Top 10 KPIs for Measuring the Success of ERP Implementation
We all know that a large expenditure goes into Enterprise Resource Planning (ERP) implementation in an organization. So as an entrepreneur you would want to evaluate the success of the implementation for good return on investment (ROI).
Successful implementation of an ERP system can spur creativity and enhance a business's various aspects. For example, just imagine the benefit of all decision-makers being able to collaborate effectively on the cloud ERP with centralized data coming from numerous departments.
No matter where you are in your digital transformation, we are here for the guidance, perspective, questions, and resources to help your Dynamics 365 implementation succeed.
How to Evaluate the Success of ERP Implementation?
It's important to consider other factors in addition to deployment speed when evaluating an ERP implementation's effectiveness. While a successful implementation is a good start, an ERP system doesn't start to provide value until it is used in streamlining company operations. Measuring advancements in the ten KPIs mentioned below helps reveal such organizational workflow improvements over time.
Answers to the questions below can also assist business managers in determining the worth of a recent ERP implementation in addition to those KPIs:
- Which operational procedures saw a quick improvement? Which was hampered, and how was it resolved?
- Has the ERP system lived up to all the goals established for it before the installation process started?
- Do company managers observe an overall decline in errors? decisions that are better?
- Customer satisfaction and relations have they improved?
- Have workers made use of the ERP system in their daily activities?
- Has business growth started to pick up speed?
- Do corporate processes feel more unified or less dispersed overall?
- Are corporate executives more content and relaxed post the deployment of ERP?
These questions will have some subjective answers, and some may take some time to become evident. However, by combining these with the KPIs that are more immediately measurable, business managers should gain a clear understanding of the value their new ERP system is bringing to the company.
To further track the progress and get answers to any of the above questions, contact our Dynamics 365 support partner for instant solutions.
Top 10 KPIs for ERP Implementation
Here’s a select set of key performance indicators (KPIs) that can assist you in proving the viability of the new system.
Companies benefit from their ERP systems for a considerable amount of time. Therefore, it's critical to monitor both short- and long-term KPIs that will collectively gauge how the business is progressing toward its strategic goals.
Following the completion of an ERP implementation, monitoring changes in the following KPIs can assist a business in gauging its success and/or determining where it may wish to make further adjustments to its ERP strategy.
1. Real Time Data: Gaining a consistent view of people, performance, and technology throughout a company depends on real-time data. For decision-makers to base their goals and plans on the same information, regardless of where they sit in the organization, a successful ERP deployment should create better, more precise information about business operations and procedures and consolidate that information.
2. Accurate Forecasting of Demands: Predicting demand KPIs demonstrate how accurately a company can forecast future demand for its goods and services. For instance, to prevent stockouts or over-ordering, a chain of grocery stores has to estimate the things that its customers will buy at different times of the year.
High forecast accuracy is provided by a well-configured ERP solution, which enables businesses to anticipate demand based on a combination of historical data and present-day signs. For example, an impending event, like thanksgiving or a significant storm, or a general economic trend, such as shortfall in the supply chain.
3. System Performance: This KPI gauges the ERP system's reliability and efficiency following its adoption. It considers elements like system availability, response times, and uptime. To ensure efficient operations and user happiness, an ERP system must be reliable and high performing.
4. Customer Experience: Customers, as well as internal and external stakeholders, may be impacted by ERP implementations. By monitoring comments, grievances, and other customer satisfaction indicators, this KPI tracks customer satisfaction levels.
High customer satisfaction scores show that the ERP system is fulfilling consumer needs, raising service standards, and improving the entire customer experience.
5. Project Margins: Project margins are used to calculate how much a company makes in project-based industries like construction after deducting its costs for supplies, labor, and overhead.
A company needs to keep track of several data, such as cost estimates and budgets, project expenses, and revenue the project generates, to effectively calculate project margins. To provide businesses with a complete picture of income and costs for each project, the best Microsoft Dynamics ERP systems combine data on all these variables.
6. IT Spending: Metrics for IT spending assist firms in getting the most value out of their technological investments at the lowest possible cost. The complexity of legacy systems and procedures, which inevitably produce inefficiencies and unneeded expenses, is especially difficult for more established businesses.
At the corporate or user level, an ERP can monitor costs for hardware, software, and cloud subscriptions. With this knowledge at their disposal, companies can seek for ways to improve and consolidate their systems to save costs without compromising performance.
7. Inventory Turnover: Inventory turnover shows how many items are sold over a certain period. A producer of white-label computer displays, for instance, would aim to sell 5,000 units every week. An ERP system will track its development after a successful implementation, giving visibility into inventory operations and showing how it can move things more swiftly.
Additionally, it aids in preventing losses from overstocking and improving demand forecasting based on market behavior. Manufacturers must establish precise inventory performance ratios to enhance production without compromising efficiency in their warehouses, which makes inventory turnover of particular importance to them.
8. Schedule Adherence: Scheduling KPIs, as their name suggests, assist businesses in monitoring production rates in relation to their production schedules to make sure they don't lag or skip important deadlines. A milestone for a toy company might be producing and delivering twice as many of its hottest games in time for the Black Friday shopping frenzy.
The launch of a software vendor's most recent product upgrade could follow a rigid production schedule. An ERP system makes scheduling simpler by giving teams insight into potential disruptions and a clear picture of how manufacturing and production processes are progressing in relation to deadlines.
9. Employee Experience: A successful ERP deployment can measure employee engagement and satisfaction even though it is not a precisely quantifiable statistic like ROI or revenue. Higher levels of productivity or employee retention, as well as a rise in sales, are all indicators of satisfaction and engagement, which are all positive signs for a company's financial health.
An ERP, on the other hand, can demonstrate when KPIs are heading in the wrong direction, giving a company the knowledge necessary to identify and resolve any possible problems as soon as they arise. Additionally, doing so can aid in maintaining the investments made in employee morale and training.
10. Return on Investment and Sales: ERP implementations can be expensive, thus calculating the ROI is crucial to determining the project's success. This KPI compares the costs associated with adopting and maintaining the ERP system to the financial gains resulting from its deployment, such as higher revenue, cost reductions, and enhanced profitability. A high ROI shows that the ERP implementation has produced the anticipated financial gains.
Revenue and sales metrics show how much money a company has made through the sale of its goods and services over a certain time frame, as well as how that changes over larger time frames, such as quarter over quarter and year over year.
Average profit per item sold, operating margin, and average order value are common metrics in this area. Companies may identify their greatest revenue development possibilities and receive insight into areas where they can improve efficiency to reduce operating costs with the help of a correctly implemented ERP and the appropriate KPIs. When combined, these kinds of data can boost sales and profit margins.
ERP implementations need effort, commitment, and support from teams across the numerous departments of the organization. Although the article's list of KPIs is not exhaustive, companies can ensure a successful adoption by concentrating on these ten-performance metrics.
While it may be alluring to focus only on ROI and revenue, businesses may achieve demonstrable ERP installation benefits and position themselves for long-term success by improving the customer experience, internal operations, and workplace culture.