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Cloud Consciousness: Is an ERP good for your product business?

by Simon Eskow
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Product companies have to innovate quickly in the coronavirus era.  With increases in online shopping and demand for click-and-collect, retailers and wholesalers are doing everything from shifting their sales-channel focus to fundamentally changing how they do business. For example, some fashion retailers have adapted their brick and mortar stores as eCommerce fulfillment centers (read our blog on how to turn your stores into fulfillment centers).

Innovation is critical, but in a time when companies are re-negotiating commercial rents and payment terms with suppliers, the inventory technology you use must make that possible without increasing your overall costs.

Is your technology the most cost-effective solution to innovate in the coronavirus era? If you run your small- or medium-sized product business using an ERP like Netsuite, or if you’re thinking of using an ERP, you should consider the advantages of a cloud-born inventory solution for getting more value from your technology budget. 

The case for cloud-born inventory over ERPs

For cost-conscious product businesses, an ERP may be simply too expensive, unfit for purpose, and too difficult to manage when speed is key. Here are some reasons why cloud-born inventory management is a better option.

Suitability

ERPs were originally designed for large corporations running software on PCs and servers. When ERPs emerged in the 1980s, enterprise departments would use software separately—finance, payroll, human resources, etc. ERPs made it possible for departments to share data between different functions, giving these solutions a wide scope. 

While ERPs can now be delivered through the cloud, they are still broad solutions based on general business assumptions that may not match your requirements. A retail edition of an ERP can have functionality for CRM, inventory management, and point of sale, but can lack out-of-the-box integration with eCommerce platforms, online marketplaces and 3PL warehouses. ERPs will require you to spend time and money for additional functionality.  

Cloud inventory software, by contrast, allows you to connect quickly with the sales channels, solutions and locations where you hold your products. The nature of the cloud allows an inventory management provider to build integrations once for limitless customers. This significantly decreases the time it takes for you to add connections to eCommerce platforms, online marketplaces and 3PL warehouses. 

Cost and Risk

Generally speaking, ERPs cost more than cloud inventory software, especially for implementation. Depending on what you need, getting an ERP up and running can cost by some estimates between $45,000 and $750,000. Because ERPs can be complex solutions, you typically must pay a third party partner to implement the software or to add functionality. On top of these upfront costs, ERPs will lock companies into long-term licensing contracts. 

Cloud computing works on a pay-as-you-go pricing model. This saves your company from paying for software that you don’t use. You can choose to cancel your subscription any time you want, which lowers the risk of buying software that isn’t fit for your business. Cloud software is also easier to implement and generally doesn’t require a third party to get you set up, which helps keep cloud implementation costs down.

Finally, cloud software does not require you to purchase any specific hardware. That brings the total costs of ownership for cloud computing down compared with ERPs running on servers and PCs.

Accounting and Specialization

Large corporations use ERPs in financial management, but for smaller businesses that sell or distribute products, core accounting requirements will boil down to managing invoices, bills, and general ledgers. Again, ERPs cover a broad range of features, but with cloud technology, you can invest in specialized software built for the functions that are core to your business. 

Because the cloud makes integration fast and simple, you can easily connect specialized inventory and accounting software to manage your core business. You’ll be able to consolidate your operational functions (order and inventory management, purchasing, warehouse, fulfillment) in a specialized inventory solution and integrate with accounting software for your core financial management functions. 

Many of our clients over the years have minimized their costs by using Cin7 with cloud-based accounting software. (Read how The Spice & Tea Exchange did this by using Cin7 and Xero instead of an ERP.) 

Learn more about how cloud-born software is a better option to ERPs. Click to download our whitepapers on why using Cin7 with Xero or Cin7 with QuickBooks can help you minimize your costs and increase your flexibility.