Do we Need a Better ERP for Ecommerce?

A better ERP system is needed for online businesses

This article started as a part of the research I am doing on ERP that can support a modern digital commerce business. That led to several questions to explore:

  1. How has Ecommerce changed the business and requirements to backend s/w needed to operate it?
  2. Why may a legacy ERP not fit the bill?
  3. What would be its design principles if a new ERP system is built today?

To answer these, let’s start looking at Ecommerce data. In the end, backend business operations are all about managing business data, and Ecommerce businesses deal with multiple types of data that are interconnected and have complex taxonomy. Product data are related to prices, orders, media assets, marketing campaigns, and inventory. Orders have references to products, prices, payments, inventories, and logistics.

Ecommerce business needs to deal with a large volume of distributed constantly updated data, and things are getting even more complex lately. Several market trends increased the complexity of Ecommerce data, which made managing digital commerce business even more challenging.

  1. Multiple channels
    The list keeps growing – online stores, retail locations, third-party marketplaces, social media channels, conversational commerce, lifestreaming. Even small merchants are using a variety of channels now.
  2. Unified commerce
    Discover, order, receive, return from anywhere to anywhere
  3. Availability of 3rd party Ecommerce Services providers:
    3PL, marketing automation, shipping aggregators, content management, personalization, etc.
  4. The shift from best of suite to best of breed cloud services
    That leads to an increased number of distributed systems that need data synchronization.
  5. Pace of growth
    Fast-growing businesses create duplicated systems and don’t pay enough attention to data quality.

Let’s look at the design assumptions of legacy ERP systems and see if they still hold in the new world of digital commerce.

Data centralization

The roots of legacy ERPs are in the mainframe and SQL database era. Designers, at that time, could assume that there is always a master system that is the single source of truth. In the current environment, data are distributed across multiple cloud-based systems.

Data consistency

A legacy ERP designer could assume that data consistency is enforced by DB design. We cannot make such assumptions in the Internet time and should design around eventual data consistency and have tools to deal with exceptions and errors.

Stability of Data structure and taxonomy

As the Ecommerce business is very agile and is changing all the time, so is its data. Any assumptions about setting up all required data structures at the initial implementation are not correct anymore. Data and workflows frequently change with new evolving business models. Customizations are the norm, and they should not lead to losing backward compatibility and the ability to get vendor updates.

Length and cost of implementation

Long and expensive ERP implementations are the norm and expected. Ecommerce businesses cannot afford the long implementation projects done by expensive certified contractors.

ERP designed for Ecommerce Business

If one would reimagine a modern ERP built with Ecommerce in mind, what would it look like?

I see several key characteristics:

  1. It is designed to work with distributed data and flexible models. Data change as the business evolves. It should be possible to tune or extend the data model at any time and mix data from multiple sources. It should be possible to retrieve data from different sources through APIs and securely expose your data to be consumed by a 3rd party system. All of these without losing the ability to benefit from the latest vendor updates. AirTable anyone?
  2. It contains a flexible integration platform with prebuilt integrations to popular Ecommerce systems and services. Integrations should not take months and a lot of top-rate billable hours.
  3. Low-code/no-code. A modern system should empower business users to modify processes or implement new ones that make them more productive. They are the people who know the business the best. I would like to see the system documentation written in a simple language and be easy to follow. A lot of videos and no TLAs (three letters acronyms), please.
  4. Best Employee Experience (EX – UX for backoffice users). The Digital Native generation expects their business applications to have the same usability as in consumer services. Today’s knowledge workers demand instant and ability to work and connect to their data anywhere. Mobile optimized UI is not an afterthought.
  5. It supports collaboration within and outside of your organization. A modern ERP system will have built-in support for collaboration with colleagues, customers, and suppliers. If I want to send a quote to a supplier or an invoice to a customer, it should be as easy as pasting a link to WhatsApp. If I want to have a discussion between a procurement team and a supplier, I should be able to create a temporary chat group.

Many new companies are working on addressing the challenges of managing an Ecommerce business. Some work on specific problems like handling returns, shipments, or managing inventory. Others are creating flexible integration platforms.

I believe that optimizing the backoffice operations of a modern Ecommerce business is as essential as optimizing its storefront, and the time has come to make it a priority.

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