Three misconceptions about ERP metrics
Let’s take a look at a few common approaches to ERP metrics and give them some thought. Are they all universally useful? When should we deprioritize them in favor of more relevant ERP analytics? We break down some key misconceptions below...
1. ERP dashboards will lead us to paradise
Extracting data from many legacy ERP systems was difficult and spreadsheets were the most popular way to present the data. Likely many of your users were looking forward to the ability to generate powerful dashboards directly from the new ERP. After all, those same users watched in awe as the demonstrator showed how easily it could be done many months ago.
Reality will set in quickly. The demo ERP dashboard was quickly developed and no one told you that it took weeks to get the data ready and then an expert in presentations to make it look lively and match the company image. Your ERP dashboards will be as powerful if you ensure they are truly focused on the specific goals for the group. In your accounts receivable group, for example, a goal to reduce overdue accounts is not the same as a goal to reduce average days outstanding. The accounts your collectors call on might be different depending on which goal is yours. The dashboard used to monitor their effectiveness must reflect the necessary activities.
2. The ERP metrics we set during selection are set in stone
When you and your team were evaluating ERP systems a long time ago there was a set of requirements you developed. Most of these requirements had some gain associated with them and you used those gains and the avoidance of expenses to justify the ERP. Is the ERP a success because all of those benefits have now accrued? Probably not – One of your customers wanted their own portal to enter orders quickly. But you found an alternate solution that works and perfectly meets the customer’s desire. The return on investment you used then was based on your best estimates and now you have precise amounts for most of the estimates. Is the ERP a failure because some benefits might have been overestimated or costs forecasted too optimistically?
You are now using the ERP and there could be process changes that will pay off quickly that no one imagined a year ago. Some improvements change just because time passed - so corresponding ERP metrics should do so too. What are your needs today? How will you use your ERP to help achieve those needs? The ROI from your ERP system that truly counts is based on the benefits gained and costs avoided in the future because you used the ERP well.
3. ‘On time and on budget’ is all we should measure during implementation
On time and on budget are frequently used to judge whether an ERP implementation was successful. Any implementation is a long and expensive project and there certainly is a feeling it time to stop, rest, and say “Whew!”
In fact, the really important work is just beginning. Some of it is mundane, how do you measure whether new users are adequately trained, for example? Yet much of these ERP metrics are truly mission-critical – what will you measure tomorrow to ensure your business grows in revenue and margin for the next decade or longer. That is why you bought the system.
Think about counting the suggestions for improvements in the user interface. A standard search query will display some set of data. If a user asks for a slightly revised display you can be confident that the user sees a way to gain greater value from the ERP. If you can track your shop users spending more time at their shop tasks and less time reporting what they did, your ERP has increased your business’ capacity to produce.
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