What is ERP?
Enterprise Resource Planning (ERP) is an integrated software system that companies use to manage and unify their core business processes — from finance and accounting to inventory, manufacturing, and order fulfillment. In practical terms, an ERP acts as the central database and workflow engine for a business. It consolidates data from different departments into one platform, providing a “single source of truth” for internal operations. For example, your ERP tracks what products are made in the factory, what’s in the warehouse, what’s been shipped to retailers, and how much revenue you’ve earned – all in one place.
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Why ERP matters for CPG Brands
For consumer goods brands (CPG) selling through retail and ecommerce, an ERP is essential plumbing. It keeps your supply chain, sales, and finance data in sync. Why does that matter? Imagine trying to fulfill large retail orders without a unified system: the warehouse might not know about the sales team’s latest orders, or the planners might not see updated inventory levels. An ERP solves this by integrating information across functions, so that everyone from a Demand Planner to a Supply Chain Leader is looking at the same figures (e.g. on-hand inventory, production schedules, shipments).
In the CPG context, ERP data is critical for meeting retailer commitments. Your Sales and National Account Managers rely on ERP to confirm product availability before pitching a big promotion. Your Supply Chain team uses it to ensure production can meet forecasted retail demand. Meanwhile, the IT and Analytics teams maintain integrations between the ERP and other systems – for instance, pulling POS data from retailers and marrying it with ERP shipment data to get a full picture of sell-in vs sell-through. Without a well-implemented ERP, a brand risks stockouts, double-booked inventory, or failing to deliver on time (and facing retailer penalties). In short, ERP is the backbone that helps a growing CPG company scale efficiently and execute reliably across all its retail and online channels.
(Hint: Modern cloud ERPs and data platforms can even pipe ERP data into analytics tools in real time. For example, Alloy.ai’s platform connects internal ERP data with retail POS data, so teams can see what’s selling through vs. what’s in stock in one view. This kind of integration breaks down silos and lets you respond faster to issues.)
Real-World Example
Imagine you’re an IT Manager at a beverage brand, and your company uses a popular ERP system to run the business. A huge order just came in from a major retailer’s e-commerce site, and your National Account Manager is excited – but you need to ensure you can fulfill it.
In your ERP, you quickly check available inventory and upcoming production runs for that specific SKU. The data shows you have enough product, but only in one warehouse on the West Coast. The Supply Chain Leader uses the ERP to allocate some of that stock to the retailer’s order and arrange a transfer to the East Coast distribution center for faster delivery.
At the same time, your Demand Planner updates the forecast in the ERP to account for the spike in demand and triggers an increase in the next production run. Because your ERP is integrated with the retailer’s order system (via EDI), the order flows in automatically, and your team can turn it around without missing a beat.
The Analytics team will later merge the retailer’s sell-through data with the ERP’s shipment data to see how quickly those units sold online. Finally, when the Executive team reviews the quarter, the ERP provides the authoritative numbers for total shipments and revenue.
This example shows how ERP touches every role: it gave sales confidence to promise the order, helped operations deliver on time, and provided leadership with accurate data – all through one integrated system.
Key Metrics and KPIs for ERP
- On-Time, In-Full (OTIF) Delivery: A key supply chain metric measuring what percentage of orders ship on schedule and complete (ERP data on shipments vs. retailer order requirements feeds this). High OTIF is crucial to avoid retailer fines and keep shelf stock healthy.
- Inventory Turnover: How many times you sell through and replenish inventory in a period. Calculated using ERP records of sales or shipments and average inventory. A higher turnover (while avoiding stockouts) means you’re efficiently moving product rather than sitting on excess stock.
- Days of Inventory (DOI): The average number of days your current inventory will last. This is derived from ERP inventory levels and recent sales/usage rates. It helps Demand Planners ensure you’re not overstocked or at risk of running dry.
- Fill Rate: The percentage of a customer’s order quantity that you were able to ship immediately. For example, if a retailer orders 1,000 units and you only had 900 ready, the fill rate is 90%. ERP order and inventory modules provide this metric, which Supply Chain Leaders and Executives watch to gauge customer service performance.
- Financial Metrics (Revenue, COGS, Margin): ERP systems in CPG track the dollars and cents as well. Sales and Finance teams will use ERP data to calculate revenue by product, cost of goods sold (COGS), and gross margin per SKU or order. These financial KPIs let Executives see profitability by account or product line.
Related Terms
- EDI (Electronic Data Interchange): A standard electronic format for exchanging business documents (like retailer purchase orders, invoices, and advanced ship notices) directly between ERP systems. Critical for CPG brands managing high-volume retail orders.
- Demand Planning: The process of forecasting consumer demand to ensure you make and ship the right amount of product. Often done using data from the ERP (historical sales, inventory) combined with market inputs.
- MRP (Material Requirements Planning): A core component of many ERPs that calculates what materials are needed and when, based on the production plan and current inventory. Helps CPG manufacturers schedule production and procurement.
- CRM (Customer Relationship Management): Software for managing customer contacts, sales opportunities, and support. Some ERPs have built-in CRM modules or are integrated with CRM tools to give a full view of the customer from sales through order fulfillment.
- Supply Chain Visibility: The ability to see product movement and inventory across the entire supply chain. This often involves combining ERP data (e.g. factory output, in-transit shipments) with downstream retail data. (Related reading: see Alloy.ai’s Inventory Visibility solution for how brands get a real-time view beyond their ERP data.)