How to Measure ERP Implementation Success?
Success is defined as “Achievement of an action within a specified period of time or within a specified parameter. Success can also mean completing an objective or reaching a goal”. Each company has its own unique processes functions and challenges. Before you embark on a journey to implement ERP software, you must have a clear vision of what exactly you want to achieve by implementing ERP? What problems are you trying to resolve? Which specific areas do you want to improve? Having a precise understanding of your ERP implementation objectives and goals will help you define, “How you will measure ERP implementation success”
When & Where to define ERP Implementation Success?
As mentioned in one of our earlier articles, creating a vision document for implementing ERP is the starting point of a journey to achieve ERP implementation success. This is the perfect place to document your ERP vision, the ERP success criteria, and parameters to measure ERP Implementation success. With this, all teams will be aligned with the vision and have a clear understanding of activities to be performed for ensuring ERP Implementation Success.
How to define ERP Implementation Success?
“To Achieve Success, You first need to define it for yourself”. Have you considered, what parameters you will use to measure the success of ERP Implementation? How will you compare the “Before ERP Implementation” and “After ERP Implementation numbers?
You will have to precisely describe how you will measure ERP implementation success at the department level, at the location level, at the organizational level, also how to measure ERP success in the short term and the long term.
Given below are some examples for your reference, please remember, that each company will have, its unique definition & measure of ERP Success.
Department Level ERP Implementation Success:
- Purchase Order Cycle Time Reduced by XX days
- Average Inventory Value Reduced by XX amount
Organization Level ERP Implementation Success:
- Achieve X% Orders Delivered on Time
- Reduce Operating Cost by X%
- Reduce the number of errors by X%
Short term ERP Implementation Success:
- Business discipline & Standard Operating Processes implemented via ERP
- Key business areas transactions are conducted via ERP
- Complete & Accurate reports are generated with ERP
Long term ERP Implementation Success:
- Reduce Operating Cost by X%
- Reduce Inventory Level by X%
How to measure ERP Implementation Success?
We observe that most companies measure ERP success based on an increase in revenues, reduction in costs, and improvement in profits. While these are the ultimate goals of every organization, it is only a single dimension of measuring ERP implementation Success.
We strongly believe that ERP makes a huge impact on the overall organization and its functioning. There are a lot of intangible & strategic benefits of ERP implementation and these need to be taken into consideration while measuring ERP Implementation success. Let us now throw some more light on the same.
1. Measure whether defined Success Criteria are fulfilled
One way to measure ERP Success is to verify whether all your defined success criteria have been met? E.g.
- Was the Implementation completed on time & within the specified budget?
- Does ERP software provide real-time, accurate data & complete visibility?
- Has ERP enabled streamlined processes & standard business operations?
- Has ERP helped reduce errors, improve efficiency & productivity of resources?
2. Employees Commitment to using ERP
This is a very significant indicator of the success of ERP implementation. Are employees using the system willingly & daily? Do the employees find the ERP solution easy to use? Are they able to save time & achieve more? When employees make optimum use of ERP software, to achieve continuous improvement, the company will be able to achieve maximum return on ERP investment
3. Real-Time Data & Analysis for Continuous Improvement
ERP systems provide real-time accurate data, as well as trends & analysis of past transactions. ERP provides excellent reports and dashboards to measure the performance of the organization & take corrective actions for continuous improvement. This is one of the most strategic advantages of ERP and if you are using it to the fullest, you are sure to achieve a competitive edge. Measure, whether your company is leveraging this data to make strong, data-backed, timely, and informed decisions?
4. Monitor KPIs to achieve long term objectives
Measure the effects of your ERP Implementation by comparing the KPI results before & after implementation. Are you using the KPIs effectively to achieve improvements such as:
- Reduce Cycle times
- Achieve Accuracy in Demand Forecasting & Planning
- Meet Production Schedules & Timelines
- Improve Resource Utilization, Reduce Downtime
- More Efficient & Productive Workforce which achieves more in less time.
5. Measure Intangible Benefits
ERP software provides benefits that are sometimes difficult to measure in terms of tangible numbers. E.g. ERP is a great mechanism to roll out & implement standard business processes, implement business discipline, implement financial discipline to achieve operational excellence, and develop a culture of continuous improvement in quality and bring speed in business.
Eventually, all this will culminate into superior customer experience, improved customer relationships, higher customer conversion rates, higher customer retention rates, higher sales, repeat sales & more. All the above mentioned are good indicators of ERP success, although difficult to measure.
We recommend you prepare a comprehensive scorecard to measure ERP implementation success and how it has helped achieve the objectives and goals in all areas of your business. You should constantly monitor whether employee are committed to using & leveraging ERP, to achieve real-time accurate visibility, make data-driven decisions using KPIs to achieve continuous improvements, reduce costs, and improve profits. Only then, we can essentially say that ERP implementation is a success, in achieving all-round development & progress of the organization.