How do you measure ERP performance?

1 ERP goals and objectives

The first step in measuring ERP performance is to define the goals and objectives of the system. These should be aligned with the overall business strategy and vision, and reflect the specific needs and expectations of the stakeholders. For example, some common ERP goals are to reduce operational costs, increase customer satisfaction, streamline workflows, enhance data quality, and support innovation. The objectives should be SMART: specific, measurable, achievable, relevant, and time-bound. By setting clear and realistic goals and objectives, you can establish the criteria and indicators for evaluating ERP performance.

2 ERP functional modules and features

The second step in measuring ERP performance is to assess the functionality and usability of the ERP modules and features, which provide the core capabilities and services of the system, such as finance, accounting, inventory, human resources, sales, and marketing. Depending on the scope and complexity of the system, there may be dozens or hundreds of modules and features to evaluate. To measure these factors, you can use surveys, interviews, feedback forms, usability tests, error logs, and audits. Some of the questions to consider are: how well do the modules and features support the business processes and requirements? How easy and intuitive are they to use and navigate? How reliable and secure are they? How flexible and customizable are they?

3 ERP data and analytics

The third step in measuring ERP performance is to analyze the data and analytics generated by the system. These outputs and outcomes provide valuable insights into the performance and impact of the system, and can be measured with tools such as dashboards, reports, charts, graphs, scorecards, and benchmarks. Key performance indicators (KPIs) are quantitative measures that reflect progress and achievement of the ERP goals and objectives - such as revenue, profitability, customer retention, inventory turnover, employee satisfaction - while business intelligence (BI) is the process of collecting, processing, and presenting data in a meaningful way. Consider data quality to ensure accuracy, completeness, consistency, timeliness, and relevance of the data and analytics.

4 ERP user satisfaction and adoption

The fourth step in measuring ERP performance is to evaluate the user satisfaction and adoption of the system. Users are the people who interact with and benefit from the system, such as employees, managers, customers, suppliers, and partners. To gauge how well the system meets user needs and expectations, and how widely and effectively it is used, you should consider factors like user satisfaction with functionality, usability, reliability, security, and flexibility; engagement with features, services, and support; proficiency with skills, knowledge, and best practices; and loyalty to the system brand. Various methods can be used to measure these factors, such as ratings, reviews, testimonials, referrals, loyalty programs, and retention rates.

5 ERP costs and benefits

The fifth step in measuring ERP performance is to calculate the costs and benefits of the system. Costs are the expenses incurred by the system implementation, operation, maintenance, and upgrade, while benefits are returns gained from system efficiency, productivity, quality, innovation, and competitive advantage. The difference between these two is the net value or return on investment (ROI) of the system. To measure these factors, you can use various formulas and models such as cost-benefit analysis, payback period, net present value, internal rate of return, and total cost of ownership. When assessing the system's ROI, consider questions like: how much does it cost to implement and upgrade? How much does it save or generate in terms of operational costs and revenue? How long does it take to break even or achieve a positive ROI? How sustainable and scalable is the system value or ROI over time?

6 ERP improvement and optimization

The sixth and final step in measuring ERP performance is to identify and implement the improvement and optimization opportunities for the system. These actions and initiatives can enhance the performance and value of the system, and address any gaps or issues that have been identified. For example, you may need to update or upgrade the system modules, features, or infrastructure to meet changing business needs; train or coach users to improve their system skills, knowledge, and best practices; enhance or expand system data and analytics; streamline or automate processes and workflows; or align or integrate system goals with the overall business strategy. You can use project management, change management, continuous improvement, and agile development methods to implement these opportunities.

7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?