ERP Systems – The Core of Your Business

It doesn’t take a lot of reflection to realize just how much technology has changed our lives, let alone your distributor business.  Where once you took orders by phone or wrote them on an order form or even received them by fax (do you remember your first fax machine?!) and then someone entered them into “the system”, you now provide e-commerce options to your customers for them to enter their own orders.  And while those front-ends get more and more sophisticated as you look to provide your customers with an “Amazon-like” shopping experience, your core systems that process them – get them produced, fulfilled, shipped, vendors paid, customers invoiced, sales tax paid, and ultimately account for everything – have not necessarily kept pace.

There was a time when the goal for your ERP system was simply for it to be accurate – it was, by definition, more efficient than the often paper-based or cobbled together system you had been using to process orders.  You may well be on your second or third ERP system and there is a good chance that it was specifically developed for this industry (helpful for an industry as unique as ours).  However, there is also a good chance that your ERP system is starting to show its age – you have to run it on your own server, enhancements are fewer and slower in coming, and your data is locked away in inscrutable internal tables inside the system itself.

ERP systems, like many systems across different industries, have also experienced a coalescence as software companies are acquired by larger companies in the same or adjacent industries or through various venture capital “rollup” strategies all leading to increased prices for less well-maintained and seldom enhanced software.  The result is fewer options with less industry-specific focus.  The positive side is that these fewer systems are better at their core functions and are beginning to make the data available to be used for driving better business decisions.  The downside is that these systems do not do certain things required in our industry, at least not natively.  

If you are considering a new ERP system or just want to make sure you are aware of the options available, you can broadly categorize the options as:

1. Purchase one of the big brand ERP systems and modify it to work for print and promotional product distribution.

    

2. Seek out an ERP written specifically for the industry from the ground up, including all the core functionality that is not necessarily specific to the industry.

    

3. Integrate and enhance one of the mid-tier solutions for the industry, leveraging their more broadly integrated solutions to also solve sales and marketing issues with integrated CRM, marketing automation, and held desk functions in addition to your ERP needs.  This approach can also incorporate aspects of “best-of-breed” integration.

Big Brands

This option delivers well-established solutions with well-tested core functionality.  These companies are well-funded and have little risk of disappearing other than via acquisition.  However, they are expensive and do lack key functionality required by our industry – they are not really viable without modification.  The only option becomes hiring very expensive consultants to add unique code that will have to be maintained or changed with each new release of the platform, since the code is uniquely done for each distributor with each engagement (i.e. the big brands are not creating a solution for the industry, just a solution for an individual distributor).  BTW, those expensive consultants don’t necessarily know our industry, so they will need to be educated by you on your dime before they can do the work!

Ground Up, Industry-specific

What about ERP systems specifically developed for our industry?  Certainly they offer the advantages of being custom-built for the industry and are often very responsive to the industry.  This model from twenty or thirty years ago was how systems were developed – smaller companies tackled part of a business problem and then they and their solutions evolved to become the more complete solutions they are today.  However, that approach poses problems today as you can’t replace such a broad system that touches so many aspects of your business with a less robust system and then give it a decade to evolve – you have to get invoices out and vendors paid and taxes submitted and ultimately customers satisfied!  Plus, writing complete new industry-focused systems from scratch is hard…and expensive…and probably will never be as good at the core functions needed, let alone any integrations needed to plug the system into your broader system landscape.  Finally, even if successful at developing the broad base of capabilities, these smaller companies always face the risks inherent to smaller sized software companies:  funding, staffing, and ongoing support.

Integration

That then leaves integrating various systems or augmenting already holistic packages (that include other solutions such as help desk, CRM, marketing automation, tax systems, logistics, etc.).  Some of these “base” systems are designed for small to medium sized businesses, and are significantly less expensive than the “big” ERP players.  They do suffer from the same issue of not being viable for our industry “as is,” but developing the pieces needed to become viable is much less expensive and there are consultants from within the industry who can help.  This integration provides a “Goldilocks / just right” approach that leverages well-accepted and broadly distributed software solutions that is maintained, enhanced, and available on modern technologies (including SAAS – Software As A Service) while still providing a solution tailored to our unique industry needs at affordable costs.  Your risks are in picking the wrong base system or the wrong integrator or both!

This approach addresses the problems of the overly expensive but still not viable “big” ERP systems by offering less expensive, and often highly integrated company-wide platforms (including ERP, CRM, help desk, marketing automation, analytics, etc.) by using less expensive but still comprehensive software solutions with additions and enhancements made specifically for this industry.  At the same time, it avoids the problems of writing an entire system from scratch and mitigates the inherent risk of small company software packages – namely the vulnerability of that company selling out leaving you in the same boat you might find yourself today with a VC controlled product roadmap or the “brain drain” of key personnel leaving.