Establish and use key performances indicators to gauge ERP effectiveness | The Business Management Blog

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Establish and use key performances indicators to gauge ERP effectiveness

4/10/2012 at 11:54 am by

Successfully implementing an enterprise resource planning suite of applications can be a tall order for most organizations. However, the establishment of metrics and benchmarks to determine if business management software is properly performing can be even more challenging. The ultimate verdict might only be available once a return on investment has been achieved, but this can take over a year to become clear. As a result, it's crucial to be able to gauge a system's effectiveness along the way.

To do so, make use of key performance indicators (KPIs). This kind of data lets companies in any industry know if an ERP system is working correctly, as well as determine if the software is being used properly by staff members and supervisors. When it seems applications are struggling based on KPI findings, it may be time to readdress the programs being used, change company operations or offer more training to personnel. Here are some of the best KPIs to track once business software has been installed.

On-time delivery
If returns on investment are the most basic gauge of effectiveness, the next tier down must surely be the time it takes to get products to customers or properly provide services to clients. After all, it doesn't matter how low an organization's overhead is or the extent to which efficiency is achieved during the production process if business partners aren’t satisfied. Keep a close eye on the speed with which customers are served to find out if the ERP system can provide its intended efficiency.

Carrying costs
Production and delivery are judged by their own metrics and must be examined carefully, but it's also a good idea to keep an eye on the price of letting products sit in production facilities or warehouses. Carrying costs derive from the money that could be made but isn't when extra items are simply waiting to be delivered or sold. A perfect operational model that's been optimized by business management software should keep carrying costs as low as possible, and a failure to reduce these rates might signal a misuse or misunderstanding of ERP technology.

Mistakes and losses
It's impossible to guarantee that there won't be some accidental losses during production and delivery. However, one of the benefits of ERP integration is these situations occur considerably less frequently. Minimizing this sort of waste at the fringes of a company's operations should be the goal of any business, and this is the motivation for many ERP implementations. However, an inability to live up to this level of functionality could indicate that a suite of applications, a business model or a staff needs to be reexamined.

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The Sage ERP team report on various topics related to ERP and business management.

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