4 Reasons Why ERP Order Management Is a Bad Idea

By
Daniella Shtemberg
August 8, 2016

For most wholesale and manufacturing companies, ERP is the core of your business, whether it’s a simple bookkeeping tool, or a full-blown ERP system like SAP. Yet ERP order management add-ons and modules may not be the best choice for your sales and order management processes. Why not? Perhaps the most important reason is that ERP was never originally intended to manage the processes around selling to customers. In this post, we’ll talk about why that matters, what order management technology should be able to do, and four reasons why ERP order management is a bad idea.

ERP’s Manufacturing Origins

One weakness of ERP order management is that the systems were originally intended as internally-facing systems that managed complex manufacturing processes. ERP systems got their start in the late 70s as systems that allowed manufacturers to translate large quantities of materials – everything a company might need to meet its manufacturing requirements – into the materials needed to manufacture each individual component of a product. Because of these beginnings, most ERP systems are still oriented around inventory and the manufacturing process. As ERP systems evolved, ERP systems slowly incorporated other areas such as financials and HR. The integration of all these applications in one place made them a critical resource for managing an entire business. ERP systems over time became “a single source of truth,” not just for manufacturing, but for a growing list of business processes, including inventory, logistics, and order entry. Today, even small companies in the manufacturing and wholesale space likely use some form of ERP to manage their business, so it might seem that adding on the sales order module from your ERP vendor would be a logical next step. Whether that is the case or not depends on what you’re expecting your order management system to do.

What Order Management Systems Should Do

Order management isn’t just about entering orders. An order management system should provide enhanced visibility into sales. It should allow your business to process orders more efficiently. It should minimize delays and backorders, and help to improve customer relationships. Increasingly, order management systems are becoming omnichannel sales platforms that allow manufacturers and distributors to receive, process and fulfill orders across a variety of sales channels, whether it’s in a store, on the phone, via mobile or online. ERP Order Management add-on modules may be able to achieve some of these objectives, but they often don’t do so seamlessly or provide the level of customer satisfaction that a best of breed order management app can. One of their biggest weaknesses is adapting to changing technology––mobile technology in particular. Here are four reasons why best-of-breed B2B commerce and order management systems beat ERP for order management.

1. Order Management processes are not native to ERP:

As we discussed above, ERP originally developed to manage the manufacturing process, and later it came to incorporate financials and other aspects of your business. Only in the last decade or so has there been an emphasis on the customer-facing aspects of the business such as CRM and order management. This matters, because it means that many of the order management solutions offered by ERP vendors are in fact add-on or bolt-on applications that are not native to the application; they have been added as an afterthought to address needs for specific functionality. Most of these add-ons were originally developed by third party vendors and interfaced rather than integrated with the ERP application. This means that the data in the order management application doesn’t reside in the ERP system – only certain parts of the data are available in the ERP system. This cobbled together solution is then sold at a premium price as an “end-to-end” solution that is supposed to handle the entire required business process. But rather than a system purpose-built to deliver results, most ERP sales order add-on tools are an afterthought designed to “check a box” on a customer requirement list, not to deliver optimal functionality.

2. ERP order management has been slow to adapt to mobile ordering:

Because ERP’s origins are in non-customer facing business processes and because these systems now incorporate dozens of different business functions, ERP vendors can be slow to adapt to change and incorporate new technologies. This has been the case with mobile, which is an increasingly critical aspect of order management. There are several reasons why ERP has been slower to go mobile than smaller, more nimble best-of-breed vendors. One reason is the ERP user base, many of whom have heavily customized their systems to the point where adding mobile functionality is either fraught with risk, or extremely expensive. Whatever the reason, lack of mobile order management functionality is a strong argument against using ERP add-ons for commerce.

3. ERP lacks comprehensive omni-channel capability:

Mobile isn’t the only modern sales channel that ERP systems may not adequately address. Today’s customer’s – whether B2B or B2C – increasingly expect to have a seamless shopping experience regardless of whether they choose to shop online, in a retail store, over the phone or via mobile. Omni-channel works best when a single platform manages every channel to provide a consistent user experience; yet because most ERP systems cannot handle mobile orders, ERP order management is at a significant disadvantage. This, along with ERP’s slow response to change, is a major reason why many manufacturers and distributors are choosing best of breed order management software rather than using an ERP add-on product. Best-of-breed applications are typically able to respond to changing customer demands by incorporating new functionality and enabling new channels more quickly than ERP.

4. ERP order management user experiences are clunky:

A growing problem with ERP as mobile applications catch on with tech savvy employees is that old-school ERP interfaces are often rather clunky. They may get the job done, but do so using a process that isn’t intuitive, requires extra steps, or doesn’t actually complete the job. This ultimately means that the ERP system isn’t as efficient as it could be. Wondering about the scope of the problem? Studies show that up to 75% of managers—especially younger ones—admit to bypassing their ERP systems, preferring instead to manage processes with spreadsheets and cloud-based apps to operate their business functions. These are just a few reasons why we think ERP order management may not be the right solution for most manufacturers and distributors. Which do you think makes more sense for order management: ERP or best of breed? We’d love to hear from you in the comments.