Do you really need an eCommerce ERP?
Anyone who has evaluated or undergone an ERP implementation understands the level of effort required across the company to successfully execute. While a successful implementation can be truly transformative for your business, a failed implementation can be incredibly disruptive, and expensive. A key way to mitigate the risk of ERP implementation failure is to thoroughly evaluate if an ERP is the right tool for your company.
Questions to Ask
Before starting your search for an ERP, make sure you have the answers to these questions:
No. 1 - What is your Pressing Problem?
An ERP is a solution that should be implemented after a pressing problem appears, not before. Otherwise, your team will likely see this as too much work for too small of a return on investment for their time.
The problem also needs to be complex and urgent enough that it can’t be solved with a point solution or swept under the rug. This typically means that it involves multiple teams across the organization, and is significantly affecting these teams today.
Example: Non-Pressing Problem
“I need a tool to track my inventory on Shopify and send the orders to my 3PL.”
This only affects one team (inventory management), and there is likely a relatively simple solution available to solve this problem by integrating your 3PL directly into your Shopify storefront. An ERP would be overkill in this situation.
Example: Pressing Problem
“I need to track raw materials across multiple suppliers, and place bulk purchase orders when inventory goes below a certain threshold to avoid selling out. The raw materials are used in multiple BOMs and assembled in our warehouse, and the finished goods are sold on Shopify, Amazon, and Wholesale.”
This example affects multiple teams: Purchasing, Inventory Management, Manufacturing, Order Management, and more. Also, the impact of not resolving this issue is selling out, which will have an immediate negative impact.
Therefore, this is a cross-functional, pressing problem that would justify considering an ERP implementation, as this would be impossible to elegantly solve with a point solution.
No. 2 - Who is your ERP team?
A successful ERP implementation relies on two key internal parties at your company:
- The Executive Sponsor
- The Internal Champion
The Executive Sponsor is typically, the Founder, CEO, or another member of the C-suite team who has recognized a Pressing Problem and is supportive of the search of an ERP to solve this problem. An ERP can’t be implemented by a new hire, and there needs to be top-down support from within the organization to push this process forward.
The Internal Champion is your boots-on-the-ground resource who will be responsible for a lot of the day-to-day implementation work. This is typically a member of the team who is familiar with almost every area of the business, and can work cross-functionally with the separate teams to drive adoption.
It’s important for the Executive Sponsor and Internal Champion to be 2 separate people. In smaller teams sometimes the Founder will try and do both, who is unlikely to have the bandwidth to do either role successfully. Even with larger teams, sometimes a single person will try and fill both of these roles, which is not setting the project up for success.
These two people are also responsible for ensuring org-wide buy-in to the project. An ERP is a big undertaking and the entire company needs to be on board for the implementation and change management to be successful.
No. 3 - Are you ready for Process Changes?
An ERP brings structured processes to teams who may not be comfortable operating within these guardrails. If a team is used to working out of spreadsheets that offer complete flexibility, an ERP will feel rigid in comparison, but this rigidity can bring accountability and scalability to teams.
However, early stage companies do not need processes; they need the ability to act quickly and with flexibility in order to grow as fast as possible. Process adds value at scale, but process can hinder in the earlier stages.
If you’ve successfully answered the above questions, you’re now ready to begin evaluating ERPs. However, the Total Cost of Ownership of an ERP can be confusing, especially for merchants who look at traditional ERPs and are blindsided by the 5 year cost down the line. In the next article we’ll discuss how to evaluate the long term cost and benefits of an ERP.
If you’re ready to begin your ERP evaluation process today, book a demo with our team.