ERP implementations can benefit companies in many ways, but judging their success, or lack thereof, can be difficult. Project leaders should consider examining some specific metrics after an ERP implementation to determine if the project was worth the investment.
Leaders should look beyond standard project measurements like budget vs. actual cost and the timeline required to implement the ERP. Clearly defined KPIs can help project leaders determine whether a new ERP is delivering value and help them quickly identify and mitigate any potential issues.
Project leaders should consider using the following KPIs to help measure ERP implementation success.
1. Inventory turnover
The new ERP should help the purchasing and manufacturing teams improve inventory management, including estimating requirements, ensuring that materials are readily available and minimizing waste when using raw materials.
Because of this, a potential measurement of ERP implementation success is an increase in inventory turnover. Project leaders can use the inventory turnover ratio or the percent reduction from historical turnover numbers for an inventory turnover KPI.
2. Project margins
Company higher-ups will likely want to see increased margins on individual projects after a new ERP implementation, because the new system should provide improved cost control, planning and reporting.
Increased margins is a good KPI for measuring ERP implementation success.
3. Year-end activities
A new ERP can help reduce the time required to close the books at year-end, so an improvement in year-end accounting activities is a useful ERP KPI.
Ideally, the system should help simplify the process and make it easier to track all the accounting data throughout the year, which can potentially minimize surprises at the end of the year.
4. Data accuracy
The new ERP should simplify the process of capturing data. Some common ways of doing so include developing forms that limit the number of options or only capturing required data.
To accurately determine whether data entry errors are decreasing, project leaders must create a process to measure the number of data entry errors, then track the number of errors over time.
5. Fewer questions from customers and vendors
An ERP that includes a customer and vendor portal should allow customers and vendors to enter information and perform certain tasks themselves, such as an invoice status check. Because of these new capabilities, employees should receive fewer requests from customers and vendors and thus spend less time responding to them.
Project leaders can measure this KPI by tracking the number of questions received or the length of time employees spend answering customer or vendor questions.
New ERP software should help the company reduce costs and gain better insight into revenue streams through the ERP software's reporting and dashboards. The project team can use the incremental change in these numbers to evaluate the ERP's ROI. Once the combined revenue with expenses subtracted surpasses the initial ERP investment, the company is in a favorable position for a positive ROI.
Project leaders must communicate to others at the company that it might take several years for the ERP to produce a positive ROI depending on the size of the company, the previous ERP system and other potential factors.
7. System uptime
Evaluating the new ERP's uptime compared to the old system is an important metric because a nonfunctioning ERP can significantly affect employee productivity. Another critical measurement is system responsiveness or performance, since a slow system will affect all users. The company may notice a difference if the new ERP system is a cloud-based ERP, as the IT team has greater control over uptime and responsiveness with an on-premises system than a cloud-based ERP, which places the responsibility of a stable system on the vendor.
Company leaders can use metrics from the previous ERP as a benchmark when measuring system uptime.
8. User satisfaction
Project leaders should potentially consider feedback from different types of system users when measuring user satisfaction, including employees in a range of departments as well as vendors and customers.
Counting each group separately is key, since each will have a different ERP experience. For example, vendors and customers will likely have limited system use.
Measuring user satisfaction can also help identify areas that still need improvement.
9. Improved efficiency
A common objective of an ERP implementation is to automate and simplify processes, reducing throughput time and costs. Confirming that the ERP implementation accomplished this goal is an important factor in determining whether the ERP project was successful.
A project team may not be able to measure every process, and they may not need to do so. However, identifying activities that were particularly time-consuming and expensive with the previous ERP is a good starting point for analyzing efficiency.