KEY PERFORMANCE INDICATORS TO TRACK ERP PROGRESS

It’s no secret that you’ve devoted a great deal of time and effort into your ERP implementation, hoping to increase organizational efficiency, reduce operating costs, and improve daily business processes. Now it’s time to evaluate the success of your ERP implementation project. Most distribution and manufacturing companies will measure their successes (or disappointments) with select quantitative key performance indicators or KPIs. These KPIs are critical indicators for strategic and operational improvement, create an analytical basis for decision making and help focus attention on what matters most.

Having that said, in order to effectively measure the success of your ERP implementation, you need to have the appropriate KPIs and metrics set in place. Your post implementation measurements should include a minimum of 12 and maximum of 36 KPIs. Make sure your KPIs are clearly defined, and goals are easily measurable.

Below are 12 KPIs for your ERP implementation that are commonly used by manufacturing and/or distribution companies.

(1) Customer Satisfaction and Experience – This is much more than just doing what you said you would. It’s about establishing genuine connections with new and existing customers, therefore creating a competitive advantage for your business.

Customer surveys are a great way to collect data to determine your overall customer satisfaction score or net promoter score (NPS).

(2) Employee Satisfaction – Consider your employees transition into the new system. Happy employees will be more confident in their role and provide improved productivity for your business.

This is another great opportunity for a survey. As you examine results, you will identify problems areas and even determine if employees could benefit from additional training.

(3) Revenue – Revenue is possibly the most important metric for any business.

Consider creating report to determine total revenue and operational costs. If your revenue is increasing and operational costs are decreasing, your ERP implementation is working correctly.

(4) IT Costs – One of the main reasons for your ERP implementation is to reduce costs over time. Costs such as maintenance, subscriptions and customizations should be reduced. If they’re not, there’s an issue with one of your system processes.

(5) Project Margins – Your ERP solution should be improving margins by automating processes, reducing labor costs, simplifying budgeting, and optimizing your use of resources. Monitoring your project margins is another avenue to help you understand whether your ERP implementation has been financially successful.

The margin of a project is calculated by subtracting the costs from the revenue. Costs can consist of time worked by your team as well as expenses required to complete a project.  Margin is presented as a dollar amount and percentage. The margin percentage is calculated as the percentage of the revenue that you get to keep.

(6) Inventory Turnover – It’s important to know how often your business completely sells and replaces inventory. Many distribution and manufacturing businesses have a significant amount of money tied up in inventory. Slow-moving inventory items consume valuable space and make the warehouse less efficient.

Your accountants and management should prepare inventory performance ratios with your real-time ERP data.

(7) Cycle Timeline – Monitoring your cycle timeline from beginning to end will help you find ways to improving timing.

Calculate the time from start of production / order placement to the shipment of product(s). Manufacturing cycle timeline includes: process time, move time, inspection time, and queue time.

(8) Downtime – Downtime is any unplanned event that prevents your business from producing or shipping.

Warehouse standstills should be tracked and later evaluated. Excess amounts of downtime is one of the key components that your ERP solution is designed to prevent.

(9) Order Management – Track the number of order returns due to improper shipments, mistakes, and defects to help control brand reputation and customer satisfaction.

Your ERP solution will provide you with more insight as to where problems are beginning and help rectify these situations.

(10) Inventory Deviation – Optimize your inventory by tracking the actual number of pieces in inventory versus what you believe to be in inventory. Your ERP solution will help lower this deviation rate since all inventory transactions are performed in real-time.

(11) Quality Control (QC) and Quality Assistance (QA) – To guarantee product safety and up the expectations of your customers, it’s important for you to know the condition of your materials provided by outside vendors.

Your ERP solution should help you perform QC and QA testing.

(12) Consumer Trends – Understanding trend data will help you uncover consumer thought processes, and launch consumer-facing innovations.

It’s important to keep track of calendar dates, weather conditions, growth in e-commerce, and/or the price of oil and how your business was affected.

How do you measure ERP Success?

When beginning a new ERP implementation, setting clearly defined KPIs is essential for success measurement. The best place to start is with a clearly defined ERP project plan, an outline of your whole ERP implementation project. Be sure to include your expected benefits and a baseline of your current performance.

The ACC team is here to walk you through the entire ERP implementation process and help you achieve business goals. Contact one of our support specialists to begin discussing your business’s future.