Why to Have an Integrated ERP Solution as Your Company Grows

7/17/2010 Carsten Howitz ERP

Allow me to introduce “ABC Distribution” a startup company that purchases goods overseas and distributes their products to retailers in the US.

ABC has already secured a few customers and some good vendor contacts overseas. They are ready to start their business and grow fast!

They start by purchasing a cheap entry-level accounting solution to get started. Now they can do all their purchasing and billing in one system. ABC is doing great. They sell a lot and start to hire new employees. They purchase additional users to their accounting system, but the system is just not handling their increased amount of inventory and is unable to do sufficient purchase planning.

So ABC finds a great warehouse and purchase planning system from a local vendor. The system is great and handles all aspects of purchasing and warehousing. The warehouse manager and purchases are very happy.

The accounting people get all the purchase orders and rekey them into the accounting system and also update the orders based on status changes from the warehouse receipts. Since ABC are using two separate systems for accounting and warehouse it is time consuming to get a good picture of existing inventory levels and estimated receipts of goods when customers ask for delivery dates.

ABC grows and grows. Now they secured a gigantic retailer as a customer but the retailer requires that ABC can receive orders via EDI. So ABC goes out and purchases an EDI system. They can now receive orders via EDI but they have to rekey the orders into the sales order system and after they send out the invoice they have to rekey the invoices into the EDI system to submit invoices to the retailer.

Now ABC has grown from a small company with a few people to a large company with maybe 100 people, but they are using three completely different systems to handle different parts of their operations. When ABC was smaller it was not a big problem with the overhead associated with rekeying data, but as they grew the issues are becoming increasingly problematic and ABC now spends a lot of time reconciling the systems and handling errors and omissions. The lack of integration is starting to cost ABC a lot of money.

I have experienced situations like the one above more times than I can remember. Companies start small and as they grow they add systems as needed, but fail to integrate the systems, mostly because they are unable to do so. In the beginning it is not a big problem but as they get larger and larger it starts to hurt. 

In order for ABC to stay competitive they have to get an integrated solution. Without it their competition will be able to provide their customers with better service and pricing and eventually ABC will not be able to stay in business.

A fully integrated solution will give ABC full end-to-end visibility throughout their entire supply chain, from purchasing to sales in one software solution. Going from three or more different and usually proprietary solutions to one integrated solution can be quite costly but ABC must take the journey or they will eventually perish. 

What if ABC looked a little further than the eminent future when they started out? What if they had a clearer vision where they wanted to go and started investing in the fully integrated solution from the start? Most often the cost difference would have been minor between a low level accounting package and a more potent integrated solution. If ABC had started out with the integrated package they would have been able to grow with the software instead of growing by adding incompatible software packages.

Integrated ERP solution may have a higher upfront cost, but they will save you a lot of money in the long run and it will allow you to grow with the software instead of having to patch things up on your existing inadequate software solution. 

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