An ERP (Enterprise Resource Planning) system is the central element of almost every business today. Sometimes referred to as the “Accounting ERP”, these systems are necessary and integrating ERP is often even mandated by law, no matter how large or small the business is.
However, the ERP functionality is rarely enough to cover all the aspects of a full-fledged transportation management business. That is why logistics companies often look for some additional solutions with broader functionality.
In this article we talk about the integration of the ERP software in logistics and custom integrating it with the transportation management systems (TMS).
What is the role of ERP in logistics?
In broader terms, the ERP system provides a view of the working processes in the company. It is a kind of a hub for the functional groups of procuring, financing, resource distribution and management. In the context of logistics, many of these functions become even more critical, as the whole point of the business is transporting goods and tracking them during the transportation.
It has to be said that for a logistical company many off-the-shelf ERP systems are usually considered “lacking” to be the single system of record. They need additional functionality to provide a range of operations for the transportation management.
This is usually achieved by custom development of additional ERP Modules or integration into a TMS of choice. In both cases, the idea is to create one integrated platform which is critical to so many aspects of logistical business. The main benefits of circulating data within one platform are the elimination of misunderstandings between the supplier, the carrier and the warehouse, as well as the efficient and therefore budget-friendly workflow between departments and organizational units within the company.
It should be noted that this approach may be irrelevant for large companies, as they often employ third-party contractors for transportation and warehouse management, providing them with access to the ERP data.
But small to mid-sized businesses often use TMS as a supplement to ERP. There are two advantages of this approach:
● Improved customer service: end users are often given access to the transportation data, which allows them to track movement in progress and makes everything clear and transparent;
● Workflow optimization: instead of having to manually transfer the information between the supply chain participants, the supplier only has to send a file or a message.
How does ERP integrate into Logistics?
TMS or WMS systems should be receiving data directly from within the ERP. In those cases when integration between 2 systems is not present, many functions become a manual operation. An example of that would be the Transport Ordering function; without proper integration this function would imply manual emailing to the transport company and hand-keying the appropriate responses back in.
On the other hand with two systems integrated, as Orders are created within the ERP system, data flows to the TMS or WMS systems seamlessly, for the further processing in those systems.
Typically, the systems exchange data by transferring files of specific formats or making appropriate API (Application Programming Interface) calls. To achieve proper synergy, data must flow in both directions, keeping both systems up to date. Ideally, this should also happen completely in the background, without any action on the part of the human.
This way, ERP generates orders, TMS calculates transportation costs, and WMS informs TMS & ERP that orders are processed and prepared for transportation. Proper Integration of the three systems is critical to allow process flow between all segments of the logistical business.
When integrating ERP in Logistics, consider the following aspects:
- Tasks. Your approach should be determined by the tasks the company faces. If all tasks can be handled by a single system of record, then you’ve just avoided all of the costs associated with multi-system integration efforts. If, on the other hand, an ERP by itself cannot handle all of the tasks, then you need to decide which other systems have to participate; keep in mind that fewer systems means less integration complexity, and therefore lower implementation costs.
- Data segmentation for processing. You need to decide which system will be responsible for each type of data. Most often ERP stores data on orders, customers and finances, and TMS keeps information on transportation and associated costs. It is important to carefully consider the integration to prevent the two systems from performing the same task;
- Technical aspects. Consider the level of data exchange (bi- or mono-directional), information that will be transferred between the systems as well as tools that will be used (file sharing services, API, etc.).
To go beyond theoretical, let’s talk about ERP integration in logistics on the example of Cloud Logistics TMS.
Let’s assume that a supplier company uses Acumatica to process orders and Acumatica’s WMS to manage warehouse operations. The customer service department creates an order in Acumatica and sends it to the logistics department as soon as its fulfillment can be started.
Information about the order is immediately available within WMS because in our example WMS is part of Acumatica’s ERP. TMS, though, receives Order information via the API Call, and creates a transport order based on the SO information. Typically, the transport order includes such information:
- tracking number;
- volume and weight specifications;
- data about the items shipped;
- shipment warehouses;
- shipping method.
Depending on the company’s activity, the list of mandatory fields can be expanded. E. g., food producers additionally specify transport temperature.
Warehouse employees start to collect the order when they receive it in WMS. Once the order is collected, its status gets updated and a TMS receives an API call with notification that the order has been collected and is ready for shipping.
Next, the logistician arranges transportation in TMS and sends the order to the shipping company. Once the customer receives the order, the logistician confirms the final shipping cost, and this information is sent back to the ERP system via another API call. Information about the actual shipping costs can be used in reports and logistics KPIs calculations.
Integrating ERP together with TMS can improve transportation management in a number of critical ways. When the tasks are properly defined and the data for processing is handled by each system in the most optimal way, then combined integration of the ERP & TMS gives you a comprehensive platform that results in a significant competitive advantage in the field.