How to Measure the Success of an ERP Implementation
Your Enterprise Resource Planning (ERP) system is the heart and soul of your company’s internal processes. It affects all your financial and operational tasks, including finance, inventory management, human resources, and customer relationship management. Implementing a new ERP takes time, capital, and resources with the promise of helping you run your business more efficiently.
But that begs the question: How do you measure a successful ERP implementation? Is it to reduce costs? Increase customer satisfaction? Reduce manual processes? Secure your data? Enable growth?
A successful ERP implementation can mean something different for each company.
Define what success means BEFORE implementation
Before you start the implementation process, discuss with your stakeholders what a successful implementation will look like. Set goals and take benchmark measurements to determine whether those goals are achieved after implementation.
Some important elements to consider before implementation include:
Define the objectives and goals for the project – Have clearly defined and measurable goals for the new ERP. Measure these objectives before and after implementation to determine whether the objectives were achieved. These might include cost reduction, revenue growth, customer satisfaction, and increased efficiency. For example, if one of your goals is to reduce costs, what amount of cost reduction constitutes a success? And is this cost reduction determined on a departmental or companywide basis?
Ensure you have executive sponsorship – An ERP implementation is a massive project involving the entire company. Strong support from executive management is essential to ensure the necessary resources are assigned and there is accountability and follow-through during the project.
Select the right ERP partner – Selecting the right partner to implement your ERP is almost as important as selecting the right ERP. Choose a partner with experience implementing your ERP for similar companies in your industry. Look for their ability to provide training, customizations, and ongoing support after the sale.
Business process analysis and optimization – Modern ERP systems offer a wealth of automation and efficiencies for business processes. Work with your partner to identify how your current business processes can be optimized for your new ERP.
Data migration – Your current data must be migrated to the new system. Work with your partner to ensure the data is accurate and cleansed before migrating it to the new system.
Plan on providing training after implementation – Have a plan to ensure your employees are trained on the new software to ensure fast adoption and proper utilization of your ERP investment.
Establish Key Performance Indicators (KPIs) – Define KPIs that will measure the success of the ERP implementation and regularly monitor these metrics to ensure the system is delivering the expected results. Examples of KPIs include:
- Inventory turnover
- Order processing time
- Customer retention rate
- System uptime/downtime
- Call response time
- On-time delivery rate
- Project margins
- Reduce cycle times
- Resource utilization
- Error rates
- Improved efficiency and productivity
- Time complete month-end and year-end activities
Taking these steps before implementation will ensure your project has the best chance of successfully meeting your goals.
Measures of a successful ERP implementation
Measuring the success of an ERP implementation will vary from company to company, but some common measurements help determine the amount of success achieved after the new ERP is installed:
Achievement of business goals and KPIs – Determine whether the business goals you established were achieved and, if so, whether the goals were exceeded. Keep ongoing measurements of your KPIs to monitor how well the ERP is serving the company.
Improved insights from your data – Modern ERPs should provide better information concerning your business operations and processes. Executive management should have access to real-time information that helps them make intelligent, strategic decisions.
ROI (Return on Investment) – ROI is determined by comparing the costs of ERP implementation and ongoing maintenance with the increased profit generated through increased efficiencies, revenue growth, and reduced operational costs. The time it takes to recoup your implementation investment can be used as one measure of success.
Process automation and increased productivity – Your staff should be able to automate formerly tedious or repetitive manual procedures with process automation and be more productive and efficient.
Optimized inventory management – Determine whether the new ERP has improved inventory management by measuring the impact on items such as inventory levels, turnover rates, and carrying costs.
Controlling costs – Measure the ERP’s impact on controlling costs in areas such as IT maintenance, inventory, and labor costs.
Be sure to include intangible benefits – Many of the benefits of modern ERPs can be hard to measure, such as increased user and data security, greater user satisfaction, and more responsive customer service. These intangible features can be challenging to track but can result in tremendous benefits to your company and your customers.
Measuring a successful ERP implementation strictly in terms of ROI or how quickly the project was completed might be tempting. However, the real test of a successful ERP implementation is how well the ERP helps your company achieve the goals you established for it. Be sure to consider all the benefits, such as reduced costs, better inventory management, increased customer satisfaction, greater productivity, and more significant insights from your data.
Contact ArcherPoint if you would like to learn more about our ERP implementation services.