What is an ERP for an Amazon Seller?
ERP is Enterprise Resource Planning. It is an umbrella term for a very complex type of business management software, but simply put, it houses an abundance of functions that help run your business from accounting to inventory management and manufacturing to supply chain management.
Regardless of what any salesperson will tell you, the main purpose of ERP is not to drive sales. Within the Amazon marketplace, search result positioning and product photography have far more to do with increasing sales than data management does.
Benefits of ERP for Amazon Sellers
ERP can be purchased from major ERP software providers such as Microsoft, Oracle, SAP and others, or it can be purchased through an ERP-as-a-Service (SaaS) model.
ERP SaaS is a convenient way to address many aspects of your business including:
- Sales & Marketing
- Customer Service / Customer Relationship Management
- Warehouse Management
- Manufacturing / Production Planning
- Asset Management
- Project Management
The functionality within this ERP tool can vary widely depending on the capability of the software provider or ERP-as-a-Service platform that you are using, so do your research before you make the decision to start migrating over.
How Amazon Sellers can use ERP for Amazon Business
ERP is a software solution with the power to reduce the administrative burden of the modern business, and can be invaluable to the management of your Amazon business. Here are some common uses for ERP.
- Automated Billing & Payments
- Accounts Receivable
- Accounts Payable
- Accounts Receivable: Automated Billing & Payments
Billing and payment automation is an excellent service that is frequently underused by businesses. Not only can it pay vendors more quickly, but it can also generate reoccurring revenue from your customers.
Automated invoicing takes the work out of managing your accounts receivable. You can auto-generate invoices based on the cycle you choose, and send them from the ERP directly to your customer. Once the customer signs for the invoice, it is done. There is no need to go searching for a signature amongst stacks of documents, no need to generate a PDF and send an email, and no need for the email to get lost before you get a response.
Accounts Receivable: Invoicing
If your ERP is set up for it, you can also take the invoicing that you are doing within the ERP, then process it right out to your customers, usually sending a PDF w/invoices attached.
This workflow eliminates the need to copy and paste invoices and it eliminates the risk that the signed invoice will get lost before being posted to your Management Platform.
Accounts Payable: Automated Payments
Similarly, when it comes to generating purchase orders, if your ERP is set up to do it, you can bill an account on your ERP, then process the payment immediately within the ERP software. With the right ERP software platform, you can even get purchase orders automatically generated from the data that is pulled from your Amazon businesses.
Accounts Receivable: Capitalization
If your business sells products, then you need to track inventory levels of how much of a product you have on hand. These inventory levels can be monitored and measured very effectively by using automated inventory replenishment software. You can set up inventory replenishment based on the actual sales of your products, or set it up so that it automatically generates an order when inventory is low.
For example, let’s say that you have $10,000 worth of an item sitting in your Amazon warehouse. The necessary setting will be inventory control. You may keep inventory set up in batches of 100 (or whatever your setting is). The inventory replenishment systems will be set up for whatever you need to order once there is zero or less inventory in place for the item. For example, you may find that you need to order 750 of the item with zero or less in inventory so you will set the auto-order up for 750 once there is zero or less inventory on hand.
The key on this one is to make sure that you maintain adequate inventory. You don’t want to keep 6,000 of an item on hand, because if you don’t sell it, you are out the money it cost you to manufacture it.
Be sure to be aware of the additional costs associated with automated inventory management software. There are complicated calculations that need to be taken into account.
POS / Point-of-Sale (POS) is a powerful business tool that allows customers to access your inventory. This is a common tool with brick-and-mortar businesses, but it is gaining popularity in online businesses.
A POS system allows you to create SKUs (Stock Keeping Units) that can then be tagged to individual units at a specific location in your inventory. Each SKU is easily identified in the system and locations can be added to the system as necessary.
Inventory Management: High-Level ERP
At a high level, inventory management or POS works by letting you get an exact picture of what is on hand within your inventory so that you can efficiently move forward with selling your products.
I frequently visit Amazon Sellers that have thousands of SKUs offering hundreds of variations of a single product. Without an ERP and POS, these sellers struggle to track inventory levels that are most relevant.
For example, imagine a seller with a product with three sizes and 36 color options. Let’s pretend that this seller has ordered 20,000 units of this product.
Without a POS it is very challenging to be able to track exactly how many units of this product are left in inventory. The seller may try counting up units, but a seller of this size will quickly see that it is simply impossible to count every single unit on hand.
This seller is in trouble if they try to go by SKUs in inventory. They can set up a POS system with SKUs, and will then be able to use the numbers within each SKU grouping to determine how many are left in inventory.