How ERP Bridges The Gap Between Logistics And Finance

While the enterprise resource planning (ERP) system is often viewed as the hub of key back-office processes, from accounting to inventory management, the technology has historically been out of reach for small businesses with limited resources.

At the same time, for many small- and medium-sized businesses (SMBs), an ERP hasn’t always been necessary, particularly as bespoke and individual FinTech solutions emerge onto the market at more affordable price points and a more flexible offering better suited to a small firm’s less complex needs.

In the world of eCommerce, however, even small players are facing the kinds of market pressures and business growth trajectories that make having an ERP a valuable asset.

Speaking with PYMNTS, Russell Griffin, vice president, global solutions providers at ShipStation, described the opportunity for eCommerce businesses to wield the benefits of the ERP, and why businesses must acknowledge the connection between logistics, accounting and overall business management in a period of high growth.

Surging Volumes

Largely driven by the pandemic, eCommerce volumes are surging, Griffin noted, and there’s a rapidly growing opportunity for the ERP to guide businesses through the growth, especially when it comes to inventory management.

“The pace of growth for emerging eCommerce brands is staggering, especially right now,” he said. “With the complexities of selling online across multiple warehouses, and with inventory tracking and management capabilities becoming critical to success in eCommerce, ERP becomes essential.”

The FinTech book has also lowered the barriers for smaller companies with limited resources to adopt such a solution, he said.

For small businesses that don’t have an ERP, elevating and fluctuating sales volumes can quickly create a logistical nightmare.

For sectors like makers of personal protective equipment (PPE), the sudden and dramatic spike in demand clogged up supply chains and led to delivery delays. That’s even more true as other businesses pivoted their business models to contribute to national PPE stockpiles or create other necessary products like hand sanitizer, Griffin said.

“This sudden volume increase across multiple segments has led to slower delivery times as carriers have had to handle increased volume while working with new protocols for worker safety,” he said. “This slowdown makes inventory management and shipping efficiency much more critical for eCommerce brands.”

For ShipStation, the opportunity to augment its existing shipping and logistics offering with ERP technology led to a collaboration with SAP to debut a new ERP for eCommerce SMBs. In a statement announcing the launch, Griffin emphasized the importance of connecting these merchants to a holistic offering that combines logistics and inventory management with financial management.

The Logistics-Accounting Connection

While there are third-party logistics and inventory management solutions, Griffin emphasized the value of wielding an ERP that can not only help eCommerce firms manage their inventory and streamline shipping, but connect those workflows to others within the ERP, like accounting.

The ERP gives businesses “the ability to properly recognize revenue as orders go out the door,” he said.

“Inventory management, billing and accounting processes are the most critical ERP features for a fast-growing eCommerce brand, especially when it comes to managing their shipping and logistics flows,” Griffin said. “All three capabilities allow brands to either ship products in a timely fashion, or accurately account for revenue, including any shipping costs, once the order has shipped.”

ERPs can also support the scaling of workflows like shipping and accounting as the eCommerce business evolves into a mid-sized firm.

It’s important for businesses to understand that, while there are plenty of individual software solutions available for shipping, inventory management, accounting and more, for eCommerce companies, all three are undeniably entwined. Understanding financial positions means a clearer picture of how much new inventory a business can afford to procure, for example. And as the pace of commerce accelerates, arming businesses with these kinds of insights in real time will become even more important.

The ERP is no longer reserved for the biggest of businesses, nor is it the clunky, complex tool it has historically been. According to Griffin, for the eCommerce segment, the ERP is now not only a valuable option, but a necessity.

“Merchants, especially SMBs, that want to remain competitive and continue to grow, must invest in ERP to survive and thrive long-term,” he said.