ERP Integration Explained: Definition, Benefits, and More

ERP integration gives more value to an enterprise resource planning system. When these modern ERP systems can function with other business-critical tools like legacy systems, business intelligence software, and a website, organizations gain a more comprehensive look at how a business is operating.

Integration refers to how well an ERP system can communicate with the other software and systems used. Manufacturing businesses rely on a myriad of tools to manage different aspects of their operations, including customer relationship management (CRM), supply chain management, and financial reporting. Without integration capabilities, these systems become isolated, which can lead to ineffective decision-making, a lack of transparency, and an increase in manual work.

Let’s discuss why ERP integration matters when selecting an ERP and how integrating business systems can simplify processes, improve data quality, and augment a business’s performance.

What Is an ERP Integration?

We define ERP integration as the process of connecting an Enterprise Resource Planning system to other software applications and systems a business uses (CRM, e‑commerce platforms, websites, supply chain management systems, etc.). The goal is to allow data to flow seamlessly between these systems.

Integrations make a technology stack greater than the sum of its parts. Companies can do more with their data while reducing the need for manual data entry and minimizing errors. This helps companies operate more efficiently, improve decision-making, and better understand their business’s health.

As companies explore the idea of investing in an ERP system for the first time or upgrading an existing ERP system, it’s important to think about the other tools and technology they’re using. ERP integrations have come a long way, but some integrate better with certain tools than others. If interconnectedness is a goal, decision-makers need to know what tools they’re already using and find an ERP system that will seamlessly integrate with them.

Benefits of ERP Integration for Manufacturing Businesses

Manufacturing businesses were among the first to start using ERP systems and continue to rely on them in daily operations. Because of this reliance, ERP integration isn’t just a convenience – it’s a necessity. 

We’ve assisted thousands of manufacturing businesses in finding the ideal ERP solution. Many of those required integrations, from simple to complex. When integration methods are done correctly, these are a few of the benefits they achieve:

• Simplify operations by coordinating all parts of the manufacturing process, from procurement to production to packaging and shipping.
• Automate business processes like inventory management, order processing, and production scheduling to save time and reduce errors and waste.
• Offer real-time visibility into business operations, including insights across departments, changes in market demands, customer and product data, and bottlenecks that could lead to waste, backorders, or problems with quality.
• Improve supply chain management by ensuring materials are available when needed, forecast demand, maintain accurate inventory levels, and collaborate with suppliers
• Enhance customer service by streamlining the order-to-delivery process and allowing marketing and sales teams to gain a better understanding of customers’ unique needs and preferences.
• Reduce costs by reducing waste and excess stock, improving coordination with suppliers, minimizing human error, and lowering labor costs.
• Eliminate data silos by making it easier to share business data between users and job functions.
• Help companies scale and grow by integrating with new tools and systems that will keep them competitive in the market.

The right ERP system and its implementation should integrate with or fully replace and migrate from the current software. This is easier said than done, given the massive software landscape and the bounty of new tools and solutions that emerge each year. 

Ideally, companies will choose an ERP that not only integrates with or replaces the current tech stack but also positions them to easily adopt and integrate new technologies as needed.

6 Types of ERP Integrations

ERP integration can take various forms, depending on the specific needs of the business and the systems involved.

Common types of ERP integrations include:

Point-to-Point Integration

Point-to-point data integration also involves creating a direct connection between two systems. Each application involved in the integration has a specific interface or connector that communicates with the ERP system. Data transfers directly from one system to another without intermediaries.

Pros:

• Simplicity: Easy to set up and maintain for a limited number of applications.
• Cost-effective: Requires fewer resources and a lower initial investment.

Cons:

• Scalability: As the number of applications increases, the number of connections grows exponentially, leading to a complex and hard-to-manage network.
• Maintenance: Each connection needs to be managed and updated separately, which can become time-consuming and costly over time.

Enterprise Service Bus (ESB) Integration

An ESB acts as a central hub through which all communication between different systems passes. It decouples the systems, meaning each system only needs to connect to the ESB rather than to each other directly. The ESB manages message routing, data transformation, and protocol conversion, allowing disparate systems to communicate seamlessly.

Pros:

• Scalability: Easily scales to integrate numerous systems without creating a complex web of connections.
• Flexibility: Supports various communication protocols and data formats, making it adaptable to different integration needs.

Cons:

• Cost: Initial setup and ongoing maintenance can be expensive.
• Complexity: Requires specialized skills to implement and maintain.

API-Based Integration

This integration uses Application Programming Interfaces (APIs) to enable communication between the ERP system and other applications. APIs define the methods and data structures for requests and responses, allowing systems to interact programmatically. 

Pros:

• Standardization: APIs provide a standardized way for applications to interact, simplifying integration.
• Real-time Data Exchange: Supports real-time data synchronization between systems.
• Flexibility: Can integrate with a wide range of applications, especially cloud-based services.

Cons:

• API Management: Requires managing API versions and ensuring compatibility.
• Complexity: Can become complex with an increasing number of APIs and endpoints.

Middleware Integration

Middleware is software that acts as an intermediary between the ERP system and other business applications used. It facilitates data exchange and communication and provides functionalities like data transformation, message brokering, and transaction management.

Pros:

• Simplification: Centralizes integration logic, reducing the complexity of direct connections.
• Scalability: Can handle integrations with multiple systems effectively.
• Flexibility: Adapts to various integration scenarios and supports different communication protocols.

Cons:

• Cost: Implementing and maintaining middleware solutions can be expensive.
• Performance: May create latency if not optimized properly.

iPaaS (Integration Platform as a Service)

Considered the current gold standard of ERP integration, iPaaS is a cloud-based integration platform that provides tools and services to connect various applications and data sources.

It offers pre-built connectors, templates, and workflows to streamline business processes and simplify the ERP integration process.

Pros:

• Cost-effective: Reduces the need for extensive on-premise infrastructure.
• Scalable: Easily scales with the business’s needs.
• Ease of Use: Often includes user-friendly interfaces and pre-built connectors for quick deployment.

Cons:

• Third-party Dependency: Reliance on a third-party service provider for integration.
• Data Security: Potential concerns regarding data security and compliance, especially for sensitive data.

Database Integration

Database integration involves a direct integration with the ERP system’s database, allowing other applications to read from and write to the ERP database. This typically involves using SQL queries, stored procedures and triggers to manage data exchange.

Pros:

• Control: Provides a high level of control over data exchange and manipulation.
• Efficiency: Can be highly efficient for specific use cases requiring direct database access.

Cons:

• Knowledge Requirements: Requires in-depth knowledge of the ERP database structure and schema.
• Data Integrity Risks: Potential for data integrity issues if not managed carefully, as direct database manipulation can bypass business logic and validation rules.

Most Popular ERP Integrations

An ERP system aims to integrate all business functions into one system. While integrating an ERP system with other software and systems is important and sometimes required, the priority is to eliminate these other systems whenever possible and use the appropriate module within the ERP system to substitute the corresponding functionality. 

As technology evolves, new opportunities emerge for ERP integration. Common ERP integration challenges persist with every type of integration. However, companies may be more agile in overcoming integration challenges when they focus on the right priorities.

Currently, the following areas present the greatest opportunity for impact.

Customer Relationship Management (CRM) Systems

Research shows that nearly three-quarters of businesses have implemented CRM to manage customer interactions. CRM systems streamline customer data and interactions, which can help improve sales forecasting, customer service, and revenue. 

Popular examples of CRM integrations include Salesforce, Hubspot, and Microsoft Dynamics 365, among others. These tools provide business intelligence for sales and marketing teams and help make sense of customer needs vs. sales.

Supply Chain Management (SCM) Systems

Supply chain management systems optimize all aspects of the supply chain, including improving inventory management, demand planning, production and shipping lead times, and warehouse management. Examples of SCM systems include SAP SCM, Oracle SCM, and Infor SCM.

Human Resources Management Systems (HRMS)

The human resources landscape has been in turmoil since the pandemic and continues to face new challenges related to remote and hybrid work, an unpredictable job market, and an aging workforce. Integrating HR management features with ERP solutions allows HR to become more of a profit center than a cost center by streamlining payroll, simplifying hiring and onboarding, and maintaining compliance. Examples of HRMS include Workday, ADP, and BambooHR. 

E‑Commerce Platforms

E‑commerce sales are expected to top $6 trillion in 2024 and experts predict that online purchasing will grow by more than 56% by the year 2026. In the face of rapidly shifting consumer preferences, supply chain disruptions, and economic uncertainty, manufacturers need to keep a firm finger on the pulse of the E‑commerce landscape. Integrating E‑commerce platforms like Shopify, WooCommerce, and Magento can help manufacturers predict consumer demand, process and fulfill orders, manage realistic stocks of inventory, and ultimately improve the customer experience.

Financial Management Systems

Financial management systems provide detailed financial reports of a business, monitor cash flow, and help with financial planning and decision-making. Examples of financial management systems include Quickbooks, Sage, and Xero. ERP integrations can enrich financial systems with other data, such as sales and forecasting, allowing companies to remain financially nimble and competitive.

Business Intelligence (BI) Tools

BI software like Tableau, Power BI, and Qlik provide data analysis to help leaders make data-driven decisions. These tools can collect data from myriad sources and transform it into visuals that are easier to process and act on. Integration with ERP allows for real-time access to business performance data, which supports strategic planning and operational improvements.

Project Management Solutions

Integrating project management software with ERP provides a comprehensive view of project costs, resources, and timelines, improving project outcomes. Tools like Asana, Trello, and Microsoft Project allow companies to take advantage of user-friendly tools while also centralizing the data that goes into them. This improves communication between departments, enhances collaboration between team members, and helps to plan and execute projects efficiently.

Customer Service Tools

ERP integration with customer service tools improves customer satisfaction and support by improving customer data access and maintaining a high level of service. These integrations may include ticket systems, customer satisfaction surveys, and performance insights collected by tools like Zendesk.

Warehouse Management Systems (WMS)

Warehouse management systems like Manhattan Associates, Fishbowl, and HighJump are particularly important for manufacturing operations. These systems display real-time inventory data, allowing manufacturers to improve production planning and build efficiency in the supply chain. These insights can help improve fulfillment speed and accuracy and optimize warehouse layout and operations.

Payment Processing Systems

Integrating with payment processing systems like PayPal, Stripe, and Square allows companies to maintain accurate financial records in real-time. With faster payment processing, manufacturers can improve transaction security, prevent fraud, and improve cash flow. 

Challenges of ERP Integration

Integrating an ERP system with other tools, software, and systems can bring significant benefits, but it also comes with several challenges. Companies often struggle to achieve ERP integration due to:

• Data migration issues in connecting to legacy systems and other software programs
• The costs and resources required for a successful integration
• The unique complexities of integrating your ERP with other systems
• Ensuring data is secure and the integration complies with relevant regulations
• Managing the organizational changes that come with implementing a new ERP system and integrating it with other systems
• Downtime and disruptions that come with introducing a new system and getting it fully functional
• Ensuring the new system can scale and accommodate future growth
• Testing each integration’s performance and accuracy
• A lack of understanding of how each ERP vendor works and the overall cost and integration strategy
• Not fully identifying where data silos exist

Addressing these challenges requires careful planning, a clear understanding of business requirements, and the involvement of experienced professionals.

Choosing ERP Based on Integration Needs

An ERP software journey begins with an understanding of a company’s priorities for an ERP and its existing technology ecosystem. If you’re considering an ERP investment, there are two ways we can help you.

Find Your Best ERP Fit Using Our Comparison Tool

We designed our ​“Best Fit” comparison tool to give you side-by-side views of ERP systems. Use this tool to find ERP vendors and systems that meet your criteria, then compare their features and functions to see how they address your needs.

Get Expert Advice and Personalized Help

Our team of ERP experts is here to offer personalized recommendations based on your business’s criteria. We ask the hard questions and ensure no detail goes overlooked so you can move forward with confidence. Contact us to start the process of solving for ERP integration.