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When it comes to the eCommerce industry, many production managers and logistics-related decision makers do their day-to-day work in a jumble of spreadsheets. They rely on an ever expanding team to manage relationships, ops, and quality in the network of suppliers that bring their products to life. Conventional wisdom dictates that brands should adopt an ERP (Enterprise Resource Planning) system as a milestone in moving from startup to scale-up. These systems are designed to provide a centralized view of an organization’s data, to provide increased efficiency and data accuracy.
While an ERP system can be extremely helpful, it is not a requirement for obtaining growth and in some cases, can even delay progress! Despite the benefits of using a single integrated system, there are many considerations to review before purchasing an ERP system. These systems do not come without their obstacles in cost, time to implement, and ability to manage processes for fabless brands.
If you are looking to purchase an ERP system to scale your business, you should first consider these five reasons for alternative solutions:
1 – Cost: Moving from the world of small business software into the enterprise software realm can be shocking for the uninitiated. Enterprise software costs start an order of magnitude above startup tools and go up from there. There are also whole new buckets of cost to be aware of: Consulting, Implementation, SaaS, Maintenance, and Support.
- Consulting: Expect to pay a consulting firm handsomely to conduct strategic business analysis, recommend and spec out your ERP and then support change management in your organization to have it work.
- Implementation: No ERP is plug and play off the shelf. Developers will need to take the consulting firm’s spec to and build customized solutions to fit your businesses’ needs. It is not uncommon for at least one of these developers to end up on your payroll in the long term.
- SaaS (up front and ongoing): Expect a big ticket bill up front plus monthly license costs running into the many thousands of dollars. An average Netsuite deployment runs $4000+ per month
- Maintenance: As software updates roll out and your business needs evolve, your ERP will need to be updated and maintained either by an in house development team or by the consultant that sold you the ERP.
- Support: Having access to expert help running your shiny new ERP is not included in your SaaS bill and will be negotiated separately.
2 – Time Commitment: Implementing ERP is akin to open heart surgery on a business. Every data structure and process needs to be mapped out and programmed in. Change management to train and bring an entire organization up to speed on them takes months to years. The cutover process can be likened to trying to move your business from one train to another train while they are both moving. Costs when the transition fails can be enough to bankrupt entire companies (see Target’s disastrous SAP transition and its leading to their $3 Billion failure in the Canadian Market)
3 – Limited ROI: The ROI of an enterprise resource planning system can vary dramatically depending on the industry and size of the business. Much of the resulting ROI also depends on how much initial time and money is invested in the initial launch of the system. In some cases, money can be lost due to poor planning or over-customizing a system. It is best to work with either an experienced team or an expert vendor to reduce poor implementation and reduce the initial costs to better support future ROI. If a system is not integrated effectively, it will be visible in future income and costs.
4 – Rigidity: Because ERP systems are designed to support internal business processes and workflows, many of them adhere to strict inputs and data systems. The value creation processes the ERP is to manage must be fully defined and coded in. This results in a less-than-flexible system without the ability to accommodate specific organizational needs and requirements. While they are useful for inputting exact data and requests, ERPs can suffer in industries that require a more dynamic approach.
5 – External Value Creation: When it comes to eCommerce, the processes that allow your businesses to be agile and bring new concepts to market quickly are both highly dynamic and rely on a network of external partners. They fall outside of your ERP umbrella: not under your roof, and not on your balance sheet. This leaves the most strategically important processes of your business in the spreadsheet domain even after the ERP is up and running.
There is a path to scaling up eCommerce brands without ERP. For truely or mostly fabless brands, a tailored stack of best in breed tools for critical business functions is a cost effective, dynamic, easy to implement path to growth. This stack will include the right accounting package (eg Quickbooks Online Advanced), eCommerce platform (eg Shopify), multi-channel inventory management system (eg SkuVault), and a multiplayer ops automation solution to wire them all together and connect them to the supply network that creates your products.
Supply operations automation platforms such as Omnae, provide the data structures and process controls to build and manage the supply networks that create your products and automate the interaction between your internal systems and that network. This paves the way for complete end-to-end value chain management from factory to consumer without the need to move to ERP.Favorite