THE ERP EDGE

Merchants juggling multiple selling channels have enough challenges these days — the last thing they need is to manage multiple software packages. That's why many marketers now want one solution to manage an entire enterprise, or an ERP system.

ERP — enterprise resource planning — software integrates all facets of a business into a single computer system that serves independent departments' needs. So ERP will help a company manage manufacturing, sales, marketing, merchandise planning, inventory control, fulfillment and replenishment, customer service, finance, and human resources, among other aspects of a business.

Not so long ago, ERP was out of reach for most multichannel merchants. Traditional ERP vendors, with roots typically in manufacturing or distribution, targeted only major players — companies with sales of more than $300 million. Also, most ERP systems didn't meet the specific needs of direct merchants.

But that's changing as more software suppliers decide they want to get into the multichannel market. Not only are many existing ERP providers with packages once geared to larger businesses now going after smaller-sized companies, they're also broadening their products' functionality to include Web, retail, and to some extent direct marketing channels.

What's more, several niche software vendors already serving the multichannel retail industry have expanded their offerings to be more ERP-like, though some still lack certain modules such as manufacturing, HR, financials, and payroll.

These factors have helped expand ERP options on the market, but with more choice oftens comes more confusion when selecting a system.

OLD ERP SUPPLIERS OR NEW ERP PROVIDERS?

Traditional ERP vendors face several obstacles in trying to tap the multichannel business market. Potential merchant customers are often concerned about the ERP vendors' lack of industry expertise and the level of service and attention they will receive after implementation. These clients do not want to be small fish in a big ERP pond.

Considerations of scale, cost, and the time required for implementation have also made some merchants wary of ERP vendors. For instance, the installation time for major systems can be a minimum of 12 to 18 months or longer from contract signing to go-live.

Merchants have good reason to be concerned about installations, as companies often fail to realize the level of discipline required to implement and use an ERP application successfully. For example, two recent installations of ERPs in the food industry went so rough that the businesses missed major selling seasons and product sales were months behind schedule.

But more ERP vendors are stepping up their game and offering their own alternative solutions to smaller businesses. In doing so they're turning up the heat on multichannel niche vendors that have long targeted niche merchants.

As a result, multichannel retail vendors have been expanding their product lines to suit larger and more complex businesses. For instance, Escalate Retail, the result of the August 2006 merger of Ecometry Corp. and GERS Retail, is one such supplier. Ecometry, which in 2005 acquired e-commerce and customer intelligence solutions provider Blue Martini, provided functionality for e-commerce and smaller retail locations. The addition of GERS Retail's expertise in planning, merchandising, analytics, and supplier collaboration solutions for general retail allows Escalate Retail to compete with larger ERP providers with best-in-class features.

In another example of conventional catalog/direct software providers joining forces, Datavantage last year acquired CommercialWare. Parent company Micros-Retail aims to bring together the two products retail and direct applications.

Still, many systems designed for multichannel merchants lack modules that would make them true ERPs. For instance, companies that need manufacturing, accounts payable, general ledger, HR, or payroll modules — provided by most ERP vendors — will need an integrated third-party solution if they go with a multichannel niche vendor. Many of these components are not part of enterprise solution, and the niche vendors have no immediate plans to develop or acquire these modules.

At the same time, the data and analytics that these niche vendors provide for e-commerce, retail, and direct channels usually exceeds the level that most ERP systems can provide. Multichannel niche vendors would also argue that their products' scalability and functionality fits with fewer customizations for larger customers than ERP systems. They'd probably also say that their success rates with project costs and timelines are better than those for some ERP vendors.

SYSTEM CONSIDERATIONS

Any merchant seeking an enterprise solution must understand its business requirements, including the data and analytics required to support those needs. It's also important to review your current system to see how well the ERP application will handle direct-oriented data and analysis.

In terms of merchandising and inventory control, merchants must answer several questions before going with an ERP. Here are five of them:

• What are your company's management reporting and merchandise analyses needs? Are these catalog- and Internet-oriented functions, which may include contribution to net profit, square-inch analysis, and category analysis, available from the ERP vendor?

• Is there assortment planning by catalog/drop and Internet?

• Does the system have the appropriate direct-oriented data for catalog planning-demand, backorders, sales, square-inch measurements for space use, and costs by category, class, product, SKU, page/picture, price range? Or will you need a data warehouse?

• Is there percent-complete forecasting by category and product/SKU for in-season forecasting?

• What end-of-promotion and seasonal analysis is there, and is it direct-oriented?

As far as general analysis and reporting, there are hundreds of reports available in legacy and commercial order management systems in the direct industry. How well are these accommodated in the ERP system? Multichannel merchants also have specific needs with regard to their call centers and distribution facilities. (see “Back-end checklist” on page 54).