Charting Success: KPIs That Define ERP Implementation Success

To ascertain the success of an ERP implementation, some key performance indicators (KPIs) need to be tracked along the way. This blog synthesizes some significant KPIs and how they can determine the success of an ERP.

An Enterprise Resource Planning (ERP) software implementation is a major commitment, especially due to the business proficiency benefits it yields. It requires a significant amount of time, dedication, training, change management and resources. Moreover, its nature is transformational, which means an organization may not have rolled out a project of this magnitude and scale. Hence, its true potential and scale may be undermined by organizations with no exposure.

Proper research, analysis and budget needs to be allocated before planning an ERP implementation as it consists of many phases that need to be in proper harmony with each other to ensure a successful implementation. These phases are:

• Discovery
• Requirement Analysis
• Planning
• Development
• Deployment
• Support
• Maintenance

Apart from the synergy of these phases, an important factor in ensuring its success are some set key performance indicators that have a direct impact on business continuity, which be synthesized in this blog.

Why Do ERP Implementations Fail?

A common theme behind the failure of ERP implementations is that their true magnitude and value is undermined. The reality is that these implementations are usually two to ten times bigger than any projects implemented by an organization. Hence, they require a level of organizational dedication and leadership commitment to be able to sustain.

Let us explore the common reasons for their failure before moving on to their success KPIs.

Lack of Commitment from Business Leadership
The executive leadership is the driving force behind these implementations as it is them who allocate budget and resources and drives motivation to adapt to a digital change, across the entire organization. If the leadership is not aware of their role in this transformation, the negative impact trickles down into the entire organization, across all departments.

This lack of commitment also points to a lack of accountability and no one in a decision-making role.

Insufficient Budget
Due to its transformational and grand nature, ERP implementation is expensive and can cost millions of dollars but when the cost of ERP failure is considered, the cost of an implementation accounts to nothing, especially due to the value it generates. Apart from the initial cost, there is the huge amount of payroll and paying contractors for various requirements, not to forget the network and infrastructure improvement costs.

Due to its complex nature, the usual budget calculated is often way less than the actual costs, which, if not prepared for, puts the organization in a grave situation. Moreover, all the phases of an ERP implementation have a significant role and if any of these is financially undermined, that can cause the entire implementation to fail.

Undermining the Significance of Change Management
A reality to be considered is that ERP comes as a win for few and a loss (replacement) for few. Hence, it is always going to be perceived as a threat to the current order in an organization. Not to forget that humans are intrinsically wired to reject change.

Often viewed as just a policy, change management is not given enough importance and hence it does not yield proper results. The organization’s inability to willingly adapt to ERP also accounts as a major factor in ERP failure.

Apart from the major reasons, some minor reasons of ERP failure are:

• Over-Customizing the ERP
• Lack of Training
• Lack of Testing
• Insufficient Data Cleansing
• Inaccurate ERP Requirements

Why Do Companies Need KPIs?

As the name suggest, a KPI is a quantifiable data aspect that needs to be continuously monitored in order to ascertain that business targets are being met and maintained. KPIs, as objective facts, that highlight the need of changing business strategies and reforming policies.

In an ERP implementation scenario, KPIs are measured to prove its viability for the company’s business goals. These can both short and long-term that can collectively analyze the business performance of an organization. KPIs hold numerous benefits for the company:

• They enhance employee morale.
• They support business aims and objectives.
• They encourage the financial growth of a company.
• They efficiently manage company performance.
• They highlight problem-areas that need focus.
• They measure its strategic progress.

Top KPIs for ERP Success

Listed below are the top KPIs that organizations should track to ensure its ERP implementation success.

Enhanced Demand Forecasting: These KPIs determine how accurately a company is forecasting future demand for its products and services. Demand forecasting is an essential element that directly impacts company’s supply chain, inventory, and budget. Inaccuracy in this KPI can cause the company to incur losses. An efficient ERP solution has the ability to empower the organization to accurately predict its demand, so that it can strike a perfect balance between demand and supply. ERP employ data analytics and business intelligence with the help of historical data and present conditions to accurately predict demands.

Elevated Customer Experience: Satisfied clienteles are the key indicator of a successful business, but it is important to quantity their satisfaction according to set standards. An ERP solution plays a critical role in measuring customer satisfaction on pre-defined objectives to enhance customer experience. The objectives range from customer ratings, repeat customers, customer churn rates to customer complaints. Higher customer satisfaction rates indicate successful functionality of an ERP.

Increased Employee Satisfaction: An ERP implementation’s purpose is not only to enhance business proficiency but also empower the employees with the latest tools and functionalities. This can be gaged by higher levels of employee retention rates and improved employee productivity as these have a positive impact for business profitability. Moreover, an ERP can also pinpoint the need for remedial measures, with the help of business insights, if trends say otherwise.

Bolstered Inventory Turnover: As a direct proponent of business success, inventory turnover rate signifies the number of products sold in a specific timeframe. A successful ERP implementation positively impacts the inventory turnover rate, by data-driven demand forecasting and aiding in inventory visibility.

Amplified Project Margins: Increased and accurately project margins, i.e., the profit ratio after completing sales and paying overheads, ensure a sustainable business success. If there is a stable or an upward graph indicating the project margins, then an ERP success is ascertained. ERP plays a monumental role in ensuring a steady and upwards ascension in a company’s project margins. It also ensures its accurate measurement by employing factors like cost estimates, budgets, project expenses and total revenue, due to the unified data functionality that accompanies an ERP implementation.

Upturned Business Productivity: Business performance or business productivity is measured by the amount of work effort being put in by employees and teams. After an ERP implementation, if the employees of an organization are utilizing their work hours to achieve business goals, then the ERP is known to be accepted by the employee. A successful ERP implementation is meant to streamline workflows and free up employees’ time to enable them to do meaningful and productive work. But if the employees are demotivated or struggling to learn the digital tools accompanied by an ERP implementation and missing business deadlines, then the ERP implementation is not suitable for them.

Decreased IT Expenditure: After an ERP implementation, the need to mange and update disparate legacy systems or disjointed digital tools and maintaining servers is efficiently eradicated, especially in the case of a cloud-based ERP. By unifying all business process and data sources under one umbrella, a successful ERP implementation empowers businesses with significant decrease in their IT expenditure.

ERP is a major expenditure, but it does wonders for the business productivity and profitability. A golden rule in ensuring its success is not to undermine its capabilities and set KPIs related to your industry, before kickstarting the implementation process.

Dynamics Solution and Technology: Your Expert Implementation Partner

Due to it being a major commitment, most companies are daunted by ERP and feel like they must put everything on the line for this commitment. Dynamics Solution and Technology is here to dispel this misconception and empower your business to truly digitize and unify its processes for optimal efficiency.

Our dynamic team of technical and functional consultants and developers gage your need and plan Microsoft Dynamics 365 implementation accordingly. As Microsoft’s Gold and Solutions partner, we have aided multiple organization in their end-to-end digital transformations, across the Gulf and MENA regions. Your organization can be digitally transformed too, all you need to do is trust and schedule a personalized demo with us now to gain that competitive advantage.