ERP Metrics: Your Compass for a Post Go-Live Landscape
On the first day of ERP go-live, if you bill a half million dollars, enter one hundred and seventy five customer orders, and place sixty purchase orders for one hundred thousand dollars, is that good or bad? Obviously, that’s a bit of a trick question if you are not intimately familiar with the daily fundamental ERP metrics of your business, and know how these metrics compare to historical norms. Because everything about life after ERP implementation is so totally different, these business metrics are the only true navigation tools you have to determine if you are on course or not. An analogy might be the difference between flying an airplane in the daytime, and flying at night; at night most visual landmarks have disappeared, and you are depending solely on GPS coordinates to tell you if you are on course or not.
There are three really key milestones post ERP go-live: (1) during the first few days, is the amount added to accounts receivable normal (are we creating a normal number of invoices)? (2) Two or three weeks after go-live, have we begun running out of any raw materials or supplies? And (3) after the first month, can we close the books, and does the income statement look reasonable? Watching ERP metrics normally gives you a good expectation of how well you will meet those milestones.
Key Daily Metrics
On the customer side of the business, you want to stay on top of three ERP metrics daily. The first is the amount of dollars you are invoicing, which will tell you if you are physically moving normal amounts of product out the door. The second is your late order position, which will tell you if you are having specific problems with any specific business processes. The third is number of customer orders entered each day, which will tell you if you are replenishing the demand pipeline. The more familiar you are with the historical behavior of these numbers, the more confident you will be about how successful ERP is post go-live. It is very possible for these numbers to be highly variable by day of the week.
On the purchasing side of the business, you need to guard against both extremes – ordering too much, or too little. Many ERP systems allow for automatic purchase order generation, and one decimal point error in a piece of master data can turn a normal order into a year’s supply. Likewise, there is a tendency to build in tighter inventory controls in the ERP system, which can have the effect of turning off the incoming raw materials spigot, in order to reduce the WIP level. Try to avoid any stair step changes for the first few weeks after ERP go-live.
The easiest way to compare these ERP metrics is in trend chart form, if the data is available. The time to get a handle on these numbers is during testing of ERP systems, not at go-live. Like true north on a compass, the external business numbers will never mislead you.
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