What is an ERP and When Do I Need One?

Published on October 13, 2022
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Filed under Warehouse
Read time 9 Minutes

Startups and newer SMBs don’t usually plan the growth of their information technology systems. Over time, they usually acquire a collection of individual apps and interfaces to manage different functions. While this usually works fine in the beginning—allowing the business owners to learn new processes—it tends to become too tedious to keep up with.

For example, the first IT system a company uses is frequently for the founder to simply email a spreadsheet of their orders to the supplier. Next, they can launch their product on a marketplace like Amazon. Once money begins to flow in and out, they add a Finance and Accounting app to manage their books. Eventually, they open their own B2C (business to customer) ecommerce site using Shopify, Square Online Store, Magento, Big Commerce, etc. They may also add a shipping software like ShipStation to fulfill and ship their orders. If they grow more, they might add EDI to process volume orders with large retailers. They might also add a B2B (business to business) ordering portal if they have a network of resellers or boutiques.These IT services are easy to add separately.  Does any of this sound familiar? 

Over time, these separate processes become a costly liability. Their disconnectedness prevents the leadership of the business from having an accurate view of the whole business. The disconnection also limits how effectively a business can scale—threatening brand-crucial customer satisfaction. As any ShipStation user knows, it can become tedious and costly to rely on manual enter or copy/paste data between different apps.  An ERP ultimately saves you a lot of time, money, and reduces stress. 

By this point in growth you’ve built a real business and it’s getting complex—a handful employees, investors, a growing set of customers, inventory and facilities, you have a real chance to succeed. But you also run the risk of missing a turn at high speed as you accelerate. At this point many entrepreneurs sense that they “need something more.”  But it can be difficult to articulate what they need because it’s all new territory. This is the point to consider an ERP, because it’s a solution designed for managing these risks.

Benefits of an ERP

Integration of processes: At its core, an ERP is a process integration engine, which weaves together the activities from each area of your business—Finance, Sales/Service/Support, Purchasing, Inventory & Distribution, and Production. The integration of these processes creates a better view of the business as the end result of its operation.

Cash Management: An ERP allows you to manage your working capital and to see where your resources are producing the most ROI. 

Transaction Throughput: ERP systems, like SAP Business One, are designed for volume transaction processing. Their throughput is quite high and can easily grow as you do. 

Analytics & Reporting: With up-to-the-minute dashboards and reports, an ERP gives instant insight into all aspects of your business. Over time, the accumulated data in the ERP system of record becomes a valuable asset to forecast and make investment decisions. This visibility makes ERPs an excellent platform for viewing what SAP calls Pervasive Analytics.   

Customer Satisfaction : Customer experience is crucial to your brand it drives shareholder value. With all the moving parts of your growing business, if one hand doesn’t know what the other is doing, your customers are going to feel it and they will make their feelings known. The process integration and orchestration enabled by the ERP empowers you to use that customer experience as a competitive tool for growth, instead of fearing it as a liability.  

Security: At a certain point, you need a system that manages access to different types of data by different people in the business. ERP does this as part of its role-centric design.

Number of SKUs: An ERP can handle a lot of SKUs, which is valuable because it can be surprising how rapidly your SKUs expand as you grow with new channels, new products, new geographies, new marketing campaigns, etc.

System of Attribution: An ERP is vital for attributing and measuring results from marketing investment.

Regulatory Compliance: If your business needs to comply with regulations, an ERP can be vital.

Prepare for Exit: Startup teams are so focused and dedicated to the business that many don’t take time to consider selling the business. But someday, you might want to exit, and having an organized system of record helps increase the valuation.  

Financial Risk: With all those moving parts that your business now has (as well as expanding investments in people, facilities, equipment, suppliers and partners) there is a lot of risk.  Accurate information is the key factor for reducing risk, and the ERP will provide that.  

How SAP Can Help

In addition to solving pressing problems now, an ERP also lays a solid foundation for the future. SAP has invested tens of billions of dollars to develop the expertise that is embodied in our ERP software platforms. This intellectual property provides a sophisticated foundation to support core business operations into the future.

ERP is not typically a consumer product, it requires discussion, tailoring, and ongoing support, so it is typically sold by ERP vendors via certified partners to small businesses. SAP has one of the largest and best-maintained partner communities, serving 170+ countries, and our partners are specialists in not only the skills needed to run the SAP ERP system, but also the business processes it manages. In effect, they become both a contract IT department for the customer’s business, and a business consultant on how to achieve optimal results through optimized business processes. Many of these certified SAP partners have now joined the ShipStation partner program and offer ERP solutions that are pre-integrated to ShipStation to minimize disruption to your business when you switch to an ERP. Those pre-integrations also reduce cost and time-to-value for your business—it’s not uncommon for an SAP channel partner to completely migrate a customer to SAP Business One in 1-2 months, and at a much lower cost than you might expect.

Questions? Please contact us or an SAP partner at this link. We’d love to help your business run better.

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