eCommerce

What is an ERP and how can it help with eCommerce

Mariluz Sampalo

Mariluz Sampalo

Mar 10, 2022

erp system automates and optimizes several internal processes for online shops

Inside this article

  • iconWhat is an ERP system?
  • iconERP features
  • iconWhat are the advantages of implementing an ERP system for eCommerce?
  • iconHow to choose an ERP system
  • iconERP systems types
  • iconERP FAQ
  • Any business looking to expand and grow must detach from the aversion to investing and the desire to cut down on costs. In this sense, the early implementation of an ERP system for eCommerce is highly recommended, especially because the initial investment is not that high compared to the advantages it brings in the long run.

    However, not all ERPs are the same, nor do all online shops require the same tools. This is why sufficient information is key to making the right purchase.

    In this article, we will give you a detailed guide about these tools and share the necessary steps to find an ERP system that works best for your eCommerce business.

    What is an ERP system?

    Enterprise Resource Planning, also known as ERP systems, are management systems that monitor all the activities of a business. 

    They also serve as databases for all departments and staff granted with access. Thanks to ERPs, companies are able to centralise their information and accelerate internal processes without involving multiple members of the team; everything can be available to everyone simultaneously.

    This kind of tool integrates many functionalities to automate several processes: marketing, sales, logistics, post-sale, finances, etc.

    If desired, you can also add modules to further expand the functionalities. In this way, the ERP is transformed into a hub for activities and information.

    ERP features

    Each ERP is different and may be focused on a special field. However, they all share some common features:

    • They join different processes in a single management tool
    • They automate processes
    • They are updated on real-time
    • They allow for accountability in different areas of the business
    • They help to keep track of the logistics and functioning of the supply chain
    • They offer functionalities for product, stock and catalog management
    • They help managing payments
    • They favour marketing, sales and communication with customers

    What are the advantages of implementing an ERP system for eCommerce?

    Traceability of internal processes

    An ERP system contains all information related to the internal and external activities of an eCommerce business. By utilising an ERP system, monitoring the progress of each department becomes easier. It also helps to detect weaknesses or inaccuracies in existing processes and correct them before they have a significant impact. For instance, inexplicable overruns can be a symptom of poor logistics management in your eCommerce business.

    Take decisions based on quantitative data

    Some sensitive decisions can have a significant impact on the stability and future of your eCommerce business. Over 50% of the management activities that an online shop makes are the result of a previous decision.

    Having quantitative indicators will ensure that decisions are made objectively. ERPs are indispensable in this sense since they offer quantitative data to support various business decisions. Among other things, they can:

    • Pinpoint the situation that needs a change
    • Determine goals for the company
    • Establish illustrative criteria
    • Compare different options and review them with precise data

    Likewise, the continuous generation of progress reports will keep you updated on the financial situation of your business at all times.

    Data protection

    Sometimes, due to technical issues, an online shop may need to use a backup of internal data. If the information is very fragmented, it can be difficult to know which backup version stores the information you are looking for. This can be solved by centralising everything in the ERP system, which stores all information in one place.

    Process automation

    ERPs are capable of automating many activities that, if done manually, will consume your time and resources. This is the case with order management, communication with customers, inventory control, reports, etc.

    As a consequence, presale and post-sale processes merge, shortening the eCommerce fulfillment cycle. In this way, order information is sent to the warehouse in real-time, and shipments are processed automatically.

    The efficient management of these tasks will mean that more resources are available for other aspects of your eCommerce business, like the creation of marketing strategies.

    Increase in productivity

    The ultimate result of these various tools is an increase in productivity and an improvement in the profit margins of the company overall. This can be achieved through cost reduction, an increase in the number of sales or a combination of both.

    How to choose an ERP system

    The ideal ERP connects to the rest of the software used by an eCommerce business and perfectly integrates with its existing processes to produce a hub for business management. The problem is that many of these solutions need to be custom-built and can easily go over budget. Opting for an ERP that solves your present needs and stays within your budget is the most reasonable way to get started.

    Identify your core processes 

    When selecting an ERP for eCommerce, it is important to identify the fundamental processes for your business’ growth in the medium and long term since that is where you should allocate your efforts and resources. Otherwise, you would be prioritising activities that are unlikely to speed up your business’ development, and the investment will be less profitable.

    Having said this, what are the processes most relevant for eCommerce?

    • Inventory and stock control
    • Warehouse management
    • Communication with customers
    • Order processing
    • Handling the product catalogue

    Choose according to your knowledge and needs

    When researching ERPs for eCommerce, you will find that some of them are complex tools while others are quite intuitive.

    We would advise you not to pick a more-complex version just because it seems to offer more options. Surely it does, but you will also be paying much more for a tool that you may not be able to afford long-term or, simply, that you are not prepared to use. If its features are too plentiful or too advanced for your online shop, you can probably choose another one that will be just as efficient and which makes more sense for your company.

    Plan future stages for implementation

    Scalability and flexibility are two factors to keep in mind if you want your ERP system to grow alongside your business. The problem comes when measuring the real growth of a company is difficult since it makes it harder to gauge the level of scalability required for further growth. 

    A good practice to solve this issue is to make an implementation plan for new functionalities and see if they fit in your project. If such functionalities make sense, the ERP may be adequate for the scalability of your business. 

    ERP systems types

    Based on their design

    • Custom-made ERP: This software is tailored to a specific business. It tends to cover all of an online shop’s needs since it is built for that company. However, the price can be quite high.
    • Out-of-the-box ERP: These ERPs are much more restricted in their functionalities, although they allow for the integration of external modules. On the other hand, they are more inexpensive. 

    Based on the hosting

    • Local ERP: This ERP is located in the server of the eCommerce business. It offers more confidentiality since the external provider has no access to the data.
    • ERP in the cloud: This ERP is located in the cloud, which means the data is stored externally. The main advantage of this system is that the service provider guarantees accessibility to all staff members. 

    Based on the development

    • Open-source ERP: These ERPs are free to use and allow for modifications. However, you may need help from developers in order to properly use and maintain them.
    • Closed-source ERP: If you want to use a closed-source ERP, you will need to purchase a license. However, they are designed to be intuitive, which makes usage easier than with open-source ERPs.

    Based on the solutions they offer

    • Horizontal ERP: These solutions are built for any kind of eCommerce business, independent of the sector they work in. Their functionalities are considered relatively basic.
    • Vertical ERP: Thoughtfully designed, these ERPs will respond to all needs that a player in this sector may have. A wide variety of options are available.
    erp for ecommerce

    ERP FAQ

    Differences between CRM and ERP

    While an ERP system gives control over all aspects of a business, a CRM system, short for Customer Relationship Management, only tackles the relationship between customers and businesses.

    To simplify things, ERPs are created for improving internal processes —like cost reduction— while CRMs are oriented toward external strategies —like boosting sales—.

    It can be argued that ERPs also manage the relationship an organisation has with external factors, such as customer support or sales strategies. 

    However, you don’t want to bite off more than you can chew. That’s why the leading firms opt for working with both systems; the shortfalls of one are addressed by the features of the other.

    How much can an ERP for eCommerce cost?

    A few years ago, integrating ERP software meant making an immense investment. However, thanks to the reduced costs of cloud systems, many companies can now find options that are simpler and more economical overall.

    In any case, the price of an ERP system for eCommerce fluctuates between €200 and €5,000 per user, depending on the system’s complexity and the functionalities included. If you opt for a custom-made solution, you will need to also consider the costs of development, assessment and maintenance.

    As we mentioned before, there are some open source ERPs that are theoretically free to use. In practice, you will need to hire a development team to operate it, and that alone can become more expensive than a custom-made solution.

    Alternatives to ERP systems

    Although working with an ERP solution can be beneficial for all businesses, only systems that are comprehensive and advanced can truly make a difference. Those systems are obviously more costly. The adoption of an ERP system can be postponed, and the financial risk avoided, by using other tools to optimise work processes.

    Outvio is a clear example of a tool that provides a logical and easy-to-use dashboard that allows you to centralise post-sale operations and thereby automate and streamline your shipping and return tasks. Plus, you only need five minutes to set it up. Get ready to be amazed by how it will impact your online shop!