tools prove sufficient to control the movement of goods and products, they are standalone on-premises systems that don’t facilitate real-time information exchange and have limited automation capabilities. 

By opting for an ERP with robust inventory management features, as in Acumatica or Odoo, a company can gain real-time stock and order fulfillment visibility across geographically-distributed locations while also streamlining manual tasks like barcoding, replenishment, expense management, and reporting. 

Abundant with finance and accounting automation features, ERPs are also a part of many financial departments’ infrastructures. SAP, for instance, offers modules that automate the financial close and treasury processes, streamline individual and mass billing while ensuring regulatory compliance. 

Acumatica’s financial management package is also up to par, with modules for automating invoicing, tax, payroll, and AI-powered expense management. The findings of PwC’s 2020 CFO survey, showing that the majority of CFOs prioritize keeping their ERP systems up-to-date, demonstrate how critical automation features are to the day-to-day functioning of their departments.

CFOs’ plans to implement new ERP or a new version of the current system

#3: Rooting out bad data

In the modern age of analytics, business data is considered an invaluable strategic asset. Unlike many other sectors, online retailers have plentiful data sources at their fingertips, from browsing history to product reviews to inventory information, which supplies daily insights into customer behavior and preferences. However, instead of supporting marketing and sales strategies, in a majority of cases data proves unfit because of its inferior quality.

Inaccurate, incomplete, non-conforming, and duplicate data results in missed opportunities, wasted resources, and customer dissatisfaction. Data-dependent marketing appears to bear the main burden of this issue, as, according to Forrester’s 2019 survey of data quality leaders, bad data undermined 26% of marketing campaigns and took 32% of marketing teams’ time to manage it. For other departments, the implications of relying on bad data can be similarly grave.

Bad data affects business outcomes

The roots of the problem typically lie in the faulty processes adopted for data collection, management and storage. It’s not uncommon for online retailers to have vague or no data quality standards and resort to manual entry of inventory, sales and customer data, which inevitably causes errors and incompleteness. Other companies, due to the siloed structure, don’t have adequate data exchange tools but employ multiple data processing techniques across different information systems, which increases redundancies and exacerbates reporting inconsistencies. 

ERP, serving as a “single source of truth” for all incoming information, eliminates the possibility of it falling through the cracks and promotes data accuracy and consistency. ERP’s automated data gathering and processing workflows will also minimize the chance of human errors in the data sets while freeing up your staff’s time for more demanding tasks. What is more, report generation tools, available in most ERP platforms by default, can slice and dice raw information in a standardized way, turning it into unified intelligible insights to use in data-driven decision-making.  

#4: Improving supply chain visibility 

The pandemic-induced proliferation of online retail has altered consumers’ expectations, but the shift is particularly noticeable in terms of order delivery. Today, customers want a speedy delivery that takes a few days at most, and expect the retailer to commit to it. They also don’t tolerate being kept in the dark about their order’s progress, as well as arising delays or issues. But delivering on these expectations is proving difficult for the majority of brands. 

Historically employing isolated on-premises systems for different supply chain operations, retail has been grappling with supply chain transparency, but not very actively. As a result, with 16% of the US and European retailers having satisfactory real-time supply chain visibility and 60% possessing comprehensive analytical capabilities, as per the joint 2020 research on ecommerce logistics by Geodis and Accenture, only a limited number of companies can ensure both their clients and staff have real-time visibility into stock levels and delivery process and timeframes. 

A cloud ERP platform can serve as a much-needed connecting element. Integrated into the ecommerce ecosystem, it will facilitate real-time data flows across remote supply chain systems and provide a full view of the inventory levels, warehouse capacity, and product movements. The company can use these insights to monitor supply chain workflows and keep customers up-to-date about product availability and delivery progress.    

What is more, with all the data automatically gathered in one place, easily available and high-quality, ERP promotes evidence-based planning and optimization decisions. Thus, drawing on the diverse data sets, the procurement department can timely identify fluctuations in demand and timely react to them, making sure the company caters to customer needs and avoids out-of-stock situations.    

#5: Supporting omnichannel commerce

Modern consumers, especially younger generations, are leveraging multiple channels to interact with an ecommerce brand and are switching from one to another constantly through their ongoing journey. Against this backdrop, an omnichannel approach to retail, or uniting all touchpoints into a single ecosystem with real-time consumer data flows, is a surefire way to keep pace with customer expectations of a seamless, consistent and personalized experience. 

In the recent years, many large retailers and SMBs set course on omnichannel transformation, but despite the investments and effort, the industry’s maturity score remains at a low 37%, found Aptos in their State of the Omnichannel Customer Experience 2020 survey. 

One of the major barriers to omnichannel personalization is stakeholders’ assumption that it requires large technology investments. While a company may indeed require to properly streamline and personalize customer experience, an ERP platform can successfully assume the considerable bulk of other, less sophisticated tasks. 

First of all, ERP can automatically synchronize customer data like personal information, order history, loyalty points, etc. across the accounts and touchpoints, eliminating friction along the customer journey. Also, having real-time visibility into the customer purchase history and interactions as well as the store’s inventory, stock levels, and shipment processes, support agents and sales assistants can be more helpful to customers, resolving their queries and providing them with necessary information without delays.  

Last but not least, as a “single source of truth”, such a platform will consolidate data across customer touchpoints, sales and service channels in its entirety, providing as accurate and consistent a picture as possible for further analysis.

Closing thoughts

Ecommerce ERP is not a silver bullet that can give your company a dramatic boost overnight. The implications of implementing this versatile, feature-rich tool are subtle yet persistent: as it supports your retail operations, makes them smarter, more automated, and data-driven, the solution makes your way towards a sustainable growth smoother. 

At the moment, the transformative effect of ERPs is being actively explored by numerous B2B and B2C retailers. We believe, it won’t be long until ecommerce catches up with other ERP champions.