Measuring the success of your manufacturing ERP implementation

Today’s ERP platforms are capable of providing process enhancements to nearly any type of enterprise, although some industry sectors feel these capabilities more deeply than others. This is particularly true in the manufacturing sector, since product-related processes tend to be resources-driven, and largely dependent on the manipulation and conversion of raw materials, that ultimately evolve to become finished goods.

However, from a business perspective, none of this matters if a system isn’t able to compare and calculate performance differences in order to define results relating to particular bottom line trends. Fortunately, this is where ERP systems shine, since as system designs go, resources-based platforms are all about measuring one thing against another to create sets of final results, or in more formal terms, the representation of series of key performance indicators (KPIs).

Like virtually any other subjective technical effort, each metrical set is different from enterprise to enterprise. However, there are some KPIs that typically emerge as hallmarks of effective ERP results. Consequently, we thought we’d list some of them; first, based on confidence-building events that typically lead to performance success, and as a follow-on comparison, more granular items that represent defined KPIs after a launch has spun up.

Key factors to consider when determining how successful your project was

Perceived price vs suggested performance – this KPI is clearly subjective but critical nevertheless. The rationale here is to ‘pre-judge’ management’s belief in the performance value of a particular ERP system, in the context of its cost and suitability of purpose. In short, if the boss can’t see a system value from the outset, it’s unlikely that things aren’t going to get any better downstream.

Workforce acceptance – this ‘gotcha’ is nearly as important as the boss’ level of happiness. Figure it this way, you can spend hundreds of thousands on the most sophisticated ERP platform on the planet, but it’ll just sit there and bleed cash unless the enterprises’ workforce is happy.

Ease of overall operation – this validation point is a bit more finite since it really comes down to how simple a system is to operate. If the workforce is quick to pick a system up, the better you’ll feel later.

Ease of data migration – this element applies in parallel with ease of operation.  Aside from IT wonks, most managers and workers probably don’t find this KPI to be particularly critical. However, everyone feels the pain if a data migration goes south.

Reduced operational pain levels – this survey component is highly-subjective and largely dependent on an enterprises’ ability to communicate with itself. There’s no such thing as a perfect software system, and when it comes to ERP systems there are hosts of external pressures that may or may not cause problems on an average day. Nevertheless, the goal here is to generally measure reductions in operational pain throughout the enterprise just to ensure that you have a heads up on what is and isn’t working effectively.

After go-live, how do you measure how successful your ERP implementation was?

Reduced production cycle times – this metric applies to the time necessary to complete a start-to-end process resulting in a finished good. If the cycle time goes down, it means that the line is moving more efficiently.

Increased projected vs actual unit delivery rates – this element operates in parallel with changes in cycle time. If more units come off the line, the more efficient the line is operating.

Reduced scrap levels – scrap is endemic to virtually all production lines. Reduced scrap typically represents better overall production performance.

Reduced static inventory levels – this validation applies to production scheduling. If inventory is moving out the loading dock rather than sitting in the warehouse, more operational performance typically accrues.

The aforementioned items are only small samplings of KPIs that are likely to apply when measuring ERP systems performance. Again, every enterprise is different so be prepared to develop your own, but given the deep granularity of today’s ERP platforms, you should be able to define nearly everything you’ll ever know about your manufacturing line once a system is well-seasoned.

(Hang Tran)