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By Ralph Hess • January 10, 2020

Five Ways Startups Scale with ERP Automation

Rothy’s, a San Francisco-based woven shoes startup valued at $700 million, began thinking seriously about automation when it only had 15 employees. The startup’s backend operations were performing well with an order volume of roughly 1 million pairs of shoes per year, but the company was growing rapidly and scaling meant either adding a lot more staff or getting serious about automation.

Naturally, Rothy’s chose lean operations assisted by technology instead of overhead-heavy staffing.

“We knew from the beginning that we weren't going to have a 50-person packs department, a 50-person billing department, a 100-person customer service department,” says Ulion Riebe, Rothy’s head of finance.

While the ecommerce side of the business was automated at Rothy’s, financials largely were not. Sales, returns, discounts and product costs were all just journal entries calculated through Microsoft Excel spreadsheets.

“We used to have these long processes in accounting where we needed to figure out what we’d sold versus what we’d shipped,” he says. “We’d pull separate reports, and there would be tens of thousands of lines because of our volume. We needed to have these systems all talking to each other in real-time, with not a whole lot of manual intervention.”

So even though the Rothy’s business was only a few years old and had a handful of employees, the startup invested in a cloud-based ERP system for end-to-end automation that would help it continue to grow without massive hiring or technical kludges that didn’t scale.

Thanks to this early focus on automation, Rothy’s operation now is automated end-to-end, and the company continues to scale rapidly without fear that the growth in order volume will break operations or require messy, mass hiring.

“We had buy-in from the founders and the leadership very early about needing to invest in a strong foundation in the infrastructure to support the customer experience and growth,” explains Riebe.

 

How Startups Use ERP Automation

Automation plays a big role in sustained growth, and here are five ways that growing startups today use ERP systems for automating their businesses.

  1. Automated Order Creation

 

Revenue leakage seriously hurts the average business, especially a startup; studies show that businesses experience revenue leaks of up to five percent each year.

Much of that leakage comes from errors in invoicing and sales orders, whether those are invoices that aren’t sent, transposition errors, or poor data entry.

Startups use ERP systems for automating invoicing and the sales order process, cutting down on revenue leaks and improving order processing times. Orders, terms, pricing, discounts, ATP dates and billing all can be automated with ERP.

  1. Automated Financial Reports

 

Management should be focused on growing the business, not handling routine report creation.

Without ERP, startups usually must pull together reports from various data streams and minimally-connected systems. Shoehorning data wastes time and reduces both the volume of reporting and the frequency. With ERP, which serves as a central hub for all aspects of the business, management can focus on business building and have reports generated automatically or with a few clicks of a button.

ERP systems also help startups make better data-driven decisions, because cloud-based ERP collects and acts on data in real-time for faster reporting.

  1. Automated Product and Service Delivery

 

Scaling a business requires reducing the friction and time it takes to deliver on orders. Startups take advantage of ERP’s widespread connectivity with other systems for linking systems so products and services can not only be ordered without manual intervention, but also delivered without human involvement.

By automating product and service delivery, startups such as Rothy’s also deliver a good customer experience even as they grow, offering accurate quotes, product status and ship times, as well as other automated customer order communications.

 

  1. Automated Material Requirements Planning

 

For startups that make physical products, ERP also helps automate material resource planning such as cost estimates, order entry, inventory control, bill of materials, purchasing and scheduling.

Most MRP activities can be automated, so startups use ERP for reducing the operational strain of handling manufacturing logistics. Businesses let their ERP handle these operational details and processes that used to take mental bandwidth and time. With ERP, MRP just requires occasional oversight.

  1. Automated Notifications

 

Knowing the transformational value of technology, startups also use ERP for automating the oversight process.

Because ERP connects with all backend systems in a company and serves as a single source of truth, notifications and alerts can be automated. So instead of having to keep a close eye on daily operations, startups automate the oversight process by having their ERP system alert them when something requires attention.

Businesses don’t run themselves quite yet, but startups can greatly reduce routine management functions by focusing on exceptions through automated notifications rather than having to keep a close eye on all of the company’s moving parts.

Learn More About Automating Your Startup with ERP

 

Enterprise resource planning systems are essential backend technology for fast-growing startups, both for the automation they enable and because they help small businesses scale into larger enterprises.

Learn more about the role ERP plays in startup growth by reading about Rothy’s ERP journey or checking out our ERP primer, Understanding Cloud ERP.

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