What is an ERP? A guide for UK suppliers

The Cambridge Business English Dictionary gives the plainest definition of enterprise resource planning: "a system of software which is designed to manage all the information and activities of a company by using shared data". For a supplier, the real test of an ERP is what it does when a customer's order arrives.

What is an ERP?

An ERP system is the business software a company runs its operations on. Every team reads and updates the same records, instead of keeping its own lists that drift apart.

Oracle, which sells ERP software, describes its own category in the same terms: "ERP systems tie together a multitude of business processes and enable the flow of data between them."

In plain terms, the ERP is your company's operational record. If an order exists, it exists there.

What does an ERP do with a customer's order?

It turns the order into a delivery and an invoice. The record that does the work is the sales order: "a supplier's own record of a customer's order that it has accepted to fulfil." You create it in your ERP under your own order number, with the customer's purchase order number held on it as a reference.

One ERP's own help pages show how direct the link is: "When you post a sales order, you create a shipment and an invoice." Despatch and invoicing are not separate jobs typed up later. Both come out of the same record, so a wrong product code or quantity on the order is the same mistake on the despatch and the invoice.

The steps below are our summary, from the supplier's side.

1. The customer's purchase order arrives. By EDI it travels as an ORDERS message, which GS1 defines as "A message specifying details for goods or services ordered under conditions agreed between the seller and the buyer." Some customers send orders through a portal, or as a PDF by email. The purchase order guide covers the customer's side of the document.
2. It becomes a sales order in your ERP. In the sales order guide's words: "The sales order is created in your ERP, keyed to the customer's PO number."
3. Stock is allocated and the goods are despatched. A despatch advice (the ASN) goes to the customer, which GS1 defines as "A message specifying details for goods despatched or ready for despatch under agreed conditions." The ASN guide covers what it carries.
4. The invoice is raised from the sales order. What was ordered and despatched is already on the record, so nothing is retyped.
5. The invoice is sent, by EDI as the invoice message (INVOIC) or by the route the customer asks for. The EDI invoice guide covers the message.

EDI carries steps 1, 3 and 5 between the two companies. The ERP holds steps 2 to 4 inside yours.

The time from order to delivery is your lead time. Whether the delivery arrived on the due date and in the quantity ordered is what OTIF records.

EDI vs ERP: what is the difference?

An ERP is one company's own system. EDI works between companies. The Transalis EDI guide defines electronic data interchange as "the automated exchange of business documents between companies, computer to computer, in a standard electronic format."

GS1, which publishes the EANCOM standards, reports that in 2020 the three most used messages among users of its EDI standards were the order, the invoice and the despatch advice. They are the documents a supplier's ERP receives or produces.

How do EDI orders get into an ERP?

Every customer sets out its own order format. The EDI mapping guide describes the starting point: "A new retail customer sends a technical guide at set-up." And the gap: "Your ERP holds the same facts under its own field names."

Mapping, or translation, closes it. A Transalis integration guide describes the result: "A customer's purchase order arrives in its own format and reaches the ERP as a sales order in the structure the ERP expects." The mapping guide says where that work happens: "Transalis translates each partner's format on its side, so your ERP sees one structure whoever the partner is. The partner-specific mapping rules stay out of your ERP." A new customer does not mean new rules inside your ERP.

Without that step, someone types the order in. AG Barr, the drinks company behind Irn-Bru, rekeyed orders from smaller customers who sent PDFs and email attachments. Its Business Process Analyst described the old routine: "We would print and match them to a form which showed the customer number and SKU, to then rekey this data into our own ERP system." Those orders are now translated into EDI format and "fed into AG Barr's ERP system, removing manual rekeying," as the AG Barr case study records.

An emailed PDF looks digital. Until someone keys it, your ERP has never seen it.

Do you need an ERP to trade by EDI?

No. The web EDI guide draws the line: "With web EDI a person reads each order and keys each invoice, while integrated EDI connects an ERP, accounting or warehouse system so documents flow without rekeying."

Transalis Web EDI runs in a browser, with "No ERP integration and no software to install". Your first retail customer can trade with you by EDI before your own systems are connected to anything.

The trade-off is the keying. "A web EDI supplier with its own ERP keys each order in as a sales order by hand," as the sales order guide notes. With Integrated EDI, the order lands in the ERP as a sales order without anyone typing it. The EDI page describes the usual path: "Many Transalis customers begin with Web EDI for their first retail buyer and scale to Integrated and Enterprise EDI as they grow".

Can an ERP do EDI on its own?

Some ERPs come with an EDI option. The Transalis article on native EDI in your ERP explains why the two jobs differ: "An ERP is built to run finance, inventory and orders, while EDI is the ongoing job of translating data for hundreds of trading partners who each change their formats and rules constantly." Myth 8 in the EDI myths guide takes on the same belief, that EDI comes included in your ERP.

The other route leaves the ERP as it is. As the native EDI article puts it, "A managed connection sits alongside your ERP rather than changing it". The AS Watson case study puts it in one line: "Existing ERP systems were kept in place rather than replaced".

How Transalis connects EDI to your ERP

Transalis is a managed outcomes provider for B2B integration, EDI and eInvoicing. Its integration network page describes the approach: "we plug into your ERP, accounting or ecommerce system through a connector that already exists". The same page lists the systems Transalis connects to.

On the EDI page, Integrated EDI is "EDI wired directly into your ERP, accounting or warehouse system." A change of system does not mean starting again: "As your technology evolves (new ERP, new channels, new partners), your Transalis connection stays the same."

Map your supply chain from your customers' orders to the sales order in your ERP.