ERP stands for “enterprise resource planning” and is a business software solution designed to manage all aspects of a company’s operations including; accounting, order entry and processing, inventory, contact management and warehouse management. ERP software replaces the need for purchasing and integrating multiple standalone inventory, accounting and CRM systems and works best for growing businesses looking to automate processes, increase efficiencies and reduce manual work.
When starting a wholesale distribution company, one of the most important considerations to make is what (if any) business management software is necessary. For most small companies, the first software purchase is made in order to manage the company’s accounting and financials, and many small businesses can benefit from introductory systems such as QuickBooks. Usually at this stage a company’s order volume is still low enough that managing inventory and the picking, packing and shipping process can be easily accomplished with the help of pen and paper or simple business tools such as Excel.
As order volume increases and the company continues to grow, there will come a time when additional software is needed. Errors are being consistently made as a result of mostly manual processes, new sales channels are being added and the competition is increasing. It is at this stage that it is time to begin looking for software tools that can be added on to an existing accounting platform, such as inventory specific systems. Although the company is experiencing moderate growth, it is still manageable with the addition of other simple software packages and perhaps a change of processes.
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Over time, as the company continues to grow it will need to start looking at software as a strategic investment and to move to a fully-integrated all-in-one solution. This is often necessary as an alternative to hiring more employees, and may also be influenced by the added complexities of business processes as a result of growth. Has the company added multiple warehouses? Does the company drop ship product? Does the company work with multiple currencies? Is the company looking to expand to other sales channels such as eCommerce? There will (hopefully) come a time when the software being used can no longer keep up with company growth. This can often leave business owners stuck managing multiple disparate systems, which means they’re no longer able to focus on the core of their business and selling product. It is now appropriate to begin searching for ERP software. ERP stands for “enterprise resource planning” and is essentially used to describe software that is designed to manage all aspects of a company’s operations including; accounting, order entry and processing, inventory and warehouse management. ERP software is typically categorized as a Tier 2 system and is designed to replace all existing systems as a stepping stone for continued growth. Certain features that were unavailable in introductory systems, or provided but with very limited functionality, are inherent in true ERP systems. These include: robust reporting, multiple units of measure, multi-locations and multi-currency, integration with email and unlimited file size and transaction volume. Since ERP systems are designed to scale with company growth, they also provide advanced functionality that can either be purchased at the get-go or added on down the road. Examples include: full two-way integration with eCommerce sites, barcode scanning and mobile picking, landed cost tracking, lot tracking and CRM.
Knowing the appropriate time to start searching for an ERP system is important, as implementation timeframes are significantly longer than those of introductory systems. It is important to begin the search and make a decision while your current systems are still adequate, and before your existing systems shortcomings begin to have a negative impact on your critical business operations. Business growth does not always follow the examples outlined above and therefore certain businesses may benefit from ERP systems as their first or second software choice. To learn more about ERP software including benefits, costs and implementation methods, check out our Infographic: What is ERP? Click image below to view full infographic.