What are the respective roles of ERP and CRM?
At their core, both systems are databases grounded in customer company and contact information. However, they serve diverse functions within an organization.
Let’s examine the areas where CRM and ERP overlap and intersect.
CRM and ERP Defined
ERP (Enterprise Resource Planning)
ERP is a system that manages business functions related to engineering, building, sourcing, and delivering products. Functions include accounting, procurement, bills of materials, project management, inventory, sales orders, and shipping.
ERP is core operational software for most manufacturers and distributors. Without it, their business won’t function properly.
Popular brands include SAP, Epicor, Infor, NetSuite, and Sage.
ERP systems are often specific to vertical markets. For example, Infor Syteline focuses on manufacturing processes for discrete and process manufacturers. IFS targets several vertical markets, including aerospace and defense, as well as energy utilities and resources.
From a sales perspective, ERP informs management about past orders, but not about future sales.
CRM (Customer Relationship Management)
CRM is a system that helps users manage customer relationships and improve customer interactions and experiences. Functions include lead, account, contact, activity, opportunity, and customer service management.
Business value encompasses tracking who said what to whom and when, anticipating customer needs, and facilitating collaboration between sales and service to deliver exceptional customer experiences.
A CRM system is a value-add for most manufacturers and distributors. Some companies thrive despite not having one, while for others, it means costly inefficiencies can lead to lower-than-expected sales and underserved customers.
Popular brands are Salesforce, HubSpot, Creatio, Microsoft, and Zoho.
CRM is very much about analyzing the sales pipeline and forecasting future orders.
Can ERP Software Include CRM Functionality?
ERP vendors often include aspects of CRM functionality, such as contact management, in their core platforms.
However, ERP systems lack the breadth of sales and marketing functionality standard in today’s CRM systems.
CRM in ERP is often basic. One vendor refers to it as ‘CRM lite.’ There may be limited fields, little to no opportunity management, weak task management, no email templates, limited collaboration, and no AI offerings.
The CRM in ERP is typically not sales-friendly from a user experience (UX) perspective.
In terms of contact data, an ERP system may only be populated with contacts for accounts payable (AP), accounts receivable (AR), and logistics – individuals involved in billing, shipping, and receiving.
For companies that deploy both ERP and CRM platforms, the respective functions are not always clearly defined, and it is unclear where the valid version of customer data resides.
Where The Systems Can Interact
When companies that already have an ERP system invest in a CRM system, they expect a seamless transfer of specific data between the systems, so that salespeople and customer service representatives no longer have to log in to the ERP.
However, this can only happen if data that is easily accessible in the ERP becomes available in real-time or near real-time in CRM.
CRM Account to ERP Customer
The primary external entity in an ERP system is the customer. Typically, sales leads and prospect organizations live in a CRM system.
When marketers and salespeople do their job, some prospects become customers. For businesses with a high new customer acquisition rate, manually entering new customers in an ERP system is an inefficient use of time. For this reason, a common CRM-to-ERP integration touchpoint involves creating a new ERP customer account with a single button click.
In many cases, the CRM system will not contain a billing contact for a new customer, so a process is needed for an ERP user to collaborate with a CRM user (typically a salesperson) to obtain the Bill To information.
The question often arises regarding which system serves as the single source of truth (SSoT) for information such as specific company details. For example, it makes sense for a customer’s Ship To address(es) to be only editable in the ERP system.
CRM ‘Won Opportunity’ to ERP Order
In manufacturing and distribution, closed CRM opportunities for new customers and add-on opportunities for existing customers should be transferred into the ERP system as new orders.
Customer orders – closing the loop on a won opportunity. Present the purchase order for entry into the ERP system. Customer invoices
ERP Data in CRM for Enhanced Customer Information and Sales Enablement
Salespeople who utilize CRM benefit from easy access to ERP information when planning or meeting with existing customers.
Classic requirements of desired ERP data within CRM are:
- Sales order history
- Open order status
- Product availability
- Service request status
- Whether a customer is on credit hold
Ideally, a salesperson should not need to make phone calls or send emails to an ERP user to inquire about product availability.
Where The Systems Overlap
There may be certain areas where it is not clear whether the business requirement should be handled by the ERP or CRM system.
Here are several examples.
Quote Generation
If salespeople have been generating quotes in an ERP system, does it make sense to shift that quoting to an ERP system?
For a distributor with thousands of SKUs, this may not be practical, as product data may be too complex to maintain in a CRM system.
For manufacturers with a limited product line, shifting the quote generation process may be relatively easy and provide advantages, such as richer templates that better inform buyers about details, including terms and conditions.
For complex, rules-based quoting, a third-party CPQ (Configure, Price, Quote) solution that integrates with ERP or CRM may be necessary. This type of solution provides features such as guided selling, custom workflows, and 3D visualization.
CRM vendor Salesforce offers native CPQ features.
Commission Calculation
A question that often arises in a mixed ERP/CRM environment is, ‘Which system has the best data for commission calculation?’
Whether commissions are calculated natively in an ERP or CRM, in spreadsheets, or a third-party system, the most precise data source must be determined.
Production Management
Certain ERPs, such as Epicor, include production management capability, while specific CRM systems, like Creatio, also market this functionality.
Depending on the complexity and level of collaboration required between salespeople and engineers, this functionality could be handled in one system or another.
Developing Extended Functionality
Over the last couple of decades, CRM systems have evolved into robust platforms for what is sometimes referred to as XRM—Extended Relationship Management.
A CRM database can be customized to meet unique business requirements and consolidate multiple legacy systems into a single platform. Extended functionality can be built out with various tools, including no-code, low-code, and full-code capabilities.
Generally speaking, ERP systems are less customizable in terms of building out the database and user experience (UX) to extend to other parts of the business.
CRM and ERP systems serve distinct purposes—CRM enhances customer relationships to drive sales, and ERP streamlines internal operations to reduce costs.
They are both crucial for a business’s profitability. Implementing both systems can provide a comprehensive approach to managing customer interactions and optimizing business processes.
