By Michiel Schipperus, CEO, Sana Commerce.
With investment in ERP pretty much a certainty, most manufacturers have sweated both time and money to build, integrate and automate their back office functions and are now reaping the rewards associated with improved product planning, purchasing and delivery.
But the value of the ERP platform goes way beyond its four walls and this is often overlooked. It holds all of the data needed to power other critical software such as e-commerce trading platforms. Yet, rather than properly integrating their ERP with these vital software extensions, many simply interface with the ERP's data, missing the opportunity to gain a true commercial advantage.
Analyst group Frost & Sullivan estimates that B2B e-commerce will hit $12 trillion in sales worldwide by 2020 – around 27% of total manufacturing trade. In the past however, some manufacturers felt that implementing e-commerce wasn't possible within their business, since it was too complex to rebuild all of the business logic required to make it work effectively. Clearly if they still feel like this today they are missing a potentially huge opportunity.
It is this interfacing approach which still leaves many tied up in complexity as they try to trade online. They may well understand the benefits of e-commerce - lower cost of sale, improved service, 24x7 access and ability to compete overseas easily, for instance. However, they struggle to provide functions like individual pricing agreements, calculating complex discounts or generating buying suggestions.
These problems are usually because they are taking data out of the ERP and building separate business logic around it, rather than simply letting the ERP do the talking. This is what we call the interfacing with ERP approach; it limits what companies can achieve and adds unnecessary complexity.
Let's examine some of the issues that can occur.
Some ERP systems simply don't offer common interfaces, meaning that project implementations like e-commerce need special application interfaces to be built. In some cases these will be based on trial and error, making implementation costs and time difficult to forecast.
Eat, sleep, interface, repeat
e-commerce implementations often start with building an interface to pull product data and pricing calculations out of the ERP, into the web store. A second interface is needed to push orders back. And so on - every single link requires its own interface. Beyond cost and time issues, this increases potential errors and lacks agility – delaying and reducing ROI.
Even when standard interfaces do exist you're still effectively running two separate solutions – one for e-commerce and the other for ERP. Maintaining data such as your discounting and catalogue structure in both systems leads to 'double business logic' and structural waste. Orders are also processed twice causing rounding differences and directly impacting invoicing.
There are many more causes of duplicate logic to consider too, such as when pricing models change or new product introductions. Double the work, double the time and double the investment in each case.
One version of the truth
In contrast to interfacing, an integrated web store utilises the data inside the ERP system itself. When an order is placed e-commerce simply finds and manipulates data within the ERP. There's only one integration point, able to process all real-time requests such as customer information retrieval, individual pricing, stock levels, and ordering. Rather than extracting the data from the ERP, the requests are executed inside it using all of the rich data and logic available there. To do so it must be optimised for configuration, knowing how the ERP's logic should react to each request. In true e-commerce integration, the ERP is the 'engine' and the e-commerce platform is the 'driver'.
Sell more, win more
Utilising data within your ERP provides an opportunity to up-sell or improve customer experience. For instance being able to provide an online search function based on product characteristics, or a bill of materials within the web store.
True integration offers additional dimensions to a web store by re-using data that's already there. Extending online product configuration or product
information management (PIM) for example, means that you can serve multiple channels identically.
For manufacturers constantly challenged by tough national and international competitive markets, reducing cost of sale is key. Transparency and insight into their data help to make them be more productive, but being able to use that data to sell more efficiently adds real bottom line value.