Measuring ERP Implementation Success

After implementing an ERP how do you know you are benefiting?

The answer is tracking your KPI, or key performance indicators. The values that are important to your company and that you have been tracking all along.

To help you track your ERP implementation success, look to some of the following KPIs to determine what to monitor.

Global ERP KPI

The following items can impact every business unit.

Workplace Integration

Are all employees fully engaged in the new ERP? Are there outliers that simply refuse to use the new system and continue to enter and process data in the previous system or systems?

A complete manufacturing ERP only works if the ERP is adopted completely by all employees. For employees are not yet onboard with the new system, try engaging with them directly to help you understand where the concerns are and if anything can be done to improve their experience.

Ease of Use

Is the new ERP a clunky, unresponsive, click-fest? Is the data not displaying where expected?

By the time you are ready to measure your success, this shouldn’t be an issue, as you have reviewed the ERP user interface and trained your staff on what to expect. For companies where this is an issue, can this be resolved with better training, or better system hardware? Perhaps try addressing the issue with your software vendor.

Data Migration

Are there gaps in your data that cannot be filled quickly or are unexpected?

During the implementation process it’s natural for there to be some data that wasn’t carried over. If these issues weren’t resolved to your satisfaction on implementation, you should contact your implementation vendor and discuss how to resolve this issue quickly.

Perceived Benefits

Is the board, or the executive team, upset that there are no, or few returns for the ERP investment?

This is one of the most dangerous areas, but also the goal of this paper. To help you ensure you can accurately transmit the tangible and intangible benefits of your ERP selection to those that make the decisions.

Business Unit KPI

Since different areas of your company have different goals, the first stage of measuring success should be in establishing the KPI’s per business unit.

Operations and production management

Here, some of the production planning and operation indicators are:

• Cycle time – A well made and implemented ERP will help decrease the cycle time.
  What to look for: The cycle time of your operations before and after the ERP was implemented.
• Forecast and schedule accuracy – An ERP with good data will be able to accurately forecast demand and schedule production to meet that demand.
  What to look for: The forecast accurately reflects the demand and are you on track to meet your demand quotas.
• Defects – An ERP with a good quality management system will help your decrease the number of defects via better reporting and machine maintenance.
  What to look for: The defect rate parts-per-million number should be lower after the ERP was implemented.
• Scrap – Smarter part management and nesting should become easier with a good ERP.
  What to look for: The scrap cost value should be lower after the ERP was implemented.
• Downtime – The amount of time your machines aren’t working impacts your productivity and performance.
  What to look for: A good ERP implementation with smarter maintenance management will show with decreases in the amount of downtime overall at our company.

Inventory control

Inventory is the most crucial element of any production floor. Proper inventory and warehouse management should be one of the most important indicators for your ERP:

• Accuracy – Knowing what you have in stock and where the stock is should be a core concept for your ERP.
  What to look for: If you tracked inventory discrepancies before, your regular checks of your inventory should more closely match the ERP values.
• Lead times – The amount of time it takes your parts to move from raw material to finished product, which is tracked by your ERP.
  What to look for: With a successful implementation of warehouse and inventory management, you should be able to see this value go down as warehouse staff will spend less time looking for materials and more time delivering it to operators.

Sales and order management

Manage your sales orders and sales team to ensure their success via:

• Average sales and Margins – The average sales value is the amount in sales made by your team and the margin is the profit made per sale.
  What to look for: With increasing customer satisfactions and faster cycle times, these values should go up.
• Sales per representative – The number of sales per sales rep is a great indicator of your strength as a company.
  What to look for: With your customer satisfaction increasing and costs decreasing, acquiring new sales, or maintaining your current rate should be clearly visible.
• Lost accounts – In a global economy, losing accounts to competitors happens, but you can avoid it.
  What to look for: Increased customer satisfaction and decreased costs should give you a competitive advantage that means your customers stay faithful. With your new ERP, this number will decrease.

Human resources

Managing staff becomes easier with a good ERP:

• Costs – Quantifying the cost per worker helps you know where your money is going.
  What to look for: A good ERP will show you a decrease in costs for every employee.

• Productivity – Proper implementation helps you analyze your business processes and streamline them. Better process mapping leads to less workarounds, less tasks with no value-add, and overall better workers.
  What to look for: A good ERP will help your company see an increase in productivity, with more parts made by the same number of hands.

Customer relationship management

Manage your customer relations to ensure you keep clients. Measure the relationship with:

• Customer satisfaction – This catch-all metric is not the easiest indicator to track. Are clients unhappy because they feel rushed by customer service agents? Are deliveries never on time or delivered to the wrong address?
  What to look for: A better ERP will mean decreased late shipments and more time for your sales staff and customer service people to spend attending to your clients, making this value increase.

Vendor relationship management

Make note of your vendor relationships. This includes paying them on time and monitoring their delivery performance:

• Vendor stats – Vendor stats are a measure of their performance to you. Are their delivery trucks on time, every time? Are they asking for money up front? Do they have rude staff? Take all these items into consideration when tracking vendor impact.
  What to look for: A good ERP helps you track vendor performance and improve planning.

Conclusion

By comparing reporting results in your new ERP to your previous system, you can confirm that acquiring your new system was the right decision.

Most ERP systems have reports and dashboards to help management understand operations and manage smarter. The goal is to improve decision-making abilities with better data. With companies being so varied, you should look into adding KPIs or metrics that can help you measure your success.

At the end of it all, your new ERP will result in a healthier bottom line for your business — tangible profits. Take note of what your fiscal profits were before the implementation and assess it 6-12 months afterward.