Before you create an ERP project plan, it’s important to know how to measure success. This is why KPIs for ERP implementation are essential. You should measure these key performance indicators (KPIs) over the course of your ERP implementation as well as post implementation.
While there are many different KPIs you can measure, some are more essential than others. We recommend starting with these:
7 KPIs for ERP Implementations
1. Improved Customer Experience
One of the biggest reasons businesses invest in ERP software is to establish a better connection with new and existing customers. This is why customer experience metrics should be among first metrics you measure.
Virtual ERP Boot Camp
Join us virtually on October 6-8 for a business transformation and ERP training event equipping executives, IT directors and project managers with the skills to transform their people, processes and technology.
ERP systems organize and streamline your business resources, which improves the business functions related to customer service. For example, if you own an eCommerce business, ERP can organize vital information such as orders and shipping. When your customers’ orders are processed shipped on time, you improve customer experience.
Consistency is also essential to customer service. It’s important to continually deliver a positive and familiar customer experience to ensure customers return to your business. You may lose a devoted customer if their order is shipped late and your support team doesn’t effectively handle the situation.
While customer experience transformation may seem like a nebulous term, it actually is very measurable. The best way to measure customer related KPIs is to listen to your customers. Explore your online reviews and send out a customer survey. You’ll also want to measure how many new customers you’re gaining and how many customers you’re retaining.
2. Increased Inventory Turnover
Inventory turnover metrics measure how much inventory is sold during a certain period of time. ERP software can increase inventory turnover by providing better visibility and enabling automation.
For example, if you consistently have excess inventory of a particular product, your ERP solution can estimate how much of this product you actually need to stock in the future. It also can make predictions based on buying behaviors that humans would take hours to detect but an ERP system could detect in a matter of seconds.
To measure inventory turnover as a KPI of your ERP project, you can divide your sales by your average inventory.
3. Better Project Margins for Your Services
To ensure your ERP system is delivering expected business benefits, it’s essential to track your project margins for the services you deliver. An ERP system can improve these margins by automating processes, reducing labor costs, simplifying your budgeting and optimizing your use of resources.
Some of the metrics you’ll want to track include estimates, budgets, invoices, bookings, completion, milestones, labor, expenses and materials.
4. Reduced IT Spending
While IT is a necessary part of your business, there are many ways your IT may be costing you too much. This can include subscription costs, hardware costs, hosting fees and maintenance fees.
Many companies are able to reduce these costs by implementing the right ERP system. For example, your legacy system could be costing you a tremendous amount in maintenance fees because you have to hire specialized resources to keep it functioning without ERP vendor support.
However, after implementing a modern ERP system, you find that the system doesn’t need extensive customization to work for your needs. In addition, you find that upgrades are no longer a headache. These cost savings can be quantified and measured as KPIs.
5. Revenue Growth
After implementing a robust ERP system, you likely will experience revenue growth. There are two reasons for this: reduced costs and increased sales.
ERP helps you reduce costs by optimizing your business processes and increasing your operational efficiency. ERP also gives you access to real-time data that you can use to make smart business decisions that cut costs and increase sales.
6. Real-time Data
Many businesses do not have access to accurate, real-time data. As a result, they implement ERP to achieve data consistency across departments and obtain insights that enable proactive decision-making.
While the business intelligence capabilities of ERP systems vary in terms of complexity, you will find many systems have advanced business intelligence.
For example, in terms of the factory floor, ERP systems with advanced business intelligence can show you what machines will soon be due for maintenance. This enables you to minimize downtime and set realistic expectations for customers.
One ERP project KPI you might measure related to real-time data is how much you are able to decrease machine downtime.
7. Increased Purchasing Power
ERP helps improve your purchasing power by maximizing your necessary business purchases while lowering costs.
You can achieve this by using your ERP system’s supplier performance management capabilities to identify points of weakness and negotiate better terms with your suppliers. You also can aggregate your supplier list to streamline your purchasing and increase efficiency.
In addition, you can use ERP to analyze your suppliers and determine which ones are costing you more than necessary. If a supplier is costing you too much money, you can take action to find a cheaper source.
One ERP project KPI you might use is how much you were able to reduce material costs through increased negotiating power.
How do you Measure ERP Success?
If you’re selecting new ERP software, then setting KPIs is essential. The best place to start is with a clearly defined enterprise strategy, an outline of the ERP business benefits you expect and a baseline of your existing performance.
Panorama’s ERP consultants take the time to understand your business goals, so they can help you set KPIs that matter and achieve measurable business results. Request a free consultation below to start talking about your vision for your company’s future.