When growing ecommerce businesses look for software solutions to improve team efficiency and accuracy, sellers tend to go down one of two paths: pursuing either an inventory management system (IMS) or an enterprise resource planning (ERP) tool. While this makes sense at a macro level with both tools having the ability to consolidate a large degree of company data and needs within one tool, there are vast differences at a micro level.
The core function an IMS plays is to ensure accurate inventory counts across sales channels. As if helping sellers avoid overselling wasn’t enough, modern-day IMS programs can also help with the management of a seller’s product procurement, orders and warehouses. Further, with such a big tie-in to the finances of a business, many IMS players have financial tools like QuickBooks Online or Xero incorporated into them as a way to help sync product purchases, costs, inventory valuation, etc.
On the other hand, the core function of an ERPis more strongly tied to the financials of a business. With the ability to integrate sales channels, inventory and other tech stack solutions, the ERP aims to be the sole source of information for a company and prioritizes the structuring of data in order to populate the general ledger properly.
As you can see, IMS and ERP systems are meant to do very different things and are also set up in very different ways. Without going too deep into detail just yet, ask yourself the following questions when considering which is the right path for your business:
- Are you looking to solve operational issues or to be more financially compliant?
- Think about your team, tech stack, and processes: are you in a state of growth and experimentation, or is everything well-defined and fail-safe?
- Do you prefer a “plug-and-play” solution, or do you have technical resources (or budget) to do integrations?
- What timeframe are you looking to have a solution implemented by? (Weeks, months, years?)
- What is your overall budget to implement a solution?
If your answers align more with the former option than the latter, an IMS is probably the right solution for you. However, if your answers landed more with the latter options, it sounds like your business is less of a growth seller and more of an enterprise, and the best fit is the enterprise resource planning tool.
Why is this? It’s because ERP tools like NetSuite, Sage, SEP, etc., are set up around a broad-reaching, well-defined process. Implementation is meant to map out data points and cement the way in which teams work. On the other hand, inventory management solutions like Finale Inventory are meant to be customizable for growing teams. They’re made to be flexible: they’re counting on your tech stack changing and that’s why IMS software platforms come with so many pre-integrated tech stack options. Not only does this make getting started with an IMS significantly cheaper, but it also makes onboarding faster.
ERPs do have the advantage of facilitating processes between a wider variety of technical resources (think sales CRM, marketing automation tools, etc.) and having the entire team (normally hundreds or thousands of employees) work within the same tool. However, with this breadth of product offering comes a depth of complications: should one part of the system go down, there’s a risk everything else within the ERP can face troubles or go down, as well.
There’s a reason why deciding on when to update ecommerce systems and what solution to pursue can often be overwhelming. Especially when ERP systems can cost hundreds of thousands of dollars to implement (across months, if not years), the added pressure of financial and competitive setbacks is very real if the wrong decision is made.
At Finale Inventory, we’re proud when sellers outgrow us and move on to ERP systems because they’re now managing millions of orders across a few hundred team members. However, we've often seen the opposite: sellers believe they’re ready to migrate to an ERP, end up having buyer’s remorse and, many times, come back to using Finale to help their business grow.
Finale Inventory has been around for over a decade and has worked with thousands of sellers over the years. We’ve stayed in business because we help ecommerce businesses grow, plain and simple. Talk to our team to learn more about how sellers use Finale to meet their unique needs or for a more in-depth comparison of an IMS vs an ERP system (features, related costs, implementation timeframes, etc.) download this ebook.