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Part 4: Thinking Forward: Metrics which Monitor Success

By Joseph Timmins

For any business project, best practices include success measurement.  Normally this is through KPIs (Key Performance Indicators).  An ERP (Enterprise Resource Planning) project is no different. If you are evaluating and planning on a new ERP, start by defining metrics that are unique, and important to your company. ERP systems improve efficiency. Efficiency can be measured. 

Here are some areas to consider at an ERP project outset and along the way.  Of course, it’s always best to use your own!  But DO IT! Someday you’ll tell a (hopefully successful) story.

 

Customer Experience

Companies invest in ERP in to establish better customer relations. Therefore, customer experience metrics should be among the first metrics you monitor.

 

An ERP system allows you to organize and streamline your business resources, thereby improving your customer service. For instance, if you own an online store, ERP can make ordering and shipping information available. As a result, the customer experience will be enhanced.  One way this is measured is by on time shipment.

 

Customer service requires consistency as well. The key to ensuring customer retention is to provide a positive customer experience as measured by customer satisfaction.

Measurable examples include: on time shipping, returns, time to problem resolution, repeat orders, total sales by customer, number of new customer acquisition.  

 

Inventory

Your ERP system helps manage inventory.  Thus you’ll know if you’re over-stocked (at the expense of tied up capital) or under-stocked (at the expense of customer satisfaction).  Good MRP systems (a capability of ERP) allow better planning, purchasing, production and order fulfillment.  An ERP system is capable of making buying and building recommendations, which a planner would take hours to determine, in seconds. Inventory management can be measured by KPIs.  Measurable examples include: on hand, on order, committed, inventory turns, obsolete, scrap.   

 

Margins

A never ending concern of all manufacturers is: Am I charging the right price based on what this product is costing me to make?  By tracking margins this question gets answered.   Perhaps it will be determined that process automation, labor reduction, price increases, product line discontinuation, or other avenues are warranted.  Lack of clarity on costs can blind companies and is why this is an important KPI to track. Measurable examples include: Rolled up BOM cost, Price(s), Discount(s), PPV, overheads (material and labor), absorption, burden, product margin, product line margin

 

IT Expenditures

IT is an integral component of your business. But IT may be costing you too much.

 

By implementing a new ERP system, many companies can reduce these costs. For instance, your legacy system could be costing you because you must hire specialized resources to custom program or write reports. Newer systems put capabilities in the hands of users.  You’ll discover that it the need for extensive customization goes away. It is also easier to perform upgrades. In addition, there is ample opportunity to shift from CAPEX to OPEX spending on a new ERP system which will get you running faster, eliminate infrastructure and simplify upgrades. Measurable examples include: IT cost, annual maintenance, external programming, CAPEX/ OPEX analysis.

 

Integration Capabilities and Automation

A robust ERP system can add capabilities to your business that result in a seed change.  Examples include automation of notifications, web site integration, EDI, 3PL integration.  Through new APIs these important business needs can be more readily deployed opening new markets and resulting in higher efficiencies.

Measurable examples include: New sales revenue through automation


Ultimately, establishing KPIs is an essential part of selecting new ERP software. The best way to begin is by laying out a clearly defined enterprise strategy, outlining the ERP benefits you expect, and evaluating your existing performance.

Acuity Consulting Group takes time to understand your business needs, and enable you to achieve measurable results.  We implement SAP Business One ERP software helping our clients improve their operations.   Please complete the form below to schedule a complimentary consultation to discuss your vision for your company's future.

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