managing inventory on a tabletby Mark Hook

When a small-to-medium sized merchant experiences rapid growth, its profit margins might go up, but its back office operations often go into meltdown. Spreadsheets get used to plug gaps between systems; mistakes and delays become commonplace, resulting in poor customer feedback; tedious manual workflows take up the time and energy of team members; and a lack of visibility hampers decision making.

This sudden onset of operational complexity has historically been the trigger which prompts retailers to sign up with a traditional ERP, or Enterprise Resource Management software, in a bid to streamline workflows, optimize data, and improve efficiency. Introducing a new technology system, such as an ERP, into an organization can be a game-changer — helping to boost productivity, reduce costs, support growth, and boost the customer experience.

Since implementation is so crucial to the overall success of the system, it is important to first consider exactly how the system will be implemented because not all implementation approaches are created equal.

The Research Is In

New research by leading operating system Brightpearl has revealed widespread and significant issues linked to ERP implementation. For instance, in the UK, a third (34%) of all UK firms have experienced a major implementation challenge when implementing an ERP in the last 12 months — with 46 percent of medium brands (turnover of £10-50m) and 40 percent of large brands (turnover of £50-100m) running into problems.

It is a similar story in the US, with four in 10 (38%) firms experiencing a major challenge when implementing an ERP over the last year. Sixty-three percent of medium brands (turnover of $10-50m) and 38 percent of large brands (turnover of $50-100m) have hit roadblocks. The study, which involved 500 retailers and took place in April 2022, also confirmed that implementing an ERP takes months, and sometimes even years, to complete. Nearly 60 percent of respondents completed their implementation in the projected timeline, which is positive, but 36 percent  of projects took longer than estimated to get live — with an average 200-day delay. 

With this data, has implementing an ERP become a time-consuming, frustrating mistake that causes more problems than it solves? It is not quite that simple. Despite ERPs being widely considered dated, slow, and inflexible, many merchants still see them as essential, and every year a new influx of growing commerce companies hit the turning point where they sign up for an ERP implementation experience. Although we have known for a while that ERP implementation fails in up to 75 percent of cases, the prevailing popularity of ERPs means they cannot be written off. Instead, we must dig deeper into exactly what is going wrong, as well as what is going right, with the implementation of these systems.

What is Going Wrong?

Integration issues, data migration challenges, and a ‘lack of training or support’ top the list of reasons for ERP implementation failure in the UK, impacting 24 percent, 20 percent, and 18 percent of brands respectively. In the US, a ‘lack of scalability and flexibility,’ data migration challenges, and major operational disruption are the biggest factors, impacting 25 percent, 23 percent, and 21 percent of retailers.

While issues with ERP tech, which is notoriously complex and rigid, are behind many of the challenges, it is not just the tech that is to blame. In the US, for instance, it is (partly) the humans Fifteen percent of businesses say a ‘lack of expert implementation consultants’ was responsible for a tricky ERP implementation, and in the UK, the businesses themselves were sometimes at fault, with almost one in five (18%) of retailers citing a ‘lack of priority at an internal level’ as the reason their ERP implementation went awry.

The research has also highlighted the issue of spiraling fees. Of course, no small-to-medium sized merchant signs up with a traditional ERP and expects it to be cheap, but the data suggest many do not realize the extent to which ERP costs can far exceed any initial quote. Brightpearl found that on average, ERP projects cost around a third more than predicted — although the good news is that only eight percent were significantly over-budget at more than 70 percent of the original scope.

Why are costs soaring? It all comes back to the issues which make it challenging to get set up in the first place. For example, 17 percent of US brands said their ERP is a ‘poor fit for retail’ and 15 percent of UK merchants admitted their ERP was inflexible. It is true: ERPs were built for the 1990s and, while the retail landscape has changed drastically, their rigid architecture has not evolved at all. This means ERPs typically lack the in-built functionality and integrations modern brands need to succeed — and while adding them is not entirely impossible, it does incur extra fees and time, driving up the cost of implementation significantly.

The Post-Implementation Picture

Unfortunately for some retailers, ERP problems continue even after they have overcome the costs and challenges of implementation. A quarter (27%) of UK brands face post-implementation data sync issues with sales channels or other platforms, and one in five (20%) report ‘endless glitches.’ In the US, a quarter of retailers (24%) have to contend with ongoing data delays in their reporting, and 13 percent say they experience broken workflows.

Overall, the data paints a clear picture: ERPs are not the cure all many brands assume they will be. Just because a brand reaches a level of growth where it can get an ERP, it does not mean it should. By their very design, legacy systems have a complex, rigid architecture which makes it expensive and costly to implement, and nearly impossible to quickly adopt new tools and apps (including platforms like Shopify and BigCommerce). Even for the brands that get over an expensive, months-long implementation, further issues, like slow processing or annoying glitches, often follow.

Some brands might be perfectly able to live with this, but modern brands that want the freedom to grow in any direction they choose will need to pick a different path, and the considerations are clear. They will need to prioritize tech partners with in-built flexibility, clear retail expertise, and a track record of successful implementation with similar brands of size, scope, and sector.

Mark Hook is the VP of Comms at Brightpearl, a retail operations platform for retailers and wholesalers with a clear mission to automate the back office so merchants can spend their time and money growing the business. Brightpearl’s complete back office solution includes financial management, inventory and sales order management, purchasing and supplier management, CRM, fulfillment, warehouse management and logistics.

Load More By Susan Hendricks
Load More In Shopping
Comments are closed.

Check Also

Brendan Fraser Talks Early Career ‘Self-Loathing,’ How Much Damage He Did to His Body

“I think on some level I felt I deserved [a beating] and wanted to be the one who go…