When Is the Right Time for Your eCommerce Business to Implement ERP Software?

Introduction

As an eCommerce business owner, it's easy to get caught up in the daily grind of operations and miss the signs that your company has outgrown its current systems. One crucial upgrade many growing online sellers need to consider is implementing Enterprise Resource Planning (ERP) software. But how do you know when the time is right to make this significant investment?

In this comprehensive guide, we'll explore the key indicators that signal it's time to move to an ERP system, the benefits you can expect, and some of the top tools to consider. We'll also look at how your technology needs evolve as your business grows and how to allocate fulfillment resources effectively.

Understanding ERP Software

Before diving into when to implement an ERP system, let's clarify what it is and how it can benefit eCommerce businesses.

ERP software is a comprehensive tool that brings your entire eCommerce operation into one unified system. It centralizes data, optimizes fulfillment, streamlines processes, and integrates various business functions. For online sellers, this means having a single platform to manage everything from inventory and orders to finances and customer relationships.

The Key Benefits of ERP for eCommerce

According to Dave Shaffer, Head of Products at Pipe17, there are four primary benefits for eCommerce businesses moving to an ERP:

1. Financial control: ERPs provide better insight into finances across your whole business. You can quickly see the cost of goods sold and calculate average margins by sales channel.
2. Centralized sales channels: An ERP system brings multiple sales channels into one unified platform. This reduces the time spent navigating between different marketplaces and allows you to provide a more standardized and streamlined service to customers.
3. Improved product development: By integrating your primary business functions, you can optimize the product development process. This includes visibility into raw material lead times, optimizing shipping methods for cross-border shipments, and calculating product availability for B2B sales.
4. Inventory efficiency: ERP software that integrates with your fulfillment systems enables complex and unified inventory management rules across multiple sales channels.

4 Signs It's Time to Move to an ERP

While the benefits of ERP software are clear, it's a significant investment that requires careful consideration. Here are four key indicators that your eCommerce business is ready for an ERP system:

1. You're Processing 1,000+ Orders Per Day

When your business consistently handles more than 1,000 orders daily, it's a strong sign that you've reached a scale where an ERP system becomes necessary. At this volume, your current systems are likely working at maximum capacity to manage various aspects of your business, including:

• Sourcing stock
• Listing items
• Processing sales
• Fulfilling orders
• Handling customer service queries

Simultaneously, you're likely running separate systems for accounting, HR, and demand forecasting. Juggling all these different tools and processes becomes increasingly challenging and inefficient as your order volume grows. An ERP system can unify these operations, streamlining your workflow and improving overall efficiency.

2. Your Revenue Has Hit $25+ Million and Is Still Growing

Aditi Dash, in her guide on "Navigating ERP for CPG Brands," notes that "An ERP is really expensive, and most brands can't afford it. Typically, companies have $25–50M in sales before they implement an ERP."

As your company's revenue reaches and surpasses the $25 million mark, financial management and controls become crucial for safeguarding your business. At this scale, you need to keep a closer eye on cash flow, unit economics, margins, and profitability. An ERP system provides the comprehensive financial oversight and reporting capabilities necessary to manage a business of this size effectively.

3. You're Commissioning Your Own eCommerce Platform

If your business has grown to the point where you're considering building a custom eCommerce platform, it's likely time to implement an ERP system as well. Many large retailers and eCommerce businesses use tailored systems for selling online, and this level of customization often goes hand-in-hand with the need for robust, integrated back-end systems.

By implementing an ERP system alongside your custom eCommerce platform, you can ensure seamless integration between your front-end and back-end operations. This synchronization can lead to improved efficiency, better data flow, and enhanced customer experiences.

4. Things Are Slipping Through the Cracks

As your business grows, managing multiple systems, manual processes, and fragmented sales channels becomes increasingly complex. If you're noticing more frequent mistakes, oversights, or inefficiencies in your operations, it's a clear sign that your current setup is no longer adequate.

These "cracks" in your processes can lead to financial losses, reputation damage, and missed opportunities. An ERP system can help you get a handle on all aspects of your business, reducing errors and providing a clear, comprehensive view of your operations.

The Typical eCommerce Journey to ERP

While every business is unique, there's a common progression that many eCommerce companies follow on their path to implementing an ERP system:

1. Starting out on a single online marketplace (e.g., Amazon)
2. Expanding to multiple marketplaces (e.g., eBay, Walmart)
3. Creating your own eCommerce website using platforms like Shopify or BigCommerce
4. Outgrowing your eCommerce platform and building a custom front-end website while retaining your existing shopping cart

While it's possible to implement an ERP system at any stage of this journey, it typically becomes financially viable and truly beneficial at stage four. This is when many businesses start adopting "headless commerce" - using separate front-end and back-end systems to provide a comprehensive eCommerce experience.

Top ERP Tools to Consider

When you're ready to make the move to an ERP system, there are several excellent options to consider. Here are some popular ERP solutions and supporting tools:

ERP Systems

• NetSuite SuiteCommerce: A single commerce platform that connects your eCommerce and in-store POS, synchronizing order management, inventory, merchandising, marketing, financials, and customer service.
• Microsoft Dynamics: A full suite of resource planning tools for every department, from sales and marketing to HR and finance. It enables you to engage with customers across channels and unify customer-centric retail experiences.
• Acumatica: A complete Cloud ERP solution that enables companies to put customer success at the heart of their operations.

Supporting Tools

In addition to core ERP systems, there are several supporting tools that can enhance your eCommerce operations:

Front-end Solutions

• Shogun Frontend: A website builder that allows you to create a fully customized web storefront separate from your back-end systems. It offers incredibly fast loading times, enhancing the customer experience.

Checkout Experience

• Bolt: A lightning-fast, one-click checkout that integrates seamlessly with your front-end website. It eliminates the need for customers to enter passwords or personal data and offers sellers a zero fraud guarantee.
• Fast: Another one-click checkout solution that claims to be the world's fastest. Like Bolt, it integrates smoothly with your front-end website.
• Shop Pay: Shopify's accelerated checkout solution that allows customers to save their shipping and billing information for faster checkout on Shopify and Shopify Plus stores.

Connectivity

• Pipe17: A tool that connects and synchronizes your entire eCommerce operation in real-time, including sales, orders, ERP, 3PL, EDI, fulfillment tools, and sales channels.

Building Your Tech Stack as You Grow

As your eCommerce business evolves, so too will your technology needs. Here's a general overview of how your tech stack might develop:

When You're Starting Out

In the early stages, your tech needs are relatively simple:

• Online marketplace platform
• Repricing software
• Basic accounting software
• Email automation tools

As You Get More Established

As you expand to multiple sales channels, your tech requirements grow:

• eCommerce platform and payment gateway
• Multi-channel management software (for listing, order management, and inventory management)
• Shipping label software
• More advanced marketing automation (including cart abandonment tools, live chat, drip-feed campaigns)

During Explosive Growth

When your eCommerce store starts scaling rapidly, your tech stack can become quite complex:

• Custom front-end website
• Integrated one-click checkout
• Customer Relationship Management (CRM) system
• Inventory forecasting and planning tools
• Inventory distribution tools
• Customer reward program tools
• Ad management tools

Allocating Fulfillment as You Grow

As your business scales, it's crucial to adapt your fulfillment strategy. When you start generating significant revenue and experiencing rapid growth, it's often beneficial to split your fulfillment operations.

For example, a seller might initially use a single fulfillment service for both D2C (Direct-to-Consumer) and wholesale orders. However, as order volumes increase significantly, it can be more efficient to handle wholesale fulfillment through your own warehouses (where speed is less critical) while using a specialized service for D2C fulfillment to ensure fast and consistent delivery across the country.

Conclusion

Implementing an ERP system is a significant step in your eCommerce business journey. It signals a transition from a small or medium-sized operation to a larger, more complex enterprise. While the investment in an ERP system is substantial, the benefits in terms of efficiency, visibility, and scalability can be transformative for your business.

The key is to recognize when your business has reached the point where an ERP system is necessary. Whether it's processing over 1,000 orders per day, hitting $25 million in revenue, building a custom eCommerce platform, or simply noticing that things are slipping through the cracks, these signs indicate that it's time to consider an ERP implementation.

Remember, the transition to an ERP system is not just about the software itself. It's about re-evaluating and optimizing your entire business process. This includes your tech stack, your fulfillment strategy, and how you manage your various sales channels.

As you navigate this journey, we at FreightAmigo are here to support your logistics needs. Our Digital Logistics Platform can integrate seamlessly with your ERP system, providing you with powerful tools for comparing freight quotes, tracking shipments, arranging customs clearance and cargo insurance, and automating shipment documents. We're committed to helping you create a streamlined, efficient, and scalable eCommerce operation.

By carefully considering your needs, choosing the right tools, and partnering with the right service providers, you can build an eCommerce operation that's not just successful today, but positioned for continued growth and success in the future.