Have you ever noticed how quickly businesses are popping up online these days? As the online retail sector continues to expand, the need for seamless e-commerce operations becomes increasingly vital. This demand to synchronize various business processes such as sales, finance, inventory, and customer data has given rise to the widespread adoption of ERP systems. But what exactly is an ERP system, and why is it so crucial for scalable e-commerce businesses? Let’s dive deep into this comprehensive guide to understand the role of ERP in e-commerce.
Understanding the Role of ERP in E-commerce
The strategic alignment of your online sales platform with an Enterprise Resource Planning (ERP) system is important. This alignment establishes a seamless, two-way information exchange, ensuring that data entered into one system effortlessly synchronizes with the other systems, eliminating the need for redundant data entry.
However, the pursuit of e-commerce excellence doesn’t conclude there. Warehouse Management Systems (WMS) play a vital role in this ecosystem. Collaborating seamlessly with ERP systems, they enhance the overall efficiency and effectiveness of your e-commerce operations, ultimately optimizing your business processes.
Key Differences Between WMS and ERP
Enterprise Resource Planning (ERP) and Warehouse Management Systems (WMS) are both critical systems used in the e-commerce ecosystem, especially in industries that rely on supply chains and inventory management. While they have some overlapping functionalities, they serve different primary purposes.
Here’s a comparison between ERP and WMS:
- ERP: An ERP system integrates various business processes across an organization into a unified system. It may encompass a broad range of functions like finance, human resources, procurement, sales, production, and, yes, even some basic inventory management.
- WMS: A WMS is designed specifically to manage and optimize warehouse operations. This includes tracking inventory levels, order fulfillment, receiving, picking, and shipping goods. Moreover, a robust WMS is a hub for strong and adaptive integrations. Strong integrations mean a responsive and optimized warehouse ecosystem.
How Integrating ERP with WMS Can Improve Your E-commerce Business Operations
Integrating ERP with WMS can significantly enhance the efficiency, responsiveness, and scalability of e-commerce business operations. Here’s how this integration can benefit e-commerce operations:
- Streamlined Inventory Management
- Consistent Data Across Platforms
- Enhanced Customer Satisfaction
- Efficient Returns Management
1. Streamlined Inventory Management
ERP typically contains sales and procurement data, while WMS tracks the real-time movement of inventory in the warehouse. By seamlessly integrating these two vital components, businesses can achieve near real-time inventory visibility.
Consider the case of WOW Skin Science, a brand with numerous SKUs. To streamline inventory management and fulfill orders promptly, they used a customized API solution of WMS integrated with Odoo, a US-based ERP software.
What WOW Skin Science achieved?
- 99.99%+ Order Fulfillment Rate
- 112% Order Growth Rate in 7 Months
- Maintained Average O2S Time of 26.8 hours
- 141% Increase in Catalog Size
- Over 8 Lakh Live Inventory Count
This integration allowed Odoo to fetch inventory data daily. When inventory levels dipped below a certain threshold, Odoo automatically generated purchase orders to WOW’s vendors and product manufacturers. This created a positive impact on unit economics by ensuring consistent product availability, minimizing stockouts and overstock issues for the brand, and enabling prompt order fulfillment.
2. Consistent Data Across Platforms
With a robust ERP solution, any update in one system is mirrored in the other. For instance, if a batch of products is found defective and labeled as bad inventory in the WMS, the ERP will instantly adjust financial projections based on this data. A real-world example is the House of Rare, which employs the Ginesys ERP system that pushes the inventory details (store-wise SKU detail) from the brand’s 51 stores into its WMS.
What House of Rare achieved?
- 178K+ dispatches per month
- 710K+ live inventory count
- 34% drop in order returns
- 51+ stores and marketplaces managed
- Maintained Average O2S Time of 27.4 hours
- 12 hrs average dispatch time
The inventory management system then compiles the details of the entire inventory and passes it to the brand’s own website (Shopify) along with multiple marketplaces, providing 360-degree visibility of inventory to the brand and customers across all stores. If a product is unavailable in one store, the system identifies its availability in another, enabling the product to be ordered and delivered to the customer from an alternative location. This ensures that potential sales are never missed due to stockouts at individual locations.
3. Enhanced Customer Satisfaction
The crux of a satisfactory e-commerce experience lies in how promptly orders are processed and delivered. With an ERP integration in place, the data exchange doesn’t just stay confined between the manufacturer and the warehouse. It becomes a seamless flow across the whole supply chain ecosystem, from suppliers to end customers.
This ensures that when a customer places an order, it’s quickly received by the warehouse, minimizing any delay. As a result, processes such as picking, packing, and shipping commence almost immediately. Quicker dispatch means quicker deliveries, making customers happy. Leading brands, such as Mamaearth, recognized these advantages. They rely on the robust capabilities of SAP ERP to elevate their order management.
What Mamaearth achieved?
- Automated order operations resulted in a 99.99%+ fulfillment rate
- Real-time inventory management ensured 3M+ order dispatches/month
- Optimized operations management led to 144% order growth in a short span of 8 months
- Multichannel order management enabled to handle 10,110,393 live inventory count
- Having a live catalog count of 2080, experiencing an increase of 176% growth
- The average order-to-ship time decreased to 17 hours
- Marketplaces increased from 1 to 8
4. Efficient Returns Management
Returns are an inevitable part of the e-commerce business. However, how efficiently a business manages these returns can significantly impact customer satisfaction. Leveraging the power of an integrated ERP-WMS setup can revolutionize the way businesses handle product returns.
Upon a customer initiating a return, the WMS swiftly alerts the warehouse, prepping them for the incoming product and providing precise directives on whether to restock, repair, or dispose of the item.
Parallelly, the ERP handles the financial intricacies, calculating and initiating the necessary refunds or credits. This seamless operation improves operational efficiency by maintaining transparent communication with customers about return statuses.
Commonly Used ERP Solutions for E-commerce Businesses
There are a lot of ERP solutions available for e-commerce businesses. Here are some commonly used options:
- Oracle NetSuite
- Microsoft Dynamics NAV
See how Unicommerce’s E-commerce ERP Integration Platform helps e-commerce businesses manage their operations –
Understanding the core of ERP and its role in your e-commerce business is not just a matter of staying competitive; it’s about future-proofing your business in an ever-changing digital world. However, it’s essential that your tech stack is not only integrated with ERP but should also complement and support each system’s unique functionalities. With the right ERP strategy and implementation, e-commerce businesses can position themselves for sustained success and growth in the dynamic e-commerce ecosystem.
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