Who said ERP was boring?
Enterprise resource planning (ERP) remains a core software solution for many small-and-medium businesses (SMBs). As the supply chain and other core business functions go increasingly digital, SMB users require ERP solutions that offer advanced features and integrate with other key technology solutions.
Enterprise resource planning (ERP) is among the most vital software solutions a company can use because it unites key transactions under one umbrella. Everything from procurement to product data, to accounting and general ledger are part of ERP. But let’s face it, general ledger isn’t that exciting.
Other, newer categories of enterprise software-like digital experience management solutions or human capital management-have grabbed more focus in recent years. However, the fact that some newer enterprise software categories have emerged doesn’t make ERP boring, especially for small- to mid-sized (SMBs) companies that rely on ERP for processes like warehouse fulfillment, supply chain analytics and ensuring that orders get out the door accurately and on time.
For SMBs that rely on ERP for integrated warehouse management system (WMS) functions or other supply chain processes, ERP is their operational life blood. If it works, orders get filled and customers stay happy. If an ERP system for an SMB doesn’t meet operational needs, key processes turn into struggles, or the SMB may find it challenging to keep pace with growth.
Like other ERP users, many SMBs are gravitating toward Cloud-based ERP. According to 2020 research from analyst firm IDC, in 2019, ERP was implemented in the Cloud for 26.4% of ERP projects in 2019, but that will increase to 48.4% of deployments in 2024, as the demand for Cloud-based ERP continues to outpace demand for on-premise options.
Interest in Cloud ERP has been around for years, but not at the high level it has reached over the past year or two, observes Kevin Beasley CIO at ERP vendor VAI.
“We’re seeing the Cloud really sticking in the ERP world these past couple of years,” says Beasley. “Five years ago, probably 80% of our clients were interested in on-premise deployment, and about 20% wanted ERP in the Cloud, and I’d say that today, that breakdown has reversed. The pandemic seems to have driven even more interest in Cloud because of the needs around work from home.”
While Cloud ERP holds appeal by eliminating the need for server hardware and other information technology (IT) expenditures for ERP, most SMBs are looking for an enterprise system that can handle operational priorities by encompassing functionality like WMS, not just corporate functions like accounting. For such SMBs, ERP is far from boring—it’s how they get things done.
While Cloud ERP has gained acceptance, functionality is crucial for SMBs, agrees Gavin Davidson, senior director of product management with Oracle NetSuite, a Cloud-based ERP vendor.
Davidson observes that functions like integrated WMS, or manufacturing features like shop floor control, or integrated e-commerce software, or customer relationship management (CRM) as well as business intelligence capabilities, are often seen as essential ERP functions by many SMBs.
“NetSuite is above all an integrated suite of functions that provides real-time data a company can drive analytics from,” says Davidson. “That broad base of functionality and business intelligence gives you the insight into what is going well with your operations and your business, and where things might be starting to go wrong.”
Having WMS within ERP takes away the need to integrate a best-of-breed solution, says Davidson, but it also ensures that full “context” from ERP is ingrained in warehouse decisions.
“ERP provides more context about issues like a supplier’s past performance in getting shipments to you, or on your past performance with key customers,” says Davidson. “With an integrated suite, you can tie-in that sort of context from ERP, to provide more information for the execution of fulfillment processes.”
WMS needs certain capabilities like RF-directed picking, or forward picking location replenishment rules, says Davidson, but a smooth order fulfillment process also relies on inventory planning and allocation rules at the enterprise level. To that end, he says, NetSuite recently redid its allocation rules management engine for inventory so a certain percentage of goods can be allocated to key customers, or to customer orders that involve the most favorable profit margins, so inventory is readily available.
“ERP has up-to-date costing and profit margin information, so you can set allocation rules that will have tactical benefit when it’s time to execute order fulfillment in WMS,” says Davidson.
Over the years, trust in Cloud ERP has grown as people have become accustomed to Cloud-based office software, document collaboration, payroll, banking or other apps. “Offering an ERP system that is Cloud-only is no longer an issue for people, because of the comfort factor in Cloud solutions that has built up over the years,” says Davidson. “It’s really more about the value you deliver as a Cloud-based vendor through frequent updates to the functionality.”
Most ERP vendors today offer a Cloud deployment option, but some vendors contend there is a significant difference between having an ERP solution that can be hosted in the Cloud and offering ERP and extended applications built for rapid, digital supply chain transformations. For example, IFS, a global vendor that offers ERP, enterprise asset management (EAM), field service management (FSM) and other applications, recently launched IFS Cloud, a single software platform for deploying its applications.
The IFS Cloud offers one data model, using a software technology known as “containers” to enable this architecture and support rapid integration with internal or external systems, using application programming interfaces (APIs). Within IFS Cloud, a WMS has functionality including put away logic, location control, location validation, order picking and pallet building, but the Cloud platform is a farther-reaching capability that allows a user to more readily integrate either internally or externally to support digital business transformations, points out IFS chief product officer Christian Pedersen.
“We recognize that IFS Cloud will be pivotal in bringing success in a customer’s business, and this shaped our approach in several areas: being able to make fast and informed decisions based on a single data model; being completely open with native APIs; and providing one single upgrade experience so customers can focus on what is important, which is to deliver exceptional moments of service to their customers,” Pedersen says.
Other factors to consider with Cloud ERP include whether the software is architected to be offered under a software-as-a-service model, rather than simply paying for a Web-hosted instance of an ERP system designed for on-premise deployment.
While Cloud ERP reduces IT infrastructure costs associated with running ERP in-house, if the solution also has integrated applications in areas like WMS, that removes the integration and migration costs of a best-of-breed approach, notes Doug Johnson, vice president of product management at
ERP provider Acumatica. As a result, ERP solutions for SMBs call for both a strong Cloud option and integrated supply chain functionality.
“To keep costs down, they’re looking for an integrated solution,” says Johnson. “They don’t want to get involved with integration costs if they have a separate vendor for CRM, or order management, or warehouse management. They want their crucial applications integrated into a single front-end that is consistent and runs off a single database.”
Acumatica offers a distribution edition of its ERP with WMS and other functionality to support omni-channel fulfillment, adds Johnson. To support this need, Acumatica offers a B2B e-com-merce portal or can integrate into commerce platforms, as well as WMS, with real-time inventory status for all apps.
The idea, explains Johnson, is that a distribution-focused ERP solution should be able to support orders through traditional sales channels or e-com-merce platforms from a single unified system with current data on inventory and customer history.
“When you can connect all those functions within ERP, you enable a single stream fulfillment process,” says Johnson. “If a customer were to order some products online, and wanted to call back and change part of the order by calling a salesperson, that can easily be done through one system, with a consistent invoicing and fulfillment process.”
Ultimately SMBs are after integrated applications that support operational best practices, rather than a “back-office” solution. As a result, SMBs need a system to exert checks and balances over key operational processes, says Scott Deakins, COO of ERP provider Deacom.
“The SMBs are generally after three things from an ERP solution,” says
Deakins. “They are looking for simplicity of the system, and they want a solution that offers a low cost of ownership. Third, they are looking for a system that can help them prevent costly mistakes and improve their profitability.”
An ERP system with integrated functions in areas like WMS and quality control supports what Deakins calls “process control” over crucial procedures, like adding the right materials to a production batch, or ensuring all the materials available for outbound shipments to customers have cleared quality control steps. Having these types of functions immediately available within one integrated suite can mean the difference between a smooth process and a costly error, says Deakins.
“Having an integrated solution with checks and balances within for processes like managing and releasing materials means you won’t have someone adding the wrong material to a batch, or putting the wrong product on a truck when shipping,” says Deakins. “Those types of errors can cost a lot of money, or potentially harm a company’s reputation in the industry. That’s why it’s important that an ERP solution helps the user company build that high level of process control into its business to help it scale and grow.”
Deakins adds that SMBs in sectors like distribution need functionality such as dock scheduling, support for serialization, and a flexible means of setting up replenishment for order pick/pack locations, all without worrying about integration.
“It all comes down to having all the key information in one centralized system so that gives your warehouse operators an effective view into what needs to be done,” says Deakins.
Roberto Michel is a contributing editor for Logistics Management
This article was written by Roberto Michel from Logistics Management and was legally licensed through the Industry Dive publisher network. Please direct all licensing questions to firstname.lastname@example.org.