Perhaps buying a house is like buying enterprise software. What were the reasons you bought that new house?
• You needed a separate bedroom for each one of your kids.
• You wanted to be in a better school district (see how pains can be grouped into kid-centered and other pains).
• You wanted to move to a warmer climate.
• You wanted a shorter commute to work.
• You wanted to move somewhere where your in-laws couldn’t find you (be nice!).
In all these examples, there are real pains (e.g., putting two children in one room could become pretty painful pretty quickly). And, of course, there are real gains to be had with the new house. Perhaps, from time to time, you and your spouse discuss how much better this new house is. And, of course you talk about the gains achieved over time. But, in reality you are unlikely to say: “You know, honey, I think we gained $1.2 million by having the kids in separate bedrooms.”
But, that is exactly the conversation you should be having around ERP software implementations. Unfortunately, too many customers take too much of a relaxed approach to ERP software. And, they shouldn’t. Done correctly, a keen understanding of pains and gains is key to the success of an ERP project, both during the implementation phase, and for years afterward. Here’s an approach.
Pains are real: In your industry, you might be turning over inventory six times a year, while on average the competition is turning over inventory 15 times a year. Or if you sell and maintain equipment for customers, perhaps your repair specialists spend 50 percent of their time in the field fixing customers’ equipment, while the average is 70 percent.
Key Performance Indicators (KPIs) provide the measurement approach: From the examples above, we have KPIs:
• KPI 1 – Inventory turns – 365 days / (the average number of days items are in inventory). Of course, for resellers of computer paper, inventory turns matter a lot. But, in hospitals, you clearly need to err on the side of caution when it comes to having the right materials for emergency surgery.
• KPI 2 – Customer facing time/total time. In general, more billable time is better. Unless, of course, we are putting repair personnel in the field who have not kept up with the latest repair approaches, thereby impacting quality. Alas, nothing is ever simple.
Gains can be quantified: There is a value for each inventory turn. And, there is a value for each percent of the time your repair people are working, rather than doing paperwork. You must be able to compute these gains.
Measure for measure: So, what to do?
• Implement the ERP software modules that provide the relevant business processes for managing the pain.
• Make sure you understand best practice in each of these areas (manual procedures in addition to ERP automation).
• Implement a business scorecard (usually inside a Data Warehouse) to track the KPIs over time.
• Populate the scorecard with the appropriate data from the ERP application and elsewhere.
• Track the KPI on a monthly basis.
• Take corrective action as required.
Bottom line: Don’t throw off those chains. Embrace them.
