Magento ERP Integration: Unify and Optimize Ecommerce Operations

What is ERP?

ERP stands for Enterprise Resource Planning software and aggregates automation services for product planning, manufacturing, marketing, sales, and other related activities. Consolidated in a single database, the tools are easily accessible to anyone with appropriate permissions. The main goal of an ERP system is to optimize processes, automate workflows, and enhance productivity. The primary features of an ERP software solution include:

• Inventory Management is a set of tools aimed at tracking inventory levels to prevent the stock from running out.
• Order Management handles sales orders and fulfillment to ensure customers receive their purchases promptly.
• Financial Management deals with billing, invoicing, and reporting and helps business owners manage their finances more efficiently.
• Business Analytics comprises a suite of tools that examine business data to offer insights into the company’s performance.
• Customer Relationship Management (CRM) allows organizations to collect and store customer data to improve their experience and increase loyalty.

Magento ERP enables the management of vital processes like supply chain, human resources, sales, and many others by integrating with one or several ERP platforms. Connecting your eCommerce store with a third-party service helps companies unlock cost savings, enhance productivity, and automate error-prone tasks.

Difference between CRM and ERP

Often confused with one another, CRM and ERP systems have a lot more differences than similarities. A CRM solution can be a part of an ERP suite but can also be independent software. Focusing on customer-related activities, a CRM system contains tools that help businesses manage customer data to improve relations with them.

CRM and ERP: Similarities

The main parallel between CRM and ERP is their goals. Both software systems aim to increase the productivity and profitability of the business by utilizing data. These software solutions are designed to automate and streamline processes by relying on data insights. Additionally, CRM and ERP can share data across departments, offering everyone access to a centralized database.

CRM and ERP: Differences

The most foundational difference lies in the approach that both systems take in helping the organization thrive. While CRM focuses on achieving higher profits through increasing sales, ERP’s mission is to reduce costs through efficient business processes. Let’s explore other important differences between them:

How to Choose an ERP System?

In the abundance of ERP systems on the market, many companies struggle to make the right choice. In this section, we will discuss criteria that will guide you through the selection process.

Cloud vs On-Premise

On-premise ERP is installed and hosted on the company’s infrastructure. Your data is stored on the organization’s server requiring your IT team to manage the software. Cloud-based solutions are stored in the cloud and offer more scalability to businesses. Let’s take a closer look at the specifics of both systems.

Initial and Long-Term Costs

An on-premise infrastructure requires a hefty initial investment to procure the license as well as accommodate servers and hardware. Additionally, you have to hire a seasoned team to administrate and manage to run the ERP system and ensure its high performance. In the case of a cloud-based ERP, also known as Software as a Service (SaaS), no upfront costs are needed. With most of these solutions being subscription-based, businesses simply pay a certain fee every month or year. Furthermore, working with the cloud enables companies to collaborate with remote employees more easily and safely.

All in all, integrating an ERP based in the cloud allows organizations to delegate infrastructure management to a third-party service while focusing on their core competencies.

Upgradeability

On-premise solutions often lead to legacy systems that halt innovation. Although customization is possible on traditional infrastructure, deploying them in new versions is quite challenging. As a result, companies get stuck with outdated systems that are harder to modernize. Cloud ERP vendors continuously launch updates and patches to ensure data protection. You can always expect a new set of features that make the application more in tune with your needs and market trends.

Deployment Speed

Again, cloud ERP solutions provide a higher deployment speed compared to their traditional counterparts. Without the need for any additional hardware, businesses can cut the deployment time in half. What will take up to a year using an om-premise system, will be done within six months with a SaaS. Cloud-based software also facilitates the much-needed scalability allowing companies to grow and shrink on demand.

Pricing

Price also plays a significant role in the selection of a fitting ERP system. Aside from the costs that on-premise demands such as licensing, maintenance, and hardware, both traditional and cloud-based infrastructures require extra charges. For example, data transfer, coding and testing, staff training as well as ongoing support from the vendor all add up to a substantial investment. The Magento integration cost is mostly contingent on the types of data, frequency of data transfers, and specific business rules.

For instance, Odoo is a prominent open-source ERP platform that is free to use. However, accessing additional features like technical support will require a subscription. Depending on your size and needs, the fee ranges from $15 per user to $30. Larger companies can opt for SAP Business One which offers more advanced features and integration capabilities. The monthly price for a single user starts at $110 and reaches $219 depending on your requirements.

Local vs Global

Before delving into the pros and cons of global and local ERP systems, let’s identify the basic tiers of this type of software:

Tier 1

SAP Enterprise, Oracle, and Infor exemplify Tier 1 of ERP systems. Multi-billion dollar corporations, they target the big players in the market and cater to their needs. In other words, Tier 1 is perfect for large-scale companies with complex structures and an international representation.

Tier 2

This tier is ideal for medium-sized organizations with less than 1,000 users. They can still cover the challenging needs of a company with complex business processes but cannot tackle the obstacles that corporations face. Tier 2 includes such market leaders like Sage X3, MS Dynamics Nav, SAP B1, and others.

Tier 3

The final tier is designed for smaller businesses with ten or fewer users and less demanding requirements. Offering sufficient functionality, vendors that fall under Tier 3 provide a standard set of features that are suitable for SMEs and startups. Companies like QuickBooks and Sage 50 are a great representation of this tier.

Although this hierarchy is not perfect and some vendors are placed between the tiers, this will give you a good first impression of the ERP market. When contrasting different software, consider your needs and budget. For example, a first-tier tool like SAP Business One can provide a great level of support across the regions. However, is it something that you need or can you do well with a Tier 2 or 3 tool that covers only one or several locations?

When to Choose a Local Vendor?

A local ERP software solution usually comes at a lower price tag and offers better customizability to individual business needs. Another advantage is a close collaboration with the support team that can be easily accessed in your region.

However, local service providers often lack standardization which can harm the development process. Additionally, smaller companies may be short on resources to innovate and grow. Finally, consider your current progress and take into account whether you might outgrow them in the near future.

If you’re a small business that needs a basic set of ERP features to unlock new opportunities and optimize processes, getting a local vendor may be a good idea.

When to Choose a Global Vendor?

A global partner provides scalability, allowing you to seamlessly grow. They also have a wider array of features that will help you expand more quickly and efficiently. It’s also advantageous to opt for a global service provider to reach out to customers across multiple locations. Finally, using such software allows for standardization which means your development partner will not have any issues dealing with the infrastructure.

Due to the size of operations, global partners may not provide the hands-on experience that local firms do. On top of that, the costs of implementation will be considerably higher and more complex. Lastly, a global company offers a lot of features, some of which you may never need.

If you’re rapidly expanding and require a reputable and scalable partner, consider choosing a global ERP vendor.

Talent Pool

Magento ERP Integration can be a challenging process that requires some technical knowledge and understanding. When choosing an IT partner, focus on their experience and case studies to determine their specialty. Especially if your existing systems are complex and intricate, seeking technical assistance will definitely pay off.

Fortunately, Magento is a popular technology that doesn’t lack subject matter experts. Consider hiring certified developers who know the platform inside and out and have a lengthy history of executing Magento projects. It can also be beneficial to collaborate with an IT partner that focuses on Magento and offers in-depth expertise.

Organizations that lack technical expertise have no-code and low-code options. More and more ERP systems do not require a deep technological prowess to add new features or customize existing ones. In the commonplace agile approach, companies are given more flexibility during the development process. You can safely build improvements to business processes without worrying about bringing the whole system down.

Functionality

Before choosing a suitable ERP, identify what issues you’re trying to solve. There’s a chance you’re already using some form of an ERP and require an expansion. Define which features are missing from your existing system and check them against the available solutions. For a brand-new ERP adoption, go through a comprehensive assessment process to identify which processes can be modified and optimized with the system.

Independent vs Bundled ERP

Another vital aspect is the independence of an ERP system. While some solutions come prepackaged with a suite of tools, others offer flexibility. Your choice will depend on your current needs and existing infrastructure. A bundled solution will cover all your needs all at once but may feature some unnecessary functions. On the other hand, an independent tool allows you to solely focus on the required elements saving you from overspending.

Benefits of Magento Integration

Magento is one of the top eCommerce platforms that allows its users to build an online store, control its look and functionality as well as manage marketing and SEO activities. In this part, we will dive into the benefits of Magento ERP integration.

Order Processing Speed

Magento ERP integration can accelerate the order processing speed by optimizing internal workflows. By adding automation to managing customer accounts and order management, the system removes human errors and provides a smooth shopping experience. This advantage unlocks additional perks like better customer satisfaction and helps businesses turn one-time buyers into loyal customers.

Preventive Inventory Restocking

Whenever a customer makes a purchase, the new inventory data is shared with the ERP system to update the database and restock if necessary. The combination of Magento and ERP allows for more precise and fast inventory management that reduces warehouse expenses. This benefit prevents businesses from both overstocking and understocking, keeping their finances in check.

Streamlined Operations

The bigger you grow the more processes you have to juggle at the same time. Centralizing and structuring your operations will decrease errors, remove oversights, and enhance overall efficiency. Magento 2 ERP integration facilitates the smooth exchange, storage, and monitoring of data. By unifying databases in one location and interconnecting processes throughout the organization, you will create a more productive workflow.

Independence

Despite integration, both Magento and ERP will be hosted and maintained separately, preventing a complete breakdown in case of an emergency. This way, you will have your systems up and running even if an ERP experiences downtime.

Strategies of Magento ERP Software Integration

There are three primary strategies for executing Magento ERP system integration. Depending on your business type, technology, and size, let’s investigate which approach is best suited for you.

Point-to-Point Integration for Smaller Companies

Point-to-Point (P2P) integration applies custom code to tether both Magento and an ERP together. An affordable option, P2P is suitable for smaller companies that do not expect to rapidly expand any time soon. The biggest limitation of this strategy is the lack of scalability. Basically, each new application requires a separate integration which will increase the load on your infrastructure with every new addition.

Enterprise Service Bus Integration for On-Premise

Enterprise Service Bus (ESB) is a service layer connecting multiple applications and enabling you access to ERP, Magento, CRM, and many other tools. This model is designed for businesses with on-premise infrastructure and legacy systems and offers process optimization and easier scalability.

Integration Platform as a Service for Cloud

Integration Platform as a Service (iPaaS) is a cloud-based integration method catering to businesses with headless architecture. Similar to ESB, iPaaS provides connectivity among multiple applications, only in the cloud. Since Magento ERP modules are predesigned, users are not required to have advanced coding skills to execute the integration.

Decide on the Type of Magento Integration

Typically, you can choose one of the three types of integration: via APIs, through marketplace connectors and modules, or by hiring an integration partner. If your team lacks the expertise to execute an integration or you’re looking for a specific option that isn’t available on the marketplace, it’s recommended to go with the custom development.

A trustworthy partner will help you connect your store to an ERP system and select the necessary features without exceeding your budget. Collaborate with a reliable agency to save your valuable resources and build successful integrations.

Preparation for Magento ERP Integration

Magento 2 ERP integration is a complex process that will likely fail without thorough preparation. In this section, we will move on to a step-by-step guide to preparing your business to integrate with an ERP solution

Evaluate Your Business Needs

Investigate your business needs to identify what exactly you would like to delegate to an ERP system. Based on your size, business model, and industry, outline which features you’re looking for in such a solution. For example, you may discover that your customer satisfaction declines due to regular delays in delivery. Consider focusing on systems with robust order and inventory management functions.

Select a Suitable ERP

To ensure consistency and interconnectivity, choose an ERP platform that facilitates a solid relationship between Magento and ERP. Let’s take a closer look at the best ERPs on the market to help you decide which one fits the best:

Odoo

Odoo is an open-source ERP system that handles essential features targeted at streamlining and automating processes. The tool is easy to implement and use and caters to small and medium-sized businesses.

SAP

While SAP Business One is a platform for big players with complex structures and high budgets, SAP ECC targets SMEs. Both highly reputable solutions, they apply advanced features like machine learning and cloud deployment to deliver industry-leading services. SAP systems come with a more complex architecture and oftentimes require a seasoned engineer to integrate.

Microsoft Dynamics

Microsoft Dynamics Nav provides over 14 Magento extensions which makes the integration process significantly easier. A comprehensive suite of various apps for warehouse automation, financial management, and many others, the tool is the perfect platform for SMEs.

Sage ERP

Sage also offers different tiers to reach diverse businesses, from startups to large corporations. While Sage 100 caters to small businesses with less than 50 employees, Sage 300 is designed for medium-sized companies. The systems contain apps for order management, manufacturing, distribution, and much more.

Epicor

Epicor Kinetic is a robust system built to deal with large manufacturing companies, offering a large array of business tools. Smaller firms will benefit from their second tier, Epicor iScala which provides affordable solutions.

Acumatica

Another medium-tier ERP platform, Acumatica is a great solution to improve sales, inventory management, and customer relationships. The software also comes at reasonable prices while assisting businesses in centralizing their data and reducing costs.

Syspro

Finally, Syspro is an ERP that helps medium-sized firms streamline supply chain management and enhance the quality of their services. The platform is easy to use and provides a personalized experience to its users to maximize the outcomes.

Cover Basic Functionalities

Although you probably don’t need every application, there is a set of basic features that even a small company needs. For example, stock management, CRM, and finance management are must-haves for any organization. Additionally, focus on business intelligence functions to take advantage of predictive analytics and be able to forecast market trends and customer behavior.

Prepare your Data

Data preparation is a process that involves systematization of your data. Start Magento integration by cleaning your database to remove duplications and unused information. Additionally, create a backup store that will remain online during the integration process to avoid reputational and monetary losses. Finally, protect your data from exposure and misuse before handing it over to a third-party service provider.

Criteria of a Successful Integration

In this section, we will go over a checklist that will help you determine whether the integration process was fruitful and effective.

• Speed:

  Evaluate how user-friendly and functional your system is by identifying how much time you’re saving on now automated tasks.

• Stability and reliability:

  Run unit tests to determine the current health status of the application and make possible changes to rectify

• Extensibility:

  Assess how scalable the chosen solution is and how quickly and effectively it can react to your changing environment.

• Price:

  Does the solution lie within your budget constraints? Are there any hidden costs that drive up the bill?

• Support availability:

  Make sure your partner is responsive and provides open and transparent communication. Whenever an issue arises, they should be there to help you fix it.

• Vendor lock-in:

  Magento 2 ERP integration is prone to cause a vendor lock-in that can be quite devastating. Migrating from one solution is not an easy endeavor which is why it’s imperative to choose an ERP wisely.

• Online reviews:

  Check B2B review platforms to identify the strengths and weaknesses of the company.

Conclusion

Magento ERP system integration is not an easy undertaking and requires deep technical understanding and experience. Especially when dealing with sensitive customer data, the utmost precision and safety are extremely important. If you’ve discovered the need for an ERP system to optimize your operations, consider cooperating with experts.

Perspective is a Magento-focused web development company with years of experience. Our extensive team of over 70 specialists is ready to take on your most ambitious project and help you grow and flourish. Reach out to us to discuss your ideas and empower your eCommerce business to achieve your goals.