Amazon has pushed the pace of retail to super-fast levels, and the trend only continues toward ever-faster sales and fulfillment. To thrive in this new environment, traditional distributors are transforming into blended ecommerce-distribution companies. In essence, these businesses are becoming the ‘one stop shop’ online retailer and distributor. Yet, many distributors, particularly small and midsized businesses, have lagged behind. They have been unwilling or unable to modernize their systems to enable streamlined, seamless experiences that start at the customer, traverse their ecommerce system, and make their way through to the ERP system. As a result, they have put their entire business model at risk.
This post explains the problems associated with having your ERP and ecommerce systems disconnected and the benefits you will gain by integrating them.
The drawbacks to non-integrated ERP and ecommerce
When a distributor’s ERP system is not seamlessly integrated with its ecommerce system, the customer experience suffers. And let’s face it: online retail success relies heavily on positive customer experiences. Online shoppers will quickly abandon retail sites that either perform too slowly or take too long to present accurate item description and product availability data. When customers wait for results, only to find the product they want is out of stock, they look for new shopping options.
Maintaining disconnected ERP and ecommerce systems also costs a distributor in terms of efficiencies lost. On the human resources front, the lack of sales cycle automation means distributor personnel must undertake more manual processes to successfully fulfill orders. Manual processes slow the pace of work and are subject to more errors, but they are the only means of operating when the ecommerce system has no visibility into the fulfillment part of the process. The sales system often books an order and collects the money, only to end up having to process a refund due to lack of available product. The cycle of bad information becomes continuous, as the company cannot manage inventory properly, because inventory levels are based on historical data only ─ not what is happening in real time within the ecommerce system.
The Benefits of Integration
With integrated ERP-ecommerce systems, intelligence rises throughout the fulfillment cycle, shopping and fulfillment activities occur in an automated way, and the entire process quickens. Moreover, the company makes huge efficiency gains. Modern ERP systems can automatically launch new purchase orders when specific inventory levels are hit, helping to avoid poor inventory management and an excessive number of stock-outs.
What’s more, integrating ERP and ecommerce systems occurs easily whether the company has its own warehouse(s) or relies on a third-party logistics (3PL) partner. If you have your own warehouse(s), then you can directly integrate ecommerce and ERP and be ready for modernizing your services. If you rely on one or more 3PL partners, there is just one additional step. Following your ecommerce-ERP integration, you then integrate to the 3PL via EDI. This is standard practice today and requires very little effort.
Integrated ERP-ecommerce in Practice
Consider a typical shopping scenario to see how a distributor performs far better with integrated systems:
A customer buys an item online and wants to return it a month later. However, with no brick-and-mortar store to accept returns, all returns must be processed online.
On the ecommerce side, the customer can log into your website, view her order history, and select the item for return. You issue the RMA, and the customer ships the product back to your warehouse location (or your 3PL partner warehouse). With the ERP system connected to the ecommerce system, warehouse personnel at the Receiving dock would be expecting the package with the return item and already account for it within inventory estimates. It could also have a bin allocation for the item before it arrives. Now, consider that this type of scenario plays out hundreds (or thousands) of times per month, and you can see how much better you can manage inventory and present more accurate product availability information to the consumer. An added benefit is that the financial tracking within ERP would account for product returns automatically, preventing your business from over-estimating revenue.
There are numerous advantages to integrating ERP and ecommerce. From our experiences across a wide range of distribution businesses, seven benefits are realized within the first year, including the following:
If you are in the process of evaluating modern ERP systems, make sure those you consider can integrate to popular ecommerce systems. At Sapphire, we understand the ERP-ecommerce landscape and can help you scope the likely integrations that will be needed within your vertical industry category. Contact us today, and we will be happy to help you prepare to modernize your distribution business.
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