ERP software and eCommerce are a match made in heaven!
There are many reasons why, but the following four examples is enough to make any ERP skeptics who sell online change their minds:
- Inventory Management: ERP software helps track purchases in real-time and so makes it easier to manage inventory levels.
- Revenue Management: ERP software automatically updates revenue stats in real-time, making current sales numbers available whenever they are needed.
- Customer Updates: ERP software has everyone up-to-date on orders keeping customers and the customer service team happy and reduces the number of inquiries.
- Customer Demand: ERP software can track customer demand levels against inventory levels and so help eCommerce businesses develop more accurate forecasts about when to scale up or when to scale down current resources.
With so many eCommerce benefits provided by ERP software, it almost seems like a no-brainer when it comes to purchasing and integrating an automated ERP solution for your eCommerce business.
However, before you go out and try to integrate the first ERP software solution you find, you should answer the following questions:
- What problems do you hope to solve with your ERP system, and how should you measure its success in solving them?.
- Which departments will use the ERP software, and how will you train them to use its applications?
- Should your ERP software be designed in-house or outsourced?
- How should you test which ERP solution is right for your eCommerce brand?
Answering the above questions will make the difference between having a poor experience with your ERP software solution and getting all the benefits previously mentioned above.
In the following sections, we attempt to answer these ERP questions via general tips, guidelines, and information regarding ERP software, applications, and solutions.
Define Problems You Wish to Solve
Sure, you sell fantastic products, provide outstanding customer service, and do your best to keep track of trends within your market!
Is that going to be enough, though?
Any business, no matter how successful, faces obstacles and challenges regularly.
The ones that become successful are the ones that are ready to meet those daily challenges, and ultimately, solve them.
An ERP solution can do that—help you solve your persistent eCommerce difficulties and obstacles!
If you don’t already have a general idea of what problems an ERP software should solve, then review the issues your eCommerce business is currently facing.
First, take a look at the areas that most businesses have difficulties with:
- Repetitive & Mundane Tasks
- Communication Issues (management-employees, employees-customers)
- Customer Data & Tracking
- Decision-Making Process
And while being able to mitigate and solve the above business issues is a huge task, ERP software solutions can do it with ease.
Understand How ERP Becomes a Solution
Measuring progress is the only way to see if your ERP solution is a real solution or just a drain of your time and budget. Here are some processes where ERP can give priceless insights and help you make more data-driven decisions.
Integrating an ERP system with your eCommerce website reduces the number of stockouts and streamlines backorders by providing real-time inventory counts, which equates to eliminating many human errors.
Integrating ERP software with your eCommerce store gives you the ability to avoid processing and fulfillment issues through the following automated processes:
- Printing Labels
- Scanning & Confirming Boxed Goods
- Integrating Ecommerce Stores With Major Delivery Fulfillment Centers (e.g., UPS, FedEx)
Returns and exchanges are usually a problem for an eCommerce business as customers are already upset that they have to ask for a refund or an exchange.
What if you could turn this negative experience into a positive one?
With ERP software, you can!
ERP software can increase customer satisfaction by automating the refund and exchange process, as well as providing you with instant refund and exchange reporting and quality control so you can get their refund or exchange their purchase as quickly as possible.
Collecting all the massive amounts of data an eCommerce company needs to make accurate forecasting decisions often seems like an impossible task.
However, a reputable and proven ERP solution can make data collection and analysis a whole lot easier by automating the following tasks:
- Collecting Real-Time Customer Data
- Providing Real-Time Forecasting Estimates
- Suggesting Real-Time Decisions
However, for any ERP software to provide the previously mentioned solutions, it needs to be given a set of metrics your eCommerce biz deems as essential.
Key Performance Indicators (KPIs)
Before getting into which metrics you need to consider to find the right ERP solution for your eCommerce business, you should first know what the “right” metrics are.
First, you should know that the right metrics are not set in stone as a number of them will be specific to your business.
Secondly, you should know that the right metrics to use for your business are called Key Performance Indicators (KPIs).
Then, you should know the definition of KPIs:
Key Performance Indicators, or KPIs for short, are quantifiable metrics that help gauge the overall success of a business over the long-term.
Specifically, they help determine a business’s overall long-term success in the following areas:
- Strategic Planning
- Financial Growth
- Operational Efficiency
Now, the above is just a general description of what KPIs are all about, but to determine which KPIs you should focus on, you need to understand which KPIs give you the most information about the productivity of your online store.
In other words, you need to know which eCommerce metrics show you the financial and operational data required to design strategic processes to optimize your eCommerce platform.
Such data will help you to at least stay competitive but hopefully help you move ahead of your competitors.
Now, it is impossible to give you specific advice on the exact KPIs you should use to determine the success of your store – KPIs can vary depending on what you sell and which sector you are currently in.
However, there is a set of general KPIs that more often than not indicate eCommerce success.
These eCommerce KPIs are as follows:
- Sales Conversion Rates: The percentage of visitors who make a purchase. The average sales conversion rate of eCommerce stores is between 1-5%.
- Customer Lifetime Value: The total revenue you earn per customer over their lifetime (i.e., as long as they remain a customer). This metric allows you to determine the amount you can spend to acquire a customer and how much effort & money you should put forth to retain them as a customer.
- Customer Acquisition Cost: How much it costs to attain a customer. The customer acquisition cost needs to be less than the customer lifetime value to make money.
- Average Order Value: The average monetary amount earned from all eCommerce purchases. Divide all sales by the number of carts in your eCommerce stores, and you’ll know your AOV.
- Cart Abandonment Rate: Percentage of customers who fill their online store carts but fail to go through with a purchase. Nearly 70% of all visitors who fill their cart fail to follow through with a purchase!
The above KPIs are the foundation of all eCommerce business metrics.
Of course, some KPIs that have proven themselves to be useful to many eCommerce businesses, but the ones just mentioned are almost always needed to determine how well an eCommerce store is performing.
Applying these metrics can also help you gauge whether or not your ERP software is living up to its claims and giving you the right information to make strategic decisions that increase the KPIs that matter most to your eCommerce biz!
Train Your Department Staff
After figuring out what problems you wish to solve with ERP software and what KPIs you will need to use to measure its effectiveness, you then have to take a look at what departments should use the software and how to train them to use it.
Most companies who employ an ERP system believe that as long as the IT department makes sure that the new software is technically integrated correctly within the relevant departments, it will run without a hitch. It will not.
ERP solutions are 90% people, politics, and processes and only 10% technology!
The following four tips can assist you in designing an employee-friendly training protocol that will satisfy both management and employees alike and keep business going as the new software is rolled out.
As soon as possible means way before the ERP software goes live, ideally 60 days before.
Starting the training process once the integration is complete, or even a few weeks before that is already too late!
If you wait this long, you will not have enough time to ensure that each department using the software has a firm grasp of its basic functions and are well-versed on how to use them to the business’s advantage.
Timely training will make your employees comfortable with the software and give managers enough time to evaluate departmental project strategies.
Technical & Business Process Training
Even if some of your employees have used ERP solutions in the past, your new software may have unique features that the old one did not.
It is important to train on both the technical applications of the new software and how it will change the way employees will work once it is integrated.
PRO TIP: If possible, customize the training specific to their needs (i.e., focus more on the technical or process side of the new ERP software).
55% of workers turn to their peers to learn a new skill!
You may already have resources within your organization that either have experience or who can learn to train employees in regards to ERP.
Business owners and managers can not always know the intricate details of all their employee’s jobs, which is why it is a good idea to have employees already versed in ERP solutions to coach novices on using ERP software.
Person-To-Person & Online Training
Which is better, peer-to-peer or online coaching?
Quick answer, both!
Many of your older employees will most likely benefit more from in-person training as this is how they have been taught since they began their work careers.
However, millennials, who now comprise 50% of the workforce, prefer online training as they grew up with the Internet.
These two reasons are why we suggest utilizing both.
The good news is that you may not have to create any type of online training or support yourself as most ERP vendors already provide online communities where resources, training, updates, and general support are available.
Look For The Best ERP For Your Business
Most eCommerce businesses believe that they can get by with a generic out-of-the-box ERP solution. Still, many brands require specific customization features that will help optimize their eCommerce processes.
Without these features, they will not be able to utilize their KPIs in a way that brings them consistent results.
Yet, customization almost always carries with it a high upfront cost that small to midsize eCommerce businesses usually can not afford, so they get an IT department to configure the standard ERP software often.
That, in turn, leads to compatibility issues that are beyond the scope of even the best IT employees.
So, the question is—should you go with an out-of-the-box ERP software, a customized enterprise software, or public SAAS software?
To answer this, you should first know what each one has to offer and what its limitations are.
Out-of-the-box ERP Solution
This is the most ‘generic’ type of ERP software.
It comes with all the general tools and features most businesses need from their ERP solution but can not be modified in any way to fit individual requirements particular to a specific company.
They are great for getting your ERP up and running but can not be scaled as your eCommerce business grows.
Here is what you can expect from out-of-the-box ERP software:
- Low Upfront Costs
- Higher Upgrade Costs (software support, licensing, etc…)
- Inflexible Features (can not be changed or customized)
- Infrastructure Changes (browsers, programming language, etc…)
- Zero Growth (can not be altered for scaling purposes)
- Minimal support (if any)
If this doesn’t sound like a good fit, and you know exactly what you need, you can explore more custom options.
Customized Enterprise Software
Enterprise ERP software is another way of saying “custom-built” ERP software as it is designed right from the start with specific business goals in mind.
Companies that use this type of ERP solution get to decide what components and features they need during the design and development process.
Many Enterprise ERP software vendors know how to examine business needs across various industries, including many types of eCommerce models, which take a lot of the guesswork out of the entire custom-built ERP process.
The following are the primary benefits and drawbacks of using custom-built ERP software:
- High Upfront Cost
- Long Rollout Time (it can take several months)
- Built-In Customization Features
- Very Few Compatibility Issues (integrates well with other software)
- Personalized support (strong vendor relationships)
For the most part, custom Enterprise ERP systems are best suited for large companies and corporations due to the high upfront costs and the complexity of large organizational structures.
Public SAAS Software
This type of software is rented instead of bought and shared with other organizations through a central database.
SAAS ERP solutions are accessed via the Internet.
Of course, as this type of software is not owned and has to be shared, it has minimal customization options.
Here are some benefits and disadvantages of using such software:
- Low Upfront Costs
- No Maintenance Fees
- Instant Use (quick implementation & deployment)
- Scalability Options (plans can be changed as business needs change)
- Security Issues (shared database)
- Possible Low Performance (dependant on internet connection & cloud-based server speed)
- Possible Integration & Compatibility Issues (internal applications vs. external applications)
As can be seen above, there are several core options available to you as an eCommerce business owner when it comes to ERP software.
eCommerce businesses need to be taken care of just like any other business, or they tend to get stale.
Stale businesses do not last long and are quickly wiped out by the competition!
Part of keeping your eCommerce stores and processes fresh and competitive is automating many of its processes so you can focus more on the creative and planning sides of your business.
ERP software helps the automation process by integrating your various eCommerce-related departments with your online store(s) so that relevant data keeps flowing to where it needs to flow.
This data is vital to spotting shopping trends before they happen, designing high ROI marketing campaigns, providing a better customer experience, and coming up with sound strategies for future growth, which ultimately leads to a successful long-term eCommerce business model.
Jen McKenzie is an independent business consultant from New York. She writes extensively on business, education and human resource topics. When Jennifer is not at her desk working, you can usually find her hiking or taking a road trip with her two dogs. You can reach Jennifer @jenmcknzie