What is ERP Software and is it the Right Choice for High-Growth Brands?
What is an ERP and what is ERP software?
ERP is an enterprise resource planning system, which refers to software that helps companies conduct and manage their business processes. If that sounds broad, that’s because it is. Brands can use ERPs for everything from manufacturing to human resources and inventory management to accounting.
Essentially, an ERP wraps up all of the various existing tools, processes, and systems a brand has in place and centralizes it in a single location.
It sounds great, in theory. But in reality, ERPs are better on paper. If you’ve ever heard the saying “jack of all trades, master of none,” that’s the case when it comes to ERPs. Think of it as the spork of software: it isn’t a great fork or spoon. Alternatively, all-in-one shampoo and conditioner: it doesn’t really work well when combined into one.
While ERPs can do so much for your retail business, they’re not able to do each thing extremely well. Instead of being a specialized solution for a particular area of your business, it offers “generalist” support and functionality.
ERPs started out as a finance-first solution. This means that while the finance and accounting features may be perfect for you, the other features of the ERP software may lack. While the finance side of things may go smoothly, you’ll likely find it harder to hit growth goals in other areas for your brand.
For a scaling online retailer, lack of inventory management capabilities specifically can hinder growth. Not to mention the fact that ERPs, because they’re so large and robust, the implementations are often done by third parties. This can seriously inhibit a scaling brand’s ability to get creative and find outside-the-box solutions and strategies. Plus, those third parties aren’t always as accessible as you need them to be.
To put growth first, multichannel retailers need to put operations first — and that means choosing agile, flexible solutions that let your team experiment, move quickly, and scale rapidly.
ERP system examples for brands
As briefly mentioned earlier, ERPs cover a wide range of business processes. Here are some examples of the types of systems ERPs can accommodate for retailers and brands:
- Finance and accounting: managing accounts receivable, accounts payable, payroll, and other financial transactions
- Human resources (HR): talent management, employee management, benefits administration, etc.
- Customer relationship management (CRM): facilitating brand-customer interactions
- Order management: keeping track of order fulfillment
- Business intelligence: data-driven business analysis and reporting
- Warehouse management: monitoring and optimizing distribution centers and warehouse operations
- Inventory management: tracking stock levels, forecasting, determining reorder points, etc.
- Supply chain management: tracking goods from manufacturing through distribution
- Point of sale (POS) inventory software): in-person transactions and retail reporting and analytics
- eCommerce management software: selling via online channels, both owned and third-party
- Marketing and sales: managing and tracking promotional campaigns and conversions across all channels
So, what is an ERP system you can get for your brand? There are many well-known ERP examples, including:
ERP for high-growth brands vs. SMBs
60% of ERP projects are unsuccessful. We touched earlier on some of the downfalls of ERPs, but let’s look at it specifically through the lens of an SMB and a fast-growing digitally native brand.
For high-growth brands
Like SMBs, budget is a top priority for rapidly scaling brands. As your business grows, so does your list of expenses. An ERP implementation is a hefty bill to add to that list.
Even more important than budget is time. ERP implementations are often slow-going. 57 percent take longer than planned, and in a fast-moving eCommerce world, that can make all the difference in staying ahead or falling behind your competition.
If you spend months out of the year implementing an ERP, that’s time taken away from your business. And post-implementation, you’ll need to hire and onboard a full-time employee(s). They’ll be solely dedicated to understanding how the ERP works and dealing with its limitations. This takes away from the agility that you need to grow as fast as you need to stay ahead of the competition.
Because of how robust ERP solutions are, and their finance-first nature, they’re often useless for much else aside from financial reports. “The non-accounting modules are just so poorly designed that when you’re done dealing with it, all you really have is an accounting tool,” said Tina Gregory, CFO for High Growth Brands.
ERPs are rigid and require companies to work within the existing confines of the software. Brands with high growth goals need flexible solutions that they can quickly customize on the fly to meet their needs. These brands aren’t sticking to “normal” methods of retail. To be a creative, high-growth retailer you need a tech stack that can change and grow with you — and accommodate non-traditional go-to-market paths.
Typically, the interface on ERPs is cumbersome and outdated. Lacking a user-friendly experience will not only make the tool difficult for your team to use, but also increase resistance to adoption. Plus, when your team is moving a million miles a minute, they don’t have time to be held back by rigid systems.
Aside from the software itself, an ERP implementation can be met with lots of internal resistance. People are conditioned to resist change, and for an implementation to be successful, you need the whole team on board. And as your team expands with business growth, that’s more people who need to get up to speed — in other words, more training that you’ll have to either provide internally or wrangle your ERP support team in to assist with.
Getting enough budget to handle an ERP implementation can be a real challenge for SMBs, especially when you consider the fact that more than half exceed projected budgets. You’ll typically need to hire a third party to handle the implementation, and possibly ongoing admin staff post-implementation. Most ERPs won’t stick around for long to help you continue to use the software. This can quickly eat away at an SMB’s budget — that could be $100k/year you’d be able to otherwise invest elsewhere.
Lack of support from the implementation team makes your learning curve that much more difficult to overcome. And once it is implemented, ERPs require extensive training for every individual who’s going to use it. Are you going to be able to offer this training in the absence of the ERP provider? Even if you have the time for it, you aren’t as intimate with the features of the software as someone from their support team.
Beyond that, there are other potential problems. Once you’ve assembled all of the modules to support your business, the bill is likely to be a lot higher than you had anticipated. Even packages built for multichannel retailers don’t have all the capability you need, and the offerings are often too broad and mediocre at best. You’ll likely end up paying for modules you don’t even use.
Still, you’re likely spending less than many of their big-name customers, which puts you at the bottom of the proverbial customer totem pole. Think about it this way: Are you more apt to help your customer who spends $10,000/month with your company, or the one who spends $100/month?
For SMBs, it’s often better to focus on your most important areas of the business and find specialized, best-in-class solutions around that. Then you can work to find integrations to cover other areas of your business.
Conclusion: Moving forward with ERPs?
ERPs are a great option for some companies. Larger, established brands with steady growth can often benefit from centralizing various business process. But when it comes to SMBs and high-growth brands, it’s not always the best solution.
High costs, slow implementation processes, and a lack of agility can hurt your business growth and ultimately do the opposite of your intended goal.