Entrepreneurs are fantastic at creating new businesses. As they grow they identify the continuing need to add processes and systems to accommodate the growth of the business in today’s digital age.
A system could simply be a method of tracking and recording information in a spreadsheet to control something. Not all systems are well thought out and many are inefficient, yet they provide some form of control, which is at least better than downright chaos.
Small businesses that sell online make for interesting case studies for how systems and processes work. Usually all products sold by an online retailer are manually loaded onto the business’s web platform, including images and description. As sales volumes start to increase, the business can start to lose control. Orders are printed from the website and the volume of email queries continues to grow; scraps of paper, spreadsheets with incomplete data and handwritten delivery consignment notes become the order of the day. Stock is often kept in a small warehouse, office or garage and a large amount of time is wasted in trying to find the correct stock to fulfil orders.
When a business reaches this stage the founder(s) usually reach out to their accountant — surely a trusted source of advice of all things business right? Often the accountant recommends an accounting platform, even offering to install or set this up. This is great but often the accountant advises a certain out of the box product because they know and use this platform, and could even get a commission for signing up this budding new customer. Is this solution right for the business at the outset? The accountant doesn’t know but from his/her perspective they have provided a solution to his client. The client though is still left with the challenge of reconciling each week’s sales and posting totals to the accounting system praying, the takings match the sales in the system.
While this is happening, it is becoming increasingly difficult for the business to respond to customer service emails, track responses and finalise queries as they scream into the business’s inbox, while the founders and their small team wander around the small warehouse trying to locate stock to fulfil orders. The owner has estimated if a casual staff member takes 15 minutes to find a product and then pick, pack and write up a label, the cost to the business all up is around $6-$9, including labour and packing materials. He worries as the expenses mount.
The owner speaks with a friend who has experienced this pain, and is advised to look at an inventory management system, customer relationship management (CRM) and email ticketing system, as there are many online offerings that charge a monthly fee for these services. There’s also freight management systems that will print the labels.
Six months later and after much grief, all these “systems” are up and working, some are integrated others are not. Things are running better than before but the owner is still frustrated. While he can save time by printing off his orders as they come in from his website and showroom, and looking up the bin locations of all his stock, it is still too labour intensive. He even feels that he is a slave to multiple systems, and he is now switching between his website, inventory system, and freight ticketing system. He is still annoyed that he must create his products on his website and then create them again in his accounting software. And he must manually remove stock from his inventory system as he was nervous to link his traditionally inaccurate stock to his accounts.
This is a typical story of most businesses that grow rapidly and start to add standalone solutions to their businesses. They take well-heeded advice from their friends, accountants, lawyers, web developers, and creative agents who are experts in their own fields but never consider the complex interrelationships that will plague a business as it grows and the need for true integration between systems.
There are some wonderful technologies available today at very low cost. As standalone products, they work very well, however when a business gets to a certain size, it often has requirements that cannot be efficiently met by out of the box solutions. It is at this point that a business needs to consider an enterprise management system or enterprise resource planning (ERP) system.
ERP systems evolved in the 1960s with more of a focus on material planning and costing for manufacturing and were largely a tool available for corporations. However, as cloud technology has advanced, the associated costs have dropped for small and medium businesses. Whether the term “enterprise resource planning” still applies is questionable, yet the term ERP now generally means a comprehensive order, inventory, and accounting system that manages the life cycle of inventory from product creation, to order, receipt, sale, dispatch and replenish, within one ecosystem including websites.
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Mark Freidin is an experienced chief operating officer, e-commerce pioneer and consultant to fast-growing firms with his company internetretailing.com.au.
