ERP Integration: Everything you Need to Know

Danielle Lobo

What is ERP Integration?

ERP integration is the process of connecting your Enterprise Resource Planning (ERP) system to additional applications or software that feed it valuable data. This process helps streamline day-to-day operations, reducing inefficiencies and speeding up tasks across various departments. The ultimate goal of an ERP integration is to act as an extension of your ERP system, empowering employees with tools that increase productivity. While integrations have historically been used to address gaps in legacy ERP systems, there comes a time when replacing an outdated system with a modern ERP solution may be more beneficial.

How Does ERP Integration Work?

ERP integration often leverages APIs (Application Programming Interfaces) to enable communication between the ERP system and external applications. APIs function as bridges and there are several methods including REST (Representational State Transfer) and SOAP (Simple Object Access Protocol).

Data fields from the ERP and the connected application need to be carefully mapped to ensure accurate and reliable data transfer. Poor mapping can lead to errors and inefficiencies, underscoring the need for careful planning. In some unique environments, often with global enterprise businesses, it is possible that a custom integration is built which can be costly and require ongoing maintenance. By understanding these methods, you can ensure the integration aligns with their operational and technical needs. In most cases, your ERP vendor and the external application will work together to integrate. More often then not, you won't need to be involved with the technical side of the project.

The Benefits of ERP Integration

The timing of ERP integration depends on your business’s unique requirements. Consider an integration if you identify inefficiencies or need specific functionalities to optimize workflows. While integrations involve costs, the ROI can justify the investment through benefits such as increased efficiency and reduced manual effort. Additionally, ERP integration streamlines communication and collaboration between different business functions. With all critical systems working together, teams can access real-time data, track inventory, and monitor order status effortlessly, resulting in quicker decision-making and better customer service. Some key reasons for ERP integration include:

  • Minimizing Human Error: Automating manual data entry processes, such as shipping and parcel dimensioning, to enhance accuracy.
  • Centralized Data Management: Eliminating departmental silos by consolidating data into a single, cohesive system.
  • Improved Efficiency: Streamlining processes to save time and reduce operational costs.
  • Enhanced Decision-Making: Providing real-time data for informed, timely decision-making.
  • Scalability: Ensuring your system grows with your business by integrating new tools as needed.
  • Channel Expansion: Integration allows you to work with other vendors and customers that have specific system requirements requiring integration.

Businesses using legacy systems or unsupported software should evaluate whether integration is feasible or if migrating to a modern ERP is a better option.

Examples of Common ERP Integrations for Distributors

ERP integrations help create a unified data flow, improving efficiency across multiple business processes, from inventory control and accounting to HR tasks and advanced analytics. By connecting these critical systems, distributors can automate routine tasks, reduce errors, enhance customer service, and gain real-time insights into their supply chain, ultimately boosting overall operational performance. Below are common integrations and their importance:

  1. EDI, eCommerce & Online Marketplaces: Enables seamless order processing and inventory updates, improving customer satisfaction and operational speed.
  2. Shipping & Delivery: Connects shipping solutions for efficient label generation, tracking, and carrier management helping businesses save costs by finding the cheapest shipping option.
  3. Parcel Dimensioner Integration: Many distribution ERP systems include basic barcode scanning features to speed up warehouse picking and reduce paper usage. Tools like FreightSnap take this further by automating weight and dimension calculations, helping to lower shipping costs, minimize errors, and improve overall warehouse efficiency.
  4. Tax Compliance Support: Streamlines tax calculations and ensures compliance with local regulations in real time eliminating the need for searching sales tax rates altogether.
  5. Industry Compliance Tools: Help businesses follow industry regulations, avoid penalties, and build trust with customers. For example, in the pharmaceutical distribution industry, it’s important to track details like licenses and product specifications. In some cases, specialized software integrations are needed to meet compliance standards.
  6. Payroll & HR Tools: Automates payroll processing and integrates employee management for better workforce efficiency. Beneficial for growing businesses with plans on hiring or businesses who hire seasonally.
  7. Payment Gateways: Facilitates secure, seamless transactions with customers and vendors. Additionally, the integration between a payment gateway and an ERP system allows a business to achieve PCI compliance.
  8. Business Intelligence/Advanced Analytics: While most ERP systems offer basic reporting as part of their standard package, many businesses benefit from exploring dynamic reporting options. By leveraging integrations, you can gain deeper insights through advanced data analysis, supporting better strategic planning.
  9. Document Management and Parsing: Simplifies document workflows and data extraction, improving administrative efficiency and reducing paper.

The above are just a few examples of integrations that can help distributors enhance the efficiency of their ERP. You should carefully evaluate your ERP partners for these integrations to ensure alignment with business objectives and long-term scalability.

The Negative Side of Not Integrating

Your ERP software is designed to streamline and manage specific areas of your business, providing centralized control over operations such as accounting, inventory, and order management. However, it’s important to recognize that not all ERP systems are created equal, and no single system can meet every unique requirement a company may have. While we've already highlighted the benefits of integrating your ERP system with external tools, it’s equally critical to explore the challenges and drawbacks of failing to do so.

  • Data Silos: Without integration, departments operate in isolation, maintaining their own separate data systems. This lack of centralized data results in discrepancies, redundancies, and a lack of cohesive decision-making across the organization. Disconnected systems require more time and effort to transfer and reconcile data, leading to inefficiencies. Routine tasks, such as updating inventory or processing orders, become cumbersome and time-intensive.
  • Poor Customer Experience: Without seamless data sharing between tools, customer information, order statuses, and inventory levels may not be updated in real-time. This leads to delayed responses, inaccurate information, and diminished trust with your customers.
  • Limited Scalability: As businesses grow and adopt new tools, the lack of integration can prevent your ERP system from scaling with you. This results in bottlenecks that require additional manual labor or system overhauls to address. When systems aren't aligned, adapting to new markets, trends, or technologies becomes a challenge. This delays your ability to capitalize on growth opportunities and stay competitive in your industry.
  • Missed Insights and Reporting Opportunities: Integrated systems provide valuable insights by combining data from multiple tools for analytics and business intelligence. Without integration, your organization misses out on critical trends and insights that could guide decision-making.
  • Increased Costs: Failure to integrate leads to higher operational costs over time. The inefficiencies from manual processes, error correction, and managing disparate systems require additional time and resources to manage.
  • Compliance Risks: Disconnected systems can lead to compliance issues, as they make it harder to manage and monitor regulatory requirements such as tax filings, labor laws, and industry-specific standards.
  • Missed Sales Opportunities: Many large-scale retailers require use of specific systems for doing business, which means you might be missing out on working with certain partners if you're not able to properly connect to their systems.

By integrating your ERP software with external tools, you can address these challenges, create more efficient workflows, and unlock the full potential of your ERP system

Best Practices for ERP Integration

To ensure successful integration, follow these best practices:

  1. Optimize Your ERP System: Ensure the system is properly configured and cleaned, facilitating accurate field mapping.
  2. Prioritize Security: Protect sensitive business and customer data by securing all integration points.
  3. Test Extensively: Conduct thorough testing of integrations to identify and resolve issues before implementation.
  4. Plan for Scalability: Choose flexible integration methods that support future business growth.

ERP integrations can be powerful if set up correctly, allowing distributors and wholesalers to optimize their operations, improve efficiency and stay competitive in an ever-evolving marketing. Enhancing the use of your ERP will continue to be a critical step towards long-term success.