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ERP Software In The Multichannel World

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Multichannel business managers frequently voice the desire to have one
system or software package that is capable of managing the entire
enterprise, encompassing all functional areas. Enterprise resources
planning (ERP) systems have been available for years. Because the
multichannel phenomenon—traditional brick-and-mortar businesses reaching
into direct marketing, and traditional direct-to-customer companies
developing brick-and-mortar stores as well as a Web presence—is so r...


Article Body:
Multichannel business managers frequently voice the desire to have one
system or software package that is capable of managing the entire
enterprise, encompassing all functional areas. Enterprise resources
planning (ERP) systems have been available for years. Because the
multichannel phenomenon—traditional brick-and-mortar businesses reaching
into direct marketing, and traditional direct-to-customer companies
developing brick-and-mortar stores as well as a Web presence—is so
recent, it has in many cases outstripped the ability of software vendors
to keep pace.

Having a single computer system control all functional areas in a
business and use a common customer, inventory, order, and item database
makes perfect sense, and the potential synergy between channels and the
ability to maximize the customer experience are clear opportunities.
Unfortunately, the search for and implementation of such a solution has
frequently proved difficult.

The push to provide an overall multichannel solution has generally
manifested itself in two ways. Traditional ERP vendors, whose genesis was
in manufacturing, have tried to develop functionality geared to the
specific needs of multichannel companies. Existing niche vendors in the
direct-to-customer or retail worlds are trying to broaden their offerings
to include more functional areas and look more like true ERPs. Both
approaches have met with limited success so far. In general, niche or
best-of-breed solutions fit more complex environments, while the ERP
solutions better fit the very broad but less complex environments.

Size matters
There are many interpretations and definitions of ―ERP‖ floating around.
One of the clearest is that an ERP is a business management system that
integrates all facets of the business, including planning (merchandise,
staff, growth), manufacturing, sales, marketing, inventory control,
fulfillment and replenishment, customer service, finance, and human
resources. The system attempts to integrate all departments and functions
across a company into a single computer system that serves independent
departments’ needs.

Many existing ERP packages are geared to larger businesses with
multinational or broad business control needs. Many ERP systems have come
from the manufacturing world and are now being developed to handle the
very different operational requirements of the multichannel retail world.
The relatively unique and complex nature of multichannel retail, combined
with the large numbers of small and medium-sized multichannel businesses,
has helped to create a void between traditional, deeply functional niche
systems vendors and the functionality provided by ERP vendors. Finding an
ERP solution with deep niche functionality geared to a medium-sized
multichannel business can be an enormous challenge. But conversely,
finding a niche player with deep functionality that can manage an entire
multichannel enterprise is an equally difficult proposition.

Recent ERP market trends
ERP vendors face several obstacles in their effort to address the
opportunities seemingly presented by the multichannel business market.
The focus of ERP marketing has traditionally been on large companies
willing to invest significant funds.

ERP vendors trying to enter mid-tier markets in retailing have been met
with resistance from potential customers concerned about the level of
service attention they will receive after implementation and about the
lack of industry expertise on the part of the ERP vendors. There are many
examples of ERP implementations failing—for many reasons. Considerations
of scale, cost, and the time required for implementation have led to
customer resistance to ERP vendors. Companies commonly fail to realize
the level of discipline required to implement and use an ERP
successfully. Most ERP installations follow a ―Big Bang‖ approach, since
the functionality is usually far reaching and encompasses many functional
areas. Another drawback is that the installation time for major systems
can be 12 to 18 months or even longer. (For example, two recent
installations of ERPs in the food industry were so difficult that the
businesses missed major selling seasons and product sales were months
behind schedule.)

A good fit for an ERP would be in a far-reaching company with somewhat
basic requirements desirous of having a single system to fully integrate
all company information and data. Many ERPs are developing features that
acknowledge the need for niche software by making it easier to integrate
the two.

What about the competition? The sheer pace of recent acquisitions and
consolidations in the software industry have made it difficult for niche
systems vendors to effectively integrate suites of products into one
unified approach with a clearly defined target market. Niche vendors who
have deep, specialized functionality are beginning to compete
successfully against the larger, more all-encompassing ERPs in the mid-
market arena. And a recent trend in the systems market is for
multichannel businesses to combine the niche, best-of-breed approach with
an overall ERP solution.
Enterprise solutions

SAP, the world’ largest business software company, has an ERP Retail
solution that incorporates e-commerce with its customer relationship
management (CRM) solution that allows users to analyze sales by channel.
For direct marketers who also utilize catalog as a sales channel,
however, SAP seems to have a disconnect related to specific functionality
that is needed for catalogs. The solution lacks the list segmentation,
source coding, catalog, drop, merchandise, square inch, contribution to
profit functions required to analyze the success of mailing files, house
and rented, and catalog promotions.

There are multichannel retailers, including ones that sell through a
catalog, that are using SAP but they are also using specific direct-to-
customer (DTC) software to set up, manage customer orders, fulfill, and
analyze catalog promotions.

SAP also has an integration product, NetWeaver, with many different types
of functionality, including the ability to link disparate systems. This
would be one way to integrate sales from another application, such as
catalog, and have this data flow into the SAP Retail solution for
merchandise analysis. However, NetWeaver does not address a key element
that catalogers measure, which is demand. As SAP and other ERP systems
continue to evolve, in order to be true multichannel solutions they will
need to adapt their software to include the functionality that is needed
by those multichannel retailers who have a catalog sales channel.

SAP has another ERP software offering, Business One, for small to mid-
sized companies. With SAP’s acquisition of Triversity point-of-sale (POS)
software and its integration to Business One ,which also includes an e-
commerce module, a small to mid-sized company has a real solution to
explore. Once again, however, if your company has a catalog sales channel
there is no specific functionality to support this sales channel. Since
Business One integration with Triversity is relatively new, it will be
interesting to see how its catalog functionality progresses as new
clients embrace this software.

These two companies, along with their parent company, MICROS Systems, are
taking a unified, integrated approach to bringing together all of their
many retail and direct applications. In 2006 CommercialWare, one of the
leading direct-to-customer software providers, was acquired by
Datavantage. Datavantage is an industry leader in retail and point-of-
sale applications. Between these companies the objective is to fully
integrate their application suites (CWSerenade, cross-channel and direct;
Xstore, JAVA-based, open standard, database-agnostic; Enterprise JAVA
Merchandising, Web-based merchandise management solution with merchandise
planning, purchasing, and distribution; Relate Retail, with CRM
functionality for marketing and loyalty clubs; XBR Analytics).
Implementation will involve a pre-planned set of parameters that will
allow the user company to install an integrated set of applications more
quickly than best-of-breed applications have been installed in the past.
The company expects to have its first user live this summer. In the fall,
all of the related companies will adopt the MICROS name.

Escalate Retail’s vision is to continue to develop specialized
applications with a focus on direct businesses, e-commerce, retail
management, and point of sale that can be implemented either as stand-
alone applications or fully integrated. Continued development of service-
oriented-architecture (SOA) will allow Escalate Retail to develop
functionality, such as payment processing, shipping, pricing and
promotions, that can be utilized by any or all of Escalate’s suite of
products. The aim is not to be a broad-based ERP application, but to be a
best-in-class application for multichannel businesses with direct
(Ecometry), retail (GERS), and e-commerce (Blue Martini) channels that
wish to enhance their customer relationship and experience. Customers
looking for an application that can support all aspects of the business
with a single system need to understand that some functionality, such as
financials, will still require a third-party application for AP and GL
when they deploy the Escalate Retail Ecometry Commerce Suite.

Best of both worlds
A long-standing subject of debate is whether to try and combine best-of-
breed niche software solutions or to employ an enterprise solution. At
the moment, it appears that a blurring of industry definitions in the
multichannel arena is occurring as some best-of-breed vendors try to
expand their traditionally deep functionality to broader areas, while ERP
vendors are deepening their traditionally broader offerings.

It will always be easier to match specific or unique requirements with a
niche solution, but the integration of several of these packages is an
issue. Attempts are being made to ease the burden with middleware
development. In addition, some ERP vendors are now acknowledging the
requirement for niche software and are facilitating integration with
their solutions.

The search, selection, and implementation of an ERP for a multichannel
company is a complex and difficult task. Since the welfare of a business
depends on an effective system to control the business, the risk of
making the wrong decision is significant.

We believe that ultimately ERPs will become more commonplace in the
direct-to-customer, multichannel industry. The good news is, assuming
that newer versions of ERPs are affordable, this increased competition
will give companies more system product choices.

Here are a few suggestions for anyone considering the purchase of an ERP
1.Make sure you do all of the homework required.
2.Keep in mind that the ―Devil is in the details‖
3.More options are rapidly being developed, so keep an open mind.
4.Strong training and discipline are required for successful
5.Insure that the ERP is flexible enough to meet future, as-yet-unknown
6.Have a well–thought-out five-year plan to minimize future surprises

The battle rages on but the options are changing. To read more of this
article, including expanded examples of what was discussed above, we
encourage you to visit our blog at: http://www.fcbco-blog.com .

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