“Keep it smart and simple” is good advice. Key performance indicators (KPIs) are a smart and simple way to harvest value from your ERP system. Just one look and you know if a particular aspect of your business is either healthy or in need of attention.
Part of the incredible value of an ERP system is its ability to house comprehensive data in one database. But users need ways to analyze that data quickly. The expression, “What gets measured gets managed” is true. Measurements generate understanding and motivate actions. Great managers are great at finding that one figure in a report that deviates from normal and responding to it. That one figure drives them to action. And that action positively impacts their company’s business. KPIs are an important part of this process as they can be used to transform the data into valuable, actionable information for managers.
In the early stages of an ERP project, KPIs are often defined as part of the planning process. These KPIs are essential to measuring the business benefits generated by the ERP initiative. ERP software often is delivered with hundreds of pre-defined KPI metrics to provide instant insight. In other situations, users need to define their own KPI metric definitions. Either way, the metrics selected determine the areas of the organization that will get quick attention when indicated necessary.
It’s important to note that although KPIs are generally developed around a business’ specific functions and processes, financial metrics such as sales and profitability are important in nearly every organization. In addition, many operational metrics are shared by organizations in the same industry.
Dashboards are a popular way to view KPIs as they are able to bring KPI metrics to life. Many ERP systems have dashboard capabilities that provide sweeping overviews of business activity (including snapshots, trends, benchmark comparisons and graphical presentations) within a focus area or across the enterprise. Deep dive analysis into dashboard presentations and the ability to customize dashboards with additional widgets both are common features. KPIs assembled into an executive dashboard provide something like a control cockpit with a variety of gauges and indicators on the state of the enterprise. With the target values in place, traffic light indicators with red-yellow-green color codes provide an easy status indicator. Green indicators indicate healthy conditions. Red and yellow indicators indicate metrics needing executive attention. Many ERP systems allow users to set up alert triggers to notify them when KPIs go outside of pre-defined threshold values. And for the less technically-minded, KPIs also can be viewed via queries and reports.
KPI’s are sometimes referred to as key success indicators as they don’t just provide smart, simple and effective reporting, but also a measurement of success for business process improvements. Panorama’s recommendation is to use KPI’s to visualize the business activity within the ERP system, review the indicators that stand out and then take action! For training on how to get the most from your enterprise solution, including KPI analysis, please contact the independent ERP consultants at Panorama. May great success be yours!
Blog post written by Greg Griffith, a project manager and business analyst at Panorama Consulting Solutions.