Enterprise resource planning for ecommerce: What it is and what to look for
Enterprise resource planning (ERP) software manages a company’s core operations from one system, including finance, inventory, and customer service. For ecommerce sellers, it promises a single source of truth across orders, stock, and accounting. It also brings costs, complexity, and gaps that matter a great deal when you sell on several channels.
The right answer depends on your size, your budget, and where the pain sits. A retailer with a finance bottleneck needs different software from one that keeps overselling on Amazon.
What is enterprise resource planning?
Enterprise resource planning is both a discipline and a type of software that helps businesses manage and integrate their back-end processes. These typically include:
- Inventory management
- Accounting
- Human resources
- Customer relationship management (CRM)
- Supply chain management
In ecommerce, ERP systems manage the processes involved in running an online store, such as:
- Managing orders and fulfillment
- Tracking inventory levels
- Processing payments
- Managing customer data
They also support forecasting and planning for future growth, and they provide analytics to inform decisions. The goal is a single, integrated platform for all of a business’s operations, including those tied to ecommerce, which can reduce costs and improve efficiency.
How do ERP systems work?
ERP systems handle a lot of internal processes, and they often sit at the center of an ecommerce tech stack. Most work in five steps.
1. Data input and integration
An ERP system takes in data from across the business, such as financial transactions, customer information, and inventory levels. Some of that data is entered manually, and some systems import it automatically from other tools.
2. Data processing and storage
Once data is in the system, it is processed and stored in a central database. Departments and users across the organization can then access and analyze it.
3. Workflow automation
An ERP system can automate business processes such as order processing and invoicing, which reduces the need for manual intervention.
4. Reporting and analytics
Most ERP systems include reporting and analytics tools for tracking key metrics, including financial reports, customer data, and inventory levels.
5. Customization and integration
Many ERP systems can be tailored to a business’s specific needs, and they can integrate with other systems, such as ecommerce platforms and CRM tools.
No two ERP systems are the same, and each comes with its own pros and cons. The good ones share a goal: helping businesses reduce costs, improve efficiency, and make better-informed decisions.
What are the benefits of using an ERP?
Improved efficiency
An ERP system can automate business processes, which reduces manual work and frees up time for other tasks.
Visibility and control
A central platform for all operations gives managers a clear view of how the organization is performing, so they can make informed decisions.
Accuracy and data integrity
Standardized processes and centralized data storage keep information accurate and consistent. That reduces errors and improves decision-making.
Lower costs
Automating processes and removing the need for multiple disconnected systems can bring costs down.
Room to grow
A well-chosen ERP can grow with the business, adding users, modules, and locations as needs change.
Better customer service
Better management of customer data and relationships helps businesses provide a higher level of service and support.
Benefits of enterprise resource planning for ecommerce
Ecommerce can look simple from the outside, but any business that handles physical goods carries extra layers of complexity, from stock and shipping to returns.
Say you own an ecommerce business that sells personal electronics like headphones and smartphone accessories. As you grow, you end up managing customer data, accounting information, inventory, and order fulfillment in separate pieces of software. Ecommerce businesses often run on many separate tools, and many of them don’t communicate with each other.
An ERP system can combine those processes on a single platform, which reduces manual data entry. It can manage inventory levels, process payments, and track customer data. Integrated with your ecommerce platform, it can also automate tasks like order fulfillment and product updates.
Ecommerce businesses that use an ERP also gain:
- Better visibility and control of inventory levels
- More accurate and consistent order fulfillment processes
- Deeper insight into customer data, product performance, and sales trends
- Simpler accounting
- Lower manual labor costs
- Integrated analytics that show where to improve
- Better customer service
Disadvantages of using an ERP system
ERPs are valuable, but they don’t suit every business. Weigh these downsides before you commit.
1. High upfront costs
Implementing an ERP system can be expensive, particularly when it involves customization or integration with other systems.
2. Complexity
An ERP system can be complex to implement and maintain, and it requires specialized knowledge and resources. That complexity may be more than your business needs today. Buying for a much bigger business than you run now often leads to sunk costs and frustration.
3. Change management
Moving to an ERP system disrupts operations and requires significant changes to processes and workflows. ERPs are only as good as the data you feed them, so you need complete buy-in and commitment from your team. That means no more inventory numbers scrawled on scraps of paper and no more incomplete CRM entries.
At a minimum, plan on dedicated training for you and your employees. More likely, your team will need to change how it works.
4. Data migration
Moving data from several disconnected systems into an ERP takes time and care. Say you discover halfway through implementation that your CRM data is inconsistent and badly formatted. You have to clean and reformat it, or start over in your ERP, before you can continue.
Migrations always surface surprises. Manage your expectations and budget plenty of time to handle them.
5. Limited flexibility
Some ERP systems offer little room for customization, which makes them hard to tailor to your business. You can reduce this risk by researching thoroughly, asking each vendor detailed questions, and watching a live demo or running a free trial before you sign.
6. Delayed inventory updates
Many ERPs refresh inventory in batches instead of continuously. If stock figures lag behind sales, a fast-moving ecommerce operation can oversell, especially over a weekend when no one is checking the numbers. Overselling leads to cancellations, disappointed customers, and damaged marketplace ratings. For a closer look at where ERPs fall short for multichannel selling, see our guide to whether you need an ERP.
The benefits of an ERP system can be significant. Weigh them against these downsides, and make sure you can manage the demands of implementation.
How do I know if my business is ready for an ERP?
If you’re still unsure, ask yourself these questions:
- Do you have a clear understanding of your business processes and how they’re managed today? Could you document them if you had to?
- Are you dealing with inconsistent data across several software platforms?
- Are you or your employees spending a significant number of hours each week on tedious tasks that automation could handle?
- Do you have the resources and budget to implement and maintain an ERP system?
- Do you have the technical infrastructure to support an ERP system, including hardware, software, and connectivity?
- Are you willing and able to change your processes and workflows to fit an ERP system?
- Do you have the expertise in-house to implement and maintain an ERP system, or will you need outside consultants?
- Are you prepared to commit the time and effort required to implement and use an ERP system properly?
- Do you have buy-in from key stakeholders, including management and the teams who will use it?
- Do you have a clear plan for data migration and integration with your other systems?
If you answered yes to most of these questions, you’re likely a good candidate for an ERP system. If not, it doesn’t mean your business will never use one. It more likely means the timing isn’t right. Revisit these questions every quarter or year to see whether an ERP could help.
If your biggest pain is overselling, channel lag, or slow fulfillment, our guide to whether you need an ERP walks through the alternatives.
What features to look for in an ERP system
Some of these features may be unnecessary depending on where your business is today, but most ecommerce businesses benefit from them.
1. Order management
An ERP system should manage orders from start to finish, including processing, fulfillment, and tracking. It should also handle returns and exchanges.
2. Inventory management
An ERP system should track inventory levels and help with forecasting and replenishment. It should also handle multiple warehouses and locations.
3. Financial management
An ERP system should handle financial tasks such as invoicing, payment processing, and reporting. It should also integrate with other financial systems, such as accounting software.
4. Customer relationship management
An ERP system should manage customer data and interactions, including customer history.
5. Supply chain management
An ERP system should manage the flow of goods and materials, including tracking orders and shipments and coordinating with suppliers.
6. Analytics and reporting
An ERP system should provide analytics and reporting tools that help businesses track key metrics and make informed decisions.
7. Customization and integration
An ERP system should be highly customizable and able to integrate with other systems and applications, such as ecommerce platforms and CRM tools.
No ERP gives equal weight to all of these features. Some prioritize inventory management, and others have especially strong CRM capabilities. Decide what matters most to your business and choose a platform on that basis.
Final thoughts
ERP software gives businesses of many sizes a central system for finance, operations, and customer data. It automates core processes such as accounting, CRM, and supply chain management. It also costs a lot, takes real resources to implement, and needs buy-in from every department in your business.
Already running an ERP? You don’t have to choose. Many retailers keep their ERP for finance and company-wide processes and add Linnworks as the operational layer for inventory, orders, and warehouse management. That saves them from building custom ecommerce integrations. Our ERP page explains how it works, and the 4Gadgets case study shows how one retailer achieved 26% growth after removing an ERP bottleneck.
Not ready for an ERP, but still struggling with ecommerce inventory and order management? Linnworks is a cloud-based platform built for ecommerce operations. It connects with Shopify, Amazon, eBay, and many other channels, so orders, inventory, and listings sit in one place and your team skips the manual data entry. Linnworks go-live can take as little as 40 days, and there’s no on-premise infrastructure to buy. Request a demo to see how it fits your operation.
FAQs about enterprise resource planning
Cost varies widely with the size and complexity of your business. ERP Focus reports an average budget of $9,000 per user and implementation costs of $150,000 to $750,000 for a mid-sized business. Larger companies pay more because they have more users and additional setup expenses.
The timeline depends on the size and complexity of your business. Smaller businesses with simple needs may finish in a few weeks or months. Larger companies often deploy in stages over many months or even years.
Depending on the complexity of your business, you will likely need to dedicate some personnel to set up and manage the system. For smaller businesses with basic needs, a single person with technical skills can often handle the job. Larger businesses may need to hire a dedicated team to manage the system and keep it properly configured and optimized.
Both exist. On-premise ERP solutions are installed on a company’s own server and require ongoing in-house support. Cloud-based ERPs are hosted online and don’t require an on-site IT team.
Cloud-based ERPs are typically more cost-effective and easier to manage, while on-premise solutions offer more control and customization. Microsoft Dynamics is available both on-premises and in the cloud, and Oracle NetSuite is cloud-based. The right choice depends on your business’s needs.
Popular examples include Oracle NetSuite, Microsoft Dynamics, SAP Business One, Sage Intacct, and Acumatica Cloud ERP. Each offers a different set of features and benefits.
An ERP system helps businesses manage core processes such as accounting, CRM, and supply chain management. An inventory management system focuses on managing a business’s inventory and tracking the movement of goods.
The two can work together as a comprehensive business management solution, but they serve different purposes and should be evaluated separately. For the full comparison, see our guide to ERP vs. inventory management systems.