Find out what ERP integration is, which areas of your business can most benefit, and the best ways to approach implementation.
ERP Integration: Definition, Types, Advantages, and Best Practices
If you have an eCommerce business, there must be times you cast a jealous glance at the likes of Jeff Bezos and Jack Ma. While it may be unlikely that you will ever grow to the size of Amazon or Alibaba, that doesn't mean your business won't grow or be successful.
With so many technological tools and systems available to businesses, not to mention the might of AI-powered automation, you can combine those with more human aspects, such as good customer service and quality products, to boost sales and profits. With the right approach, your business can grow substantially.
At the heart of a good tech-based strategy lies enterprise resource planning (ERP). ERP solutions cover every aspect of the systems, modules, and software that connect your business functions from procurement to sales and customer service. ERP integrates all your business processes into one centralized system. So, how should you approach ERP?
Defining ERP system integration
The simplest way to define ERP integration is as a process of connecting specialist ERP software with various other tech systems, such as warehouse management software or CRM (customer relationship management) systems, so that you have a fully-integrated system.
The ERP market is huge and continues to grow apace. In fact, the global market was worth some $104.1 billion in 2021. As eCommerce tech continues to evolve and new products constantly appear on the market, the need for ERP integration will increase for any organization that wants to be successful.
Efficient ERP integration can allow you to automate many of your business processes, especially ones that are repetitive or prone to human error. This means your staff can focus on other areas that can boost growth and see dramatic operational efficiency and productivity improvements.
Types of integrations with ERP systems
Of course, simply saying that ERP integration involves marrying your business processes to an ERP system is over-simplistic. It can help you know the most crucial systems to consider integrating and what benefits those integrations will bring to your business.
A customer relationship management system may be one of the most important tools you ever invest in. It not only lies at the heart of your customer service and sales teams’ work, but it also helps personalize your relationship with customers, increase customer retention, and can help boost conversion rates by up to 300%.
Integrate your CRM system with ERP software allows all your different silos to communicate with each other and access data on a customer relevant to their role. Every team can improve their performance, whether they work in sales or logistics.
Some of the main benefits of ERP integration include:
- Optimization of your sales funnels, leading to increased sales/conversions and performance improvement.
- Improved collaboration between different teams, such as sales and logistics, leading to a better customer experience
- Improved customer service, such as higher personalization levels, leading to an increase in overall customer satisfaction
- Synchronized and uniform information on your customers that can be accessed by every employee as appropriate.
BI (business intelligence) software can be crucial to business growth. It provides detailed insights that allow informed decisions in areas such as new products, business diversification, demand forecasting. Being able to make those decisions accurately can positively impact revenue growth.
Integrating BI with ERP means that all your departments can access insights into how their particular department operates and contributes to the overall business success. Where department heads or supervisors have some autonomy, they can then make decisions that they think will improve performance. Some of the benefits that come with integrating BI and ERP include:
- Every employee can access insights and relevant data, helping to boost morale
- It can improve the accuracy of demand forecasting and thus enable better business decisions
- It can enhance collaboration across your organization and make employees feel more empowered to contribute suggestions
- It can increase transparency and openness, improving company culture, and employee satisfaction.
While HRP (human resource planning) may not be the first area you think of when it comes to ERP integration, it can prove very useful to your HR team or department. Point-to-point integration can help you plan and improve your workforce as a whole. It can assist you with recruitment by matching job applicants with the desired experience and qualifications you have highlighted.
It can also help your HR team map out compensation and bonus packages, assist with holiday entitlement, and ensure coverage and efficient scheduling. Good integration can also give management insights into employee performance, including periods of illness, and may allow management to identify areas where staff need further training.
Every successful eCommerce business needs good data collection and analytics. Your store is the primary customer touchpoint; it’s where they browse and buy products and can often be the first point of contact. Efficient integration improves the quality of that data and can help in areas such as remarketing and lead generation.
You also need to consider that most eCommerce businesses do not operate solely via their own website and social media platforms. They may be using major eCommerce platforms such as Shopify, so there could be a lot of data to harvest. Thus, integration is essential to ensure easy access to all relevant data. The main benefits of integration in this area include:
- Better inventory management abilities across your business
- Access to crucial data by all departments involved in your eCommerce workflows
- Easier to implement dynamic pricing in real-time.
Some ERP systems come with a project management tool built in. However, many organizations may already be using project management software or prefer a more powerful option if they have a complex business model. Whatever your needs, integrating your ERP system with a project management tool means:
- All relevant stakeholders can instantly see updates on projects and tasks
- You can easily track project costs and can see when something may be going over budget
- Progress can also be easily tracked, both of the project as a whole and of individual tasks where delays may cause logjams
- Easily spot Issues with methodologies
- Better communication and collaboration between teams and/or departments
- HR and payroll teams can see the hours worked, making it easier to calculate any overtime or bonuses due.
Electronic data interchange (EDI)
An eCommerce business requires efficient communication with partners and customers. EDI has long been the communication method that covers everything from payments to shipping. Integrating your EDI with an ERP system means that many communications are now automated.
While EDI may be beneficial for high-volume organizations, it can bring benefits to any size of business. One of its major benefits is automating processes such as invoicing and notifications that can be prone to human error. It also improves data flows and saves money (and reduces environmental impacts) by moving away from paper-based systems to electronic data usage and storage.
Enterprise asset management
Tracking and managing assets are important to many businesses. It can mean extending asset lifetime (through maintenance) and can also track depreciation and identify when certain assets need to be replaced. Integrating enterprise asset management (EAM) systems with your ERP system can be hugely beneficial, especially for larger businesses.
You can get a better overview of all assets and automate alerts for when something needs maintenance or is coming to the end of its lifecycle. This can also help minimize downtime, as you can see when assets are due to be offline. It can also help you to plan ahead. For example, you may need to allocate capital expenditure to replace some assets in one financial year.
Inventory is another tool you may already be using and is also one that garners great benefits from integrating with any ERP system. Efficiently managing your inventory is a cornerstone of any good eCommerce business. ERP integration means that processes are automated and also work with other tools you use.
An integrated inventory management system can improve your restocking process and combine it with demand forecasting to know when to order certain products. It can highlight your best-selling products and those moving slowly and adding to warehousing costs.
Forecasting and demand planning
While some forecasting, such as seasonal demand, may be obvious, you want good demand forecasting on a year-round basis. Integrating forecasting tools with your ERP gives access to all relevant data, including information from the sales team’s predictions, warehousing, market trends, and so on.
Good forecasting is not just about stock levels or new products, it can also help with staff scheduling, particularly in relation to times of peak demand or school holidays. With software integration, every department can access the data it needs to plan for changes in demand and adjust things in real-time.
Supply chain management
Supply chain management (SCM) is crucial to every type of business. Good SCM can offer cost savings to organizations regarding order fulfillment and other areas. It can cover the supply of raw materials to be turned into products or the supply of finished products to third-party retailers.
Integration with ERP can bring you more benefits, thus more savings. It can help eliminate waste, improve efficiency, and help direct your staff where their efforts are most needed. However, it should be noted that this can present integration challenges and should be approached carefully. If done properly, it can offer the following benefits:
- Improved efficiency in every step of your supply chain
- Better customer service that can increase customer loyalty, leading to higher CLV (customer lifetime value)
- Reductions in overhead and operating costs by automating workflows
- Increased flexibility in supply chain solutions that can overcome future challenges.
Financial management is yet another area where you may have existing accounting software and can either integrate it or use the ERP’s own one (if provided). Financial management covers a vast range of factors that can be anything to do with your cash flow. It can include sales revenue, payments to suppliers, payroll, and whatever utilities you may use.
Integration removes the need for manual data entry, something that is prone to human error. It can let you access analytics in real-time so you can monitor business performance and improve your internal financial controls. It can increase financial transparency across your business, from back-office functions to sales, and can also help you with regulatory reporting in areas such as taxation.
Advantages of eCommerce and other types of integration with ERP systems
Of course, the use of ERP, and the benefits of integration with new or existing tools, are not only reserved for the world of eCommerce. Knowing what advantages come from ERP integration can benefit many organizations. It can play a major role in bringing digital to manufacturing and increasing productivity and efficiency.
Real-time data updates
While most businesses will look at regular updates to monitor performance and efficiency, accessing real-time data and updates can be a major advantage as it provides detailed insights into your organization. With advanced BI tools integrated with your ERP, you can get instant insights that can inform crucial business decisions.
Data can be gold for every department of your company. Integrating the tools and systems that collect and analyze data offers crucial insights for every area of your business. ERP integration means that anyone (with authorization) can access whatever data they need to make decisions and drive improvements.
Modernized ERP legacy systems
The costs of complete replacement may be very high. Many organizations seek to modernize their ERP monolithic legacy systems through microservices and APIs There can be particular challenges for insurers and other financial institutions with core and legacy systems containing massive amounts of crucial data.
Integrating these ERP systems can play a major role in this modernization though it should be noted that it can be complex. It can be easier with OpenLegacy. OpenLegacy offers a cloud-native legacy integration platform. OpenLegacy Hub delivers high ROI with a simple, disruption-free, method to generate, extend and manage digital services from legacy systems such as JDE, Temenos, FIS, Infor, Finestra, SAP, and others that operate on Mainframe and IBM i/AS400 platforms.
You may have many parts of your business automated already. With 97% of businesses feeling that automation is important to future success, it’s almost unavoidable. ERP integration allows you to automate repetitive tasks and ones that are prone to human error. These include workflow processes, financial planning and invoicing, payments, and data visualization.
Improved supply and value chain
With good ERP integration, you can improve your supply and value chains. No matter the type of business you run, ERP integration can help automate demand planning and reordering processes as well as supply real-time data on how resources are being used and how staff schedules have positive or negative effects.
Better data visibility
A fully integrated ERP system gives you a full 360° view of your organization’s data. It can cover everything from each step in the customer journey to each step in a product’s journey. It can help you bridge organizational silos and means that everyone can see every piece of data relevant to their role.
Excellent customer service
Customer satisfaction helps drive your business forward, especially with customer retention. Integrated ERP systems, particularly when CRM is involved, mean that customer data is available to any department handling touch points, from sales to after sales to logistics. This means they can provide a smoother customer journey and can contribute towards a boost in customer satisfaction.
Getting the most out of ERP integration solutions
Of course, it’s not just a case of plugging an ERP system in and switching it on; you want to plan purposely so you get the most out of your system and the integrations you choose. ERP integrations go hand-in-hand with cloud modernization and should be part of an overall plan to improve business operations and move away from on-premises IT systems.
Understand what you want to achieve
Before you start integrating, think about what your goals are. A good start is reviewing your current tools and processes and seeing which ones would benefit from ERP integration. Prioritize your integration strategy for tools that will benefit the process in terms of time to on-board, how easily they fit within your technology stack.
Prioritize your data
As with goals, prioritize what data matters most to you. Different types (and sizes) of business focus on different datasets. Knowing what data will give you more detailed insights and help inform business decisions is a major step in successfully implementing an integrated ERP system. You should do this in collaboration with your various departments to have a comprehensive list.
Collaborate with your team
You already know that, without an integrated system, silos present significant hurdles. It’s the same with all decision making around what to integrate and where. Listen to and collaborate with your teams across every silo. They know best what day-to-day problems they face and where integrations might solve those problems and help improve efficiency and productivity.
Plan as early as possible
While careful planning is crucial, procrastination should be avoided. Start planning integrations as early as you can and implement the ones you have identified as priorities as quickly as possible. The thing to think about here is if an ERP integration will bring definite positives to your overall business. Why delay things till later?
One part of planning an integrated ERP system is determining which KPIs will indicate that your strategy succeeded. While different businesses may look at different KPIs, there are generally five that can help monitor how successful your ERP integration has been:
- Increases in revenue and sales/conversion rate growth
- The customer experience (CX) and customer satisfaction levels
- Project margins and project efficiency
- Overall operational efficiency and business productivity
- Employee satisfaction levels.
Choose the right methodology
It may all sound easy, but did you know that 50% of ERP implementations fail on the first attempt? That means choosing the right ERP integration methods could be a make-or-break decision. It needs to suit your current IT setup and one that will reduce the risk of mistakes. There are three primary methodologies you can consider:
- Big bang: with this methodology, you implement integrated ERP for your whole organization on the same date. This approach has to be planned very carefully, as one error could cause a domino effect across your business.
- Phased approach: this method is much safer than the big bang approach and involves rolling out ERP integration more gradually. You can do this for one or more processes at once and by department, location, or whatever suits you best.
- Parallel method: with this final methodology, you implement the new system while still running your legacy systems. Using hybrid integration will reduce risks and complexities significantly.
Consider insights from end users
While you may have sought input from relevant parties within your organization, what about your end users? They will also see (and reap) any benefits of a successful ERP implementation and integration. Use your social media pages to survey them for insights or send a survey via email. They can offer a different and unique perspective on how well your integrations have worked.
Optimize your business operation with ERP integration
As you can see, ERP integration can bring many benefits to your organization and boost productivity, improve efficiency, and take your customer experience up a level. That’s not to say it’s always a simple process, and it’s why ERP integration should be carefully thought out and planned before implementation.
Some ERP systems, such as SAP, can be incredibly complex, but this is a system that is used by many large organizations, especially when they rely on multiple applications and systems developed by third parties, such as Oracle NetSuite and Salesforce. However, using a good SAP application integration tool can help you overcome any hurdles you face and move quickly to SAP integration.
By using the OpenLegacy integration platform for on-prem, core, and legacy systems, your team can quickly and easily develop APIs and connectors from your SAP or other ERPs, and legacy systems so that you can move towards a fully-integrated system that delivers high-quality digital services. Your developers can generate all the APIs you need to move to full integrations.
As well as APIs, your team can also generate Angular HTML5 and RFCs (remote function calls) from your business APIs and deploy them wherever you need them; on-prem, in the cloud, or both. . You can overcome difficulties with any ERP system by using OpenLegacy’s Cloud-Native Integration Platform..
ERP integration FAQs
What is the role of ERP systems in systems integration?
ERP systems act as a central hub that can combine various business applications your organization may be using. It allows wider accessibility and collaboration between silos, automates many processes, and provides a single source of truth, information, and data.
What are the types of ERP integration?
There are many different types of ERP integration, which can vary according to business type and needs. However, these are five of the most common ERP integrations, especially for eCommerce businesses:
- CRM: This type of ERP integration can enhance communication and help your teams easily access comprehensive customer data. This can help improve the customer experience and boost your customer satisfaction levels.
- BI (business intelligence): Integrating your BI tool, makes it easier (and more efficient) to collect and analyze your relevant internal data. This means your managers can make informed business decisions and action plans.
- HR (human resources): With good HR integration, it’s simpler for your HR team to handle every aspect of employee management, from onboarding to employee records. It also helps to automate more repetitive processes and can streamline your overall HR workflows.
- Project management: Many organizations have ongoing projects with sub-tasks being undertaken by different teams. With project management tools integrated into your ERP system, it makes monitoring progress, identifying potential logjams, and keeping track of scheduling and costs easier.
- eCommerce: eCommerce integration means a business can link the various stores and platforms they may be using and, most importantly, closely monitor inventory levels to avoid stockout or backorder scenarios. They can also track incoming orders and tie them to demand forecasting.
How can ERP integration help to achieve wider business integration?
The easiest way to think about ERP integration is to imagine a workforce that rarely communicates with each other. ERP integration gets them ‘talking’ by linking and synchronizing your ERP system with your most important business apps. This can help towards further integration through communication and collaboration.
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