Why you should measure your metrics before implementing a new D365 cloud ERP
Jon Byrd
|
Oct 25 2021
|
3 min read
Regardless of the reason why an organization decides it’s time to implement a new ERP system, most everyone expects the investment to realize measurable business value. The frustrating reality is that many organizations seek measurable results without spending time to establish their baseline measures.
One of the activities we strongly recommend organizations perform in preparation for a project is to identify and measure their baseline performance metrics. By knowing how you perform against these varied metrics, you can identify areas of improvement with the new system and then monitor your achievement. Secondly, you can associate the investment with some level of return. If you intend to manage the outcomes of your project around business value, then you must have measurements.
Key Takeaways
Remember, you cannot manage what you cannot measure.
Identify the metrics you will use to determine project success.
Take your “before” measures now, so you know your starting point.
Where do you expect to see improvements?
Create your desired “after” measures and embed them in your project charter.
Common Metrics in Distribution and Manufacturing
How organizations measure their performance varies company by company, industry by industry. We have several recommendations and ideas for your pre-implementation performance baseline.
Finance and Accounting
Gross Margin %
Net Profit %
Days to close
AP and AR Turnover Ratio
AP turnover ratio
Total credit purchases / Average accounts payable
Measure of short-term liquidity
Higher payable turnover ratio is favorable
AR Turnover Ratio
Net credit sales / average AR
Quantify effectiveness in extension of client credit and collection efforts
High turnover ratio is favorable
Days Sales Outstanding
Finance Error Reporting Rate
Measure to track the accuracy of your company’s reporting
Key indicator for improvement needed in software or employee training
Percentage of financial reports that contain errors necessitating a review or more detailed audit
Budget Variance Rate
Compares budget projections to actuals
Reveals areas for improvement in the forecasting process such as assumptions of growth, headcount or expense accruals
Payment Error Rate
Percentage of payments not completed due to
processing errors
It could mean quality control issues such as no PO reference, missing approvals or documentation, etc.
Order Processing
Quote preparation times / quote conversion rates
Times to process quote / quote to order / order to invoice
Order entry error rates
Credits quantity by reason code, credits value by reason code
Pricing & discounting accuracy
SHIPPING ORDER PREPARATION TIME
Orders per month / minutes per shipment
# of FTEs * Minutes per day * Workdays / 60 minutes = Hours per month
On-time delivery
On-time shipment
DIFOTS (Delivery in full, on time, to spec)
Picking error rates
Packing error rates
Shipping error rates
WAREHOUSE AND INVENTORY PERFORMANCE
Inventory variances by reason code
Inventory Manual Reconciliation: # of FTEs * Minutes per day * Work Days / 6 minutes = Hours per month
Locations counted and accurate
Sales order shipping lines per hour
DSIs (Days sales in inventory)
CUSTOMER SERVICE
Customer complaints by reason
Average age of Customer Service Case
Average number of customer adds
Average % of customers retained
ADDITIONAL EXAMPLES
Kit assembly time (Kits per Hour)
Time spent per return (minutes)
Number of returns dealt with per month
Current annual procurement value * Targeted price improvement
Manual time spent on manual quotes
If you are serious about moving forward with selecting a new ERP system, please check out our post regarding 6 To-Dos Before You Select a New ERP. In addition to the pre-implementation metrics we’ve outlined here, there are other critical to-dos for your company checklist before you even get to the pre-implementation phase.
If you have any questions about implementing a new ERP or about these pre-implementation metrics, please reach out to us at any time!
This publication contains general information only and Sikich is not, by means of this publication, rendering accounting, business, financial, investment, legal, tax, or any other professional advice or services. This publication is not a substitute for such professional advice or services, nor should you use it as a basis for any decision, action or omission that may affect you or your business. Before making any decision, taking any action or omitting an action that may affect you or your business, you should consult a qualified professional advisor. In addition, this publication may contain certain content generated by an artificial intelligence (AI) language model. You acknowledge that Sikich shall not be responsible for any loss sustained by you or any person who relies on this publication.
About the Author
Jon Byrd
Experienced Enterprise Sales Executive with a demonstrated history of working in the accounting industry. Skilled in Business Process, Sales, Partner Management, Customer Relationship Management (CRM), and Channel Sales. Strong sales professional with a Business Administration focused in Business from Kennesaw State University - Michael J. Coles College of Business.
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