Enterprises undertake a myriad of projects, each presenting distinctive characteristics—internal or external, short or long-term, billable or cost-centric, and varying across industries with specific scheduling and reporting needs. Construction projects diverge substantially from software development endeavors. Each falls under the umbrella of project management, necessitating diverse processes and unique capabilities from project management systems. How do you navigate this complexity effectively?
The architecture of project management systems is also intricately shaped by their capabilities overlapping with other adjacent systems. Being part of an ERP system requires alignment with accounting and procurement, driven by workflow needs and the balance of front-end and back-end processes. Additionally, potential overlaps with CRM processes may arise, particularly when sales and project management are closely linked, necessitating smooth data exchange. In certain industries, where project management systems integrate billing, scheduling, invoicing, and finance extensively, it is termed a PSA, prevalent in professional services. PSA shares design principles similar to project management but encompass broader capabilities than standard project management systems.
Project management systems exhibit diversity, yet common elements prevail, reflecting the fundamental components of any project. Projects inherently involve start and end dates, tasks, activities, and the allocation of resources and materials. Correspondingly, project management systems incorporate these essentials, providing features like task scheduling for designated resources to facilitate capacity planning and service delivery. Analyzing your project scope and conducting a gap analysis with a project management software data model will guide you to a fitting solution. Ready to discover the top 10 project management software options for 2024? Let’s explore the details.
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Definition of a project management system. A siloed system that can be acquired and implemented without dependencies on cross-functional workflows.
Overall market share/# of customers. The higher the market share, the higher it ranks on our list.
Ownership/funding. Superior financial standing and funding by private equity or corporate investors rank higher on our list.
Quality of development. The more cloud-native capabilities, the higher it ranks on our list.
Community/Ecosystem. The larger the community, the higher it ranks on our list.
Depth of native functionality for specific industries. The deeper the publisher-owned out-of-the-box functionality, the higher it ranks on our list.
Quality of publicly available product documentation. The poorer the product documentation, the lower it ranks on our list.
Project management system market share. The higher the marketshare as a project management solution, the higher it ranks on our list.
Ability to natively support diversified business models. The more diverse the product, the higher it ranks on our list.
Acquisition strategy aligned with this product. The more aligned the acquisitions are with the product, the higher it ranks on our list.
User Reviews. The deeper the reviews with pros and cons, the higher the score for a specific product.
It must be a project management system: it can’t be a project management module of an ERP. It must be a standalone project management software that can be acquired by the line of business or department without aligning with other departments.
10. Workzone
Initially crafted with ad agencies and marketing firms in mind, Workzone shares similarities with software designed for software development companies. Primarily adept at handling internal projects and workflow components, it encompasses technical and operational features but may lack robust financial capabilities for aspects like invoicing, billing, resource budget planning, and project finance. Another potential drawback is its technology, which may not be as modern as the alternatives on the list. Despite these limitations, Workzone holds a significant market share in its industry verticals, earning it a spot as the 10th choice on our list of project management options.
Set permission levels by project and document. The permission level could be another area, generally leaner in smaller packages, relatively detailed with Workzone.
Project templates. Most project management software might have template capabilities but fewer pre-built, which is not a limitation with Workzone.
Cons
UX is not as modern as other options on this list, such as Wrike. Their technology might not be as modern as other leading options, making the UX slightly inferior to other products.
Batch features such as editing multiple tasks at once might be limiting. Limited batch features might require additional clicks, driving operational inefficiencies.
Limited workflow capabilities for each individual user. The limited workflow capabilities may lead to overbloated screens and features for users, causing adoption issues.
9. ClickUp
Much like Workzone, ClickUp was initially tailored for remote work and agile development teams. While there are some similarities, the unique requirements of Agile and remote teams set them apart significantly from traditional project management, making ClickUp less suitable for other industries. While an excellent choice for software development or marketing firms, it may not be the ideal fit for professional services or construction-centric companies. Considering its strengths and limitations, ClickUp secures the 9th position on our list.
Pros
Designed for software development and agile teams and primarily for internal projects. Companies caring for agile-centric capabilities might struggle to relate to the product.
Responsive customer support. The other products in this segment will have limited support from external consulting firms, and because of their missing channel, having good support from the provider is a huge advantage.
Automation of administrative tasks. Automation of tasks will help maintain data integrity, offering analytical workflows without manual inputs.
Cons
Billing and project costing could be a challenge. Companies seeking PSA capabilities or client-centric workflows might struggle with the product, requiring manual overhead for billing and invoicing.
Using nested formulas may be a challenge. The flexibility offered by other project management tools, through their formula capabilities, to track dependencies for complex projects, such as Microsoft projects, might not be as detailed.
Batch tasks such as bulk user management and CSV capabilities. The limited bulk user management and CSV capabilities might be operationally inefficient for larger teams and complex projects.
8. Jira
Jira stands out as a popular choice among software development firms, largely due to its parent company’s suite offering bug tracking and integration with version management software. However, these capabilities may not be as relevant for other professional companies that prioritize critical functions like billing and invoicing. Despite its widespread use, Jira’s strengths lie primarily in the software development and technology sectors, supported by a dynamic marketplace. Its applicability beyond these domains is limited, leading it to secure the 8th position on our list.
Pros
Requirements management and bug tracking are integrated in one place. The tight integration of project management with requirements management and the intertwined nature of bug tracking with Kanban processes is a huge plus for software development companies.
Perhaps the best tool for Agile software development and internal project tracking. Due to the unique process of agile development, even the tools designed for marketing agencies might fall short.
Requirements, QA, and project management teams can all work together with complete traceability from release, sprint, epics, and user stories. This traceability is a unique requirement for software development because of the unique requirements of diverse teams.
Cons
Time tracking may require an add-on. Time tracking is not out-of-the-box, a key input for companies caring for project costing and financials.
Might not be the best fit for client-focused project management where the hours need to be billed, and the costs of the projects need to be measured. Industries such as professional services such as accounting legal practices.
Airtable belongs to the emerging category of project management tools alongside Monday.com and SmartSheet. These tools, essentially workflow management software, serve diverse needs and function as technical frameworks for various use cases, including project management and CRM. Their flexibility proves advantageous for industries with custom and evolving workflows, like financial services, non-profit organizations, or membership-based entities. However, deploying these tools may necessitate extensive consulting and custom development, potentially leading to over-engineering processes. Tight business rules and data integrity, common in more mature software, may be lacking. Despite their adaptability, these tools secure the 7th position on our list.
Pros
Graphic design, integration with 3D models, etc for engineering teams. Airtable’s unique capabilities and integration with graphic design and 3D engineering software make them uniquely suitable for marketing agencies, event management, and architectural and engineering firms.
Integration and ecosystem. The biggest advantage of Airtable is the number of integrations available and companies consulting in its ecosystem, augmenting core capabilities.
Designed for custom workflows. Companies with custom workflows require substantial flexibility with the data model and the ability to create data-gathering forms for ongoing needs.
Cons
Workflow and notifications might not be as advanced as Monday.com. The workflows and notifications are far more developed with other options, such as Monday.com.
The interface is not as intuitive as Monday.com. The richer layers providing advanced capabilities might require consulting and training help for users to effectively use the software.
Project costing and billing may require consulting hours to get it right. Mature capabilities such as project costing and billing might require expert consulting help, driving implementation budget, and cheaper with other pre-baked platforms.
6. Monday.com
Monday.com presents a comparable alternative to Airtable, differing subtly in its pricing model and industry alignment. Like Airtable, Monday.com is exceptionally well-suited for industries relying on custom workflows, particularly in workflow management scenarios where external collaboration holds equal importance to internal collaboration, resembling use cases found in surveys or customer experience software. However, similar to Airtable, the main drawback of Monday.com lies in its need for consulting assistance to implement more advanced business capabilities, which are pre-built in other options on this list. Despite this limitation, it secures the 6th position on our list.
Pros
Best for industries with custom workflows. The industries with custom workflows would find other smaller packages, flavored for specific business models and industries, constraining.
Industry-specific variations and templates. While the core packages might not provide core capabilities, the marketplace offers industry-specific templates and variations, augmenting core capabilities.
Clean user interface. The user interface is one of the cleanest, providing a nice balance of spreadsheet-like views and forms, along with the flexibility to switch to different perspectives.
Cons
Project costing and billing might require significant expertise and consulting efforts. Companies needing critical financial capabilities embedded with projects would struggle the most, requiring consulting help to be successful.
Gantt charts are exported as PDFs, which may be difficult to use in other applications. Complex projects are likely to require compatibility with external software, especially if external teams might collaborate on the projects, making PDF-centric exports restricting.
Tasks cannot be linked across boards. The data model is not as linked, creating issues while linking different boards where dependencies might be across the projects among projects or across portfolios.
5. SmartSheet
SmartSheet, similar to Monday.com and Airtable, despite UX not being as compelling as its rivals, is likely to have friendlier capabilities for traditional project managers, similar to Microsoft Project. It combines features similar to Monday.com and Airtable with the ability to create quick boards and Kanban queues along with the calendar view for easy scheduling. It also allows features such as easier workflow management for users, enabling them to enter their time, which will be recorded and accounted for on projects without much operational overhead. However, mature capabilities such as billing and invoicing, etc., would require substantial consulting help or an add-on on top of SmartSheet.
Pros
Spreadsheet look, loved by project managers. The biggest plus of SmartSheet is the familiar spreadsheet and MS project look, providing an easier transition for users.
Customizable automation is easy to use. Customizable automation does not require as much technical expertise, making it easier for business users to easily customize the workflows for their use.
Users can instantly toggle between various project views. The ability to switch between different views increases adoption among users with different preferences.
Cons
Billing. Implementing mature features available with a PSA, such as billing, would require substantial consulting help while still causing scalability issues.
Performance with larger sheets. Complex projects with larger sheets might experience performance bottlenecks, slowing them down.
4. Asana
Asana stands out as the market leader, boasting a data and process model that is particularly accommodating for marketing agencies. While it delivers fundamental project management capabilities, especially for non-billable operations, it may not offer the same seamless experience found in workflow management platforms like Monday.com or Airtable, which are designed for companies with customized project management workflows. Despite its rich ecosystem, professional services firms in areas such as accounting or legal may find it less relatable. Nevertheless, its market strength earns it the 4th position on our list.
Integrations and ecosystem. The integration and ecosystem are likely to be friendly for marketing and creative agencies, with the possibility of pre-baked integrations working as is without increasing the consulting budget with custom integration.
Track bugs, manage sprints, and plan and run campaigns, events, and product launches. Similar to Jira, it has several features that are uniquely applicable to software development firms and marketing agencies, which is where it is predominantly used.
Cons
Primarily for internal project management. Without the PSA capabilities pre-built, it’s meant to be for internal project management, primarily focusing on the operational aspect of project management and not financial.
Other industries that are not software or marketing might not be able to relate to it. The industries with substantial divergence from software development or marketing agencies might not be able to relate to it.
Kantata, a market leader, caters to companies requiring mature PSA capabilities. Its offerings include workflows like skill-based scheduling, capacity planning, and intricate milestones and billing processes. Kantata boasts two products—one tailored for a native Salesforce experience and the other for an external cloud-native experience akin to Wrike. However, it’s worth noting that Kantata may not be the best fit for smaller companies due to user limits and its higher cost. Nevertheless, for Salesforce users seeking comprehensive capabilities, it secures the 3rd position on our list.
Pros
Milestone tracking, billing, and skill-based resource scheduling. Companies with complex project milestones, especially contingent on client billing, would find Kantata especially friendly.
Native Salesforce and non-native experience are available through SX and OX platforms. Different options for native salesforce experience or non-native makes provide flexibility with users’ preferences for the right interface.
Enterprise-grade PSA functionality for companies that don’t prefer integrated accounting and GL bloatedness of ERP systems. The integrated features of ERP would require corporate alignment with accounting and procurement functions.
Cons
Minimum 30 users requirement. The user requirement makes it unfriendly for companies with smaller teams with fewer billable resources.
Might be difficult to use for smaller companies. Smaller companies with resources that are not as digitally savvy and not versed in business transactions with milestone billing might find it overwhelming.
It would require expensive consulting services to set it up. The complex data model and workflows would require substantial consulting help to be successful with the product.
2. Wrike
Wrike, positioned in the prescriptive cloud-native category and primarily crafted for internal project management, stands out as an ideal choice for companies seeking versatile project management capabilities. In contrast to Jira and Asana which might have better integration for requirement management or bug tracking, Wrike exhibits superior integration and ecosystem, particularly in time management. Its robust data model surpasses that of smaller project management software, offering detailed capabilities for project portfolio management and sub-projects. Drawing the closest comparison to Asana in terms of strategy and design, Wrike secures the 2nd position on our list.
Pros
Comprehensive project management with a focus on transparency and tracking. Ideal for companies seeking pre-baked project management capabilities without much consulting help.
Project and team organization can be easily customized to meet teams’ needs. The project structure is fluid enough to accommodate the needs of most projects.
Security and granular permission needs. Unlike smaller packages, which might not have as detailed security and workflow capabilities such as enabling task administration for specific users or having multiple moderators, Wrike’s security architecture is not as limited.
Cons
Designed for internal project management. The external project management capabilities often found in a fully-baked PSA would be limited, making it less relevant for professional services companies.
Client billing and invoicing would be a disconnected experience. The layers required for client billing and invoicing would require ad-hoc arrangements or manual processes.
Positioned as the most balanced choice, Teamwork caters to client-centric professional services seamlessly integrating project delivery capabilities. Diverging from slightly flexible alternatives like Monday.com or Airtable, Teamwork adopts a prescriptive strategy akin to Wrike. Its advantageous alignment with the HubSpot ecosystem enhances its appeal. Notably, Teamwork excels in PSA capabilities, mirroring those of Kantana, and remains accessible for smaller businesses, earning it the top spot on our list.
Pros
Client invoicing, project, and timesheet management in one place. This is highly beneficial for companies with billable processes and projects, with operational workflows intertwined with financial such as billing and invoicing.
Easier to track project costs and track utilization. Very few options on this list combine both operational and financial aspects of project management. Teamwork is one of them.
Unlimited client collaboration users with paid plans. While the data and process model is not as flexible, it would allow client collaboration just as with Monday.com or Airtable.
Cons
It might have a steeper learning curve for teams not familiar with the setup. The prescriptive data and process model might have a steep learning curve for skillsets not familiar with the upkeep of relational data models.
The integration options and ecosystem might not be as developed as some other options on this list. The integration and ecosystem might not be as developed as other options on this list, such as Asana or Monday.com etc.
It might be more expensive per user than the other options. The pre-baked functionality provided as part of the software would require a higher licensing fee compared to other options on this list.
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The project management category may appear entwined with ERP or CRM, yet companies emphasizing internal project management workflows may find integrated solutions overly complex. The inclusion of accounting and procurement workflows could prove cumbersome, especially for companies not caring for cross-functional processes like cost accounting.
Deciding between standalone project management systems and integrated solutions hinges on corporate strategy and enterprise alignment. If you’re seeking standalone options, this list offers potential choices. However, extracting maximum business value from project management software demands expertise—an area where an independent ERP consultant can provide invaluable guidance.
FAQs
How can project management systems enhance collaboration within teams?
Project management systems enhance collaboration by providing centralized communication, task assignment, and tracking, file sharing with version control, calendar integration, and visibility into project progress.
How do I determine which project management system is best suited for my industry?
Determining the best project management system for your industry involves analyzing the specific requirements and workflows prevalent in your sector. Consider factors such as whether the system offers industry-specific functionalities, integrates seamlessly with other tools commonly used in your industry, and has a track record of successful implementations in similar organizations. Additionally, look for user reviews and case studies from companies within your industry to gauge the system’s effectiveness.
What are the main differences between standalone project management software and integrated solutions like ERP or CRM systems?
Standalone project management software is designed solely to manage projects and typically offers a more focused set of features tailored to project planning, execution, and monitoring. On the other hand, integrated solutions like ERP or CRM systems combine project management functionalities with other business processes such as accounting, procurement, customer relationship management, and resource planning. While integrated solutions offer a comprehensive approach to managing various aspects of business operations, standalone project management software provides greater flexibility and simplicity for organizations primarily focused on project management workflows.
Operations managers are often responsible for all operational business processes from start to finish. From employees to suppliers, projects, jobs, and meetings, they strive to increase productivity, lower costs, and improve the quality of work. Their job is to empower their team of material planners, schedulers, estimators, warehouse workers, field service technicians, consultants, quality managers, maintenance staff, and laborers with relatable information.
The KPIs for operations managers would always differ based on their responsibilities, the size of the organization, and the industry. Operations management could be as diverse as managing tactical roles such as logistics to strategic roles such as procurement or marketing. Despite being so diverse, weak operations management can lead to weak sales and operations planning, which might, in turn, lead to operational disruptions and inferior customer experience. So, which KPIs for operations managers are the most relevant to ensure streamlined operations?
Operations managers are often tasked with harmonizing diverse functions spanning marketing, retail, human resources, sales, distribution, IT, finance, manufacturing, construction, and professional services. Here is the examination of the top 10 KPIs for operations managers based on each company department. This discusses ten departmental KPIs for operations managers: retail, marketing, human resources, sales, IT operations, distribution, finance, manufacturing, construction, and professional service operations KPIs, respectively. These KPIs serve as instruments, finely tuned to provide chaotic insights into the efficient, effective, and overall healthy operational facets.
Retail KPIs For Operations Managers
1. Gross Margins
Gross margins are critical components of retail KPIs for operations managers. It represents the percentage difference between the revenue generated from sales and the cost of goods sold (COGS). This means it measures the profitability of each product or service.
A high gross margin indicates that a significant portion of revenue is retained after covering the production or acquisition costs. Thus, signaling healthy financial performance. On the contrary, a low gross margin suggests that a substantial portion of revenue is consumed by the cost of goods sold, potentially impacting overall profitability.
Formula: Gross Margin Percentage=[(Total Revenue−Cost of Goods Sold)/Total Revenue]×100.
2. Average Order Value
Average order value provides insights into the average amount customers spend per transaction. AOV is calculated by dividing the total revenue generated by the number of orders. This metric is a valuable indicator of consumer purchasing behavior, reflecting the effectiveness of a company’s sales and marketing strategies.
A high AOV suggests that customers are making more valuable transactions, indicating a successful upselling or cross-selling approach. Conversely, a low AOV may signal the need for strategic adjustments to encourage customers to add more items to their carts. Operations managers keen on maximizing revenue and profitability should closely monitor AOV. They can utilize the insights gained to refine sales tactics, enhance customer experience, and optimize pricing strategies.
Formula: AOV= Total Revenue/Number of Orders
3. Customer Retention
Customer retention measures the ability of a business to retain its existing customers over a specific period. This metric is a testament to the loyalty and satisfaction of customers. It reflects the effectiveness of a company’s products, services, and overall customer experience.
A high customer retention rate indicates a strong and loyal customer base, highlighting successful customer relationship management strategies. Conversely, a low retention rate may signal dissatisfaction or a lack of engagement, prompting operations managers to investigate and implement strategies to improve customer satisfaction and loyalty. Armed with this metric, operations managers can proactively shape strategies to enhance customer engagement, foster brand loyalty, and drive sustained business growth.
Formula: Customer Retention Rate = (Number of Customers at End of Period - Number of New Customers Acquired During Period)/ Numbers of Customers at Start of Period
4. Conversion Rate
Conversion rate measures the percentage of website visitors or potential customers who take a desired action, such as making a purchase. It serves as a critical indicator of the effectiveness of a company’s sales and marketing strategies in turning potential customers into actual buyers.
A high conversion rate suggests that a significant portion of visitors is engaged and motivated to complete a transaction, reflecting the success of the company’s efforts in driving customer actions. Conversely, a low conversion rate may indicate inefficiencies or barriers in the customer journey, prompting operations managers to assess and refine the online shopping experience or marketing tactics.
Formula: Conversion Rate = (Number of Conversion/Number of Website Visitors or Potential Customers)×100
5. Foot Traffic and Digital Traffic
These two are essential retail KPIs for operations managers that provide insights into customer engagement across physical and online channels, respectively. Foot traffic refers to the number of visitors to a physical retail store, while digital traffic encompasses the online presence, measuring the number of visitors to a company’s digital platforms. These metrics indicate the level of interest and interaction customers have with the brand in different spaces.
High foot traffic signifies a bustling physical store, indicating popularity and potential sales opportunities. Similarly, high digital traffic suggests a robust online presence, which can translate into increased digital sales and brand visibility. On the flip side, low foot traffic or digital traffic may signal a need for improved marketing strategies, enhanced customer experiences, or adjustments to product offerings.
6. Inventory Turnover
Inventory turnover measures how efficiently a company manages its inventory by evaluating the number of times inventory is sold and replaced within a specific period. It is defined as the ratio of the cost of goods sold (COGS) to the average inventory during that period. This metric serves as a key indicator of inventory management effectiveness, providing insights into how quickly products are moving off the shelves.
A high inventory turnover ratio typically indicates efficient inventory management, swift sales, and minimized holding costs. Conversely, a low inventory turnover suggests slow-moving stock, potential overstocking issues, and increased holding costs. Operations managers can leverage this metric to fine-tune inventory strategies, optimize stock levels, and ensure a healthy balance between product availability and financial efficiency.
Formula: Inventory Turnover = Cost of Goods Sold (COGS)/Average Inventory
7. Returns and Exchanges
Returns and exchanges are integral components of retail KPIs for operations managers. It includes the volume of products customers bring back or exchange within a specified timeframe. This metric is a crucial measure of customer satisfaction, product quality, and overall operational efficiency.
A high rate of returns and exchanges may indicate potential issues such as dissatisfaction, product defects, or discrepancies between customer expectations and delivered goods. Operations managers must scrutinize the reasons behind high return rates to address underlying concerns, optimize product quality, and enhance customer experiences. Conversely, a low rate of returns and exchanges generally signifies customer contentment and operational effectiveness, indicating that products meet or exceed customer expectations.
Formula: Return and Exchange Rate = (Number of Returns and Exchanges/Total Number of Items Sold)×100
8. Stock Turnover Rate
Stock turnover rate is a metric that assesses how efficiently a company manages its inventory by measuring the number of times stock is sold and replaced within a specific period. This KPI is a key indicator of inventory management efficiency, providing insights into how quickly a company can sell and restock its products.
A high stock turnover rate generally indicates efficient inventory management, where products move briskly, reducing holding costs and potential obsolescence. Conversely, a low turnover rate may suggest overstocking or slow-moving inventory, leading to increased holding costs and the risk of product obsolescence. Operations managers can leverage this KPI to make informed decisions about inventory levels, ensuring a balance between meeting customer demand and optimizing operational costs.
Formula: Stock Turnover rate = Cost of Goods Sold (COGS)/Average Inventory Value
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Sell-through rate quantifies the efficiency of a company in selling its inventory over a specific period. Essentially, it gauges how well a business is managing its stock levels and meeting consumer demand.
A high sell-through rate indicates that products are moving off the shelves swiftly, signifying strong consumer interest and effective inventory management. Conversely, a low sell-through rate may suggest that products are lingering in stock, potentially indicating overstocking, pricing issues, or a lack of demand. Operations managers, by closely monitoring sell-through rate, gain valuable insights into inventory performance, enabling them to make data-driven decisions on pricing strategies, product assortment, and overall inventory management for optimal business outcomes.
Formula: Sell-Through Rate = (Number of Units Sold/Beginning Inventory) ×100
10. Sales Year-Over-Year
Sales year-over-year (YoY) is one of the crucial retail KPIs for operation managers that assesses the percentage change in a company’s sales performance for a specific period compared to the same period in the previous year. It provides a longitudinal perspective on sales trends, allowing operations managers to gauge the overall growth or decline in revenue.
A positive YoY indicates sales growth, showcasing the effectiveness of business strategies and market demand. Conversely, a negative YoY suggests a decline in sales, prompting operations managers to investigate the root causes, adapt strategies, and make informed decisions to reverse the trend.
Formula: Sales Year-Over-Year = [(Current Year Sales - Previous Year Sales)/Previous Year Sales] ×100
Marketing KPIs For Operations Managers
11. Cost Per Click
Cost per click measures the average cost incurred by advertisers each time a user clicks on their online ad. CPC serves as a key metric for evaluating the efficiency and cost-effectiveness of online advertising campaigns.
A high CPC may indicate that the cost of acquiring each click is relatively expensive, possibly requiring a reassessment of the advertising strategy or targeting parameters. Conversely, a low CPC suggests that the advertising campaign is cost-efficient, allowing the company to reach a broader audience for a lower investment. Operations managers can leverage this metric to optimize advertising budgets, refine targeting strategies, and ensure that marketing initiatives generate valuable user engagement at an optimal cost.
Formula: CPC = Total Advertising Cost/Number of Clicks
12. Cost Per Acquisition
Cost per acquisition is one of the fundamental marketing KPIs for operations managers, serving as a metric to evaluate the average expense incurred in acquiring a new customer. CPA is a vital indicator of the efficiency and cost-effectiveness of a company’s marketing campaigns and strategies.
A high CPA suggests that acquiring new customers is relatively expensive, possibly indicating inefficiencies in the marketing approach or the need for optimization. Conversely, a low CPA reflects a more cost-effective strategy for attracting new customers. Monitoring CPA allows operations managers to assess marketing efforts’ return on investment (ROI), guiding strategic decisions and resource allocations to optimize customer acquisition processes effectively.
Formula: CPA = Total Cost of Acquisition/Number of New Customers Acquired
13. Return on Advertising Spend
Return on advertising spend is one of the critical marketing KPIs for operations managers, serving as a quantitative measure of the revenue generated for every dollar spent on advertising. It is a powerful indicator of the effectiveness and efficiency of a company’s advertising campaigns.
A high ROAS implies that the revenue generated significantly exceeds the advertising costs, suggesting a profitable and successful campaign. On the other hand, a low ROAS may indicate that the return on investment from advertising is not meeting expectations, prompting operations managers to reevaluate and refine their marketing strategies. Operations managers can utilize ROAS to optimize marketing budget allocation, identify successful channels, and make data-driven decisions to maximize the impact of advertising efforts on overall business profitability.
Formula: ROAS = Revenue Generated From Advertising/ Cost of Advertising
14. Time to Payback
Time to payback in marketing operations refers to the duration it takes for a company to recover the costs associated with acquiring a new customer. It is essentially a measure of the efficiency of marketing campaigns in terms of cost recovery.
A low time to payback is favorable, signifying a swift recovery of customer acquisition costs and a quicker return on investment. Conversely, a high time to payback suggests a longer period for cost recovery, which may raise concerns about the effectiveness and sustainability of marketing initiatives. Operations managers can use this metric to assess the efficiency of marketing efforts, optimize campaign strategies, and ensure a more rapid and cost-effective return on investment.
Formula: Time to Payback = Customer Acquisition Costs/ Average Monthly Gross Margin per Customer
15. Marketing-Originated Customer Percentage
Marketing-originated customer percentage is a key performance indicator in marketing operations, providing insights into the percentage of customers that can be attributed to marketing efforts within a specific period. It serves as a valuable measure of the effectiveness of marketing campaigns in driving customer acquisition.
A high marketing-originated customer percentage indicates that a significant proportion of new customers were influenced by marketing strategies, showcasing the success of marketing campaigns in attracting and converting leads. On the other hand, a low percentage suggests a need for adjustments in marketing strategies to enhance their impact on customer acquisition. Operations managers can leverage this KPI to gauge the return on marketing investments, refine campaign strategies, and optimize resource allocation to bolster customer acquisition through effective marketing initiatives.
Formula: Marketing-Originated Customer Percentage = (Number of Customers Acquired Through Marketing/Total Number of New Customers) ×100
Human Resource KPIs For Operations Managers
16. Absenteeism rate
The absenteeism rate is a metric that quantifies the frequency and extent of employee absences. It is defined as the percentage of scheduled work hours that employees are absent due to various reasons, such as illness, personal issues, or other unforeseen circumstances. The absenteeism rate provides valuable insights into workforce attendance patterns and employee engagement.
A high absenteeism rate may indicate potential issues within the workplace, such as low morale, dissatisfaction, or health concerns, which can negatively impact overall productivity. Conversely, a low absenteeism rate is generally associated with a motivated and engaged workforce. Operations managers can utilize this KPI to identify trends, address underlying concerns, and implement strategies to promote a healthier and more productive work environment.
Formula: Absenteeism Rate = (Total Scheduled Hours of Absence/Total Scheduled Work Hours) ×100
17. Overtime Hours
Overtime hours refer to the additional hours employees work beyond their regular scheduled work hours. This metric is crucial in understanding human resource utilization and indicates the workload demands on a workforce.
When overtime hours are high, it may signify increased workloads, tight deadlines, or understaffing, potentially leading to concerns about employee burnout, decreased morale, and increased labor costs. On the other hand, low overtime hours suggest efficient workforce management or a period of reduced demand. Operations managers utilize this metric to strike a balance between meeting operational demands and ensuring the well-being and productivity of the workforce.
Formula: Overtime Hours = Total Hours Worked - Scheduled Work Hours
18. Employee Turnover Rate
Employee turnover rate quantifies the percentage of employees who leave a company within a specific timeframe. This metric serves as a key indicator of workforce stability and organizational health.
A high turnover rate may suggest issues such as dissatisfaction, lack of engagement, or inadequate workplace conditions, potentially impacting overall productivity and morale. On the other hand, a low turnover rate typically signifies a stable and content workforce, reflecting positive workplace culture and effective talent management. Operations managers, armed with insights from this metric, can implement targeted strategies to reduce turnover, enhance employee satisfaction, and foster a more resilient and engaged workforce.
Formula: Employee Turnover Rate = (Number of Employees Departed/Average Number of Employees) ×100
19. Employee Efficiency Metrics
Employee efficiency serves as an invaluable KPI for operations managers, providing a comprehensive understanding of workforce productivity. These metrics include:
A high number of deals closed YTD signals a robust and proactive sales effort, showcasing the team’s ability to navigate the sales pipeline and capitalize on opportunities. Conversely, a low number may suggest potential challenges or inefficiencies in the sales process, prompting operations managers to assess and refine sales strategies. Operations managers leverage this KPI to gauge the overall health of the sales function, set realistic targets, and implement targeted improvements to optimize deal conversion rates and, ultimately, drive revenue growth.
21. Customer Churn Rate
Customer churn rate is a critical sales operations KPI that quantifies the percentage of customers who discontinue their relationship with a business within a given period. This metric serves as a key indicator of customer attrition and the overall health of a customer base.
A high churn rate typically suggests issues with customer satisfaction, service quality, or competitive pressures, signaling potential revenue loss. Conversely, a low churn rate indicates a stable and satisfied customer base, reflecting successful customer retention strategies. Operations managers can utilize the churn rate to identify patterns, understand the reasons behind customer departures, and implement targeted measures to enhance customer satisfaction and loyalty.
Formula: Customer Churn Rate = Number of Customers Lost During a Period/Number of Customers at the Start of the Period) ×100
22. Lead-to-Opportunity Ratio
The lead-to-opportunity ratio is a key performance indicator in sales operations to assess the efficiency of converting leads into qualified opportunities. A high lead-to-opportunity ratio suggests a successful lead generation and qualification process, indicating that a substantial percentage of leads are translating into potential revenue-generating opportunities.
Conversely, a low ratio may imply inefficiencies in lead nurturing or qualification, signaling the need for improvements in the sales process to enhance conversion rates. Operations managers in sales can leverage this KPI to refine lead management strategies, optimize marketing efforts, and ensure a streamlined conversion pipeline, ultimately contributing to increased revenue and business success.
Formula: Lear-to-Opportunity Ratio = (Number of Opportunities Created/Number of Leads Generated) ×100
A high lead conversion rate suggests a streamlined and effective sales process, indicating that a significant proportion of leads are progressing through the sales funnel to become valuable customers. On the contrary, a low lead conversion rate may signify inefficiencies or gaps in the sales strategy, prompting operations managers to reassess and optimize their lead management practices. Operations managers can leverage this metric to refine sales strategies, identify areas for improvement, and enhance overall sales performance, ultimately contributing to the company’s bottom line.
Formula: Lead Conversion Rate = (Number of Converted Leads/Total Number of Leads) ×100
IT KPIs For Operations Managers
24. Total Tickets vs Open Tickets
The number of total tickets vs open tickets provides insights into the efficiency of an IT support system. Total tickets represent the overall number of requests or issues raised by users, while open tickets are the subset that remains unresolved or in-progress. In essence, this KPI measures the ratio of resolved or closed tickets to the total number of tickets, offering a snapshot of the IT team’s responsiveness and effectiveness.
A high ratio indicates a swift resolution of issues, suggesting a proficient and agile IT support system. Conversely, a low ratio may signify a backlog of unresolved issues, potential inefficiencies, or challenges in meeting user demands promptly. Operations managers can utilize this KPI to gauge the health of their IT support services, make informed decisions on resource allocation, and ensure that user concerns are addressed in a timely manner, ultimately contributing to enhanced operational efficiency and user satisfaction.
25. Ticket Response Time
The duration it takes for a support team to respond to user-reported issues or service requests is called ticket response time. It serves as a key indicator of the efficiency and effectiveness of an IT support system.
A low response time is generally desirable, as it signifies a prompt acknowledgment of user concerns and a swift initiation of troubleshooting or problem resolution. Conversely, a high response time may indicate delays in addressing user issues, potentially leading to increased user frustration and a negative impact on overall service quality. Operations managers can leverage insights from this KPI to optimize IT support workflows, allocate resources efficiently, and enhance the overall user experience with IT services.
Formula: Ticket Response Time = [(Time of First Response - Time of Ticket Creation)/Number of Tickets]
26. Resolution Rate
Resolution rate is a critical IT operations KPI for operations managers that quantifies the effectiveness of resolving issues or incidents within a specified timeframe. This metric serves as a key performance indicator for IT support teams, measuring their efficiency in addressing and resolving technical challenges.
A high resolution rate signifies a swift and effective response to issues, indicating operational excellence and customer satisfaction. On the other hand, a low resolution rate may suggest inefficiencies in the IT support process. This can potentially lead to prolonged system downtimes and dissatisfied end-users. Operations managers can utilize this metric to gauge the performance of their IT support teams and identify areas for improvement. They can also ensure the smooth functioning of IT operations in alignment with organizational goals.
Formula: Resolution Rate = (Number of Incidents Resolved/Total Number of Incidents Reported) ×100
27. Mean Time to Recover
Mean time to recover quantifies the average time taken to restore a system/service to normal functioning after an incident or outage. It serves as a key performance indicator for operations managers in the IT industry. It also offers valuable insights into the efficiency of incident resolution processes.
A low MTTR indicates a swift and effective response to incidents, minimizing downtime and disruptions to IT services. Conversely, a high MTTR suggests a prolonged recovery process, potentially leading to increased downtime and adverse impacts on productivity. Operations managers use MTTR to assess the effectiveness of incident management, refine response strategies, and ensure timely service restoration. Ultimately, contributing to the resilience and reliability of IT systems within an organization.
Formula: MTTR = Total downtime/Number of Incidents
28. Technology Downtime
Technology downtime is when a system, network, or technology infrastructure is unavailable or not functioning as intended. It is the time when IT services or systems are offline, disrupting normal business operations. This metric is a key indicator of the reliability and resilience of an organization’s technological infrastructure.
A high technology downtime indicates a greater frequency or duration of disruptions. It can potentially lead to decreased productivity, customer dissatisfaction, and financial losses. Conversely, a low technology downtime suggests a more stable and robust IT environment, ensuring seamless business operations. Operations managers can utilize this KPI to pinpoint areas for improvement in IT systems and implement preventive measures. It can also ensure the uninterrupted flow of technology-dependent processes, safeguarding the overall efficiency and reliability of the organization.
Supplier and carrier costs quantify the expenses associated with sourcing materials from suppliers and transporting them through various carriers. It reflects the financial efficiency of the supply chain.
A high score indicates a dependable network, ensuring timely and quality deliveries. On the contrary, a low score may signal disruptions or inconsistencies, prompting operations managers to reassess and potentially diversify their supplier and carrier base. Operations managers can utilize this KPI to identify underperforming partners, negotiate improvements, and ensure a smooth and reliable flow of goods.
31. Inventory Turns and Carrying Costs
Inventory turns and carrying costs represent the number of times inventory is sold or used in a given period and the associated costs of holding that inventory. A high inventory turns value implies efficient inventory management, with goods swiftly transitioning from shelves to customers.
On the flip side, a low value may indicate overstocking, leading to increased carrying costs. Operations managers can utilize these KPIs to refine inventory strategies, minimize holding costs, and enhance overall supply chain efficiency.
Formula: Inventory Turns = Cost of Goods Sold/Average Inventory Value
32. Order Fill and Back Order Rates
Order fill rate measures the percentage of customer orders that are fulfilled completely on the first attempt, while the back order rate tracks the orders that cannot be filled immediately and are delayed.
High order fill rates signify efficiency and customer satisfaction, while high back order rates may indicate inventory shortages or inefficient order processing systems. Operations managers can utilize these KPIs to optimize inventory levels, improve order processing, and enhance customer service.
Formula: Order Fill Rate = Number of Order Filled/ Total Number of Orders
Conversely, a low accuracy rate may lead to order discrepancies and additional costs for corrections. Operations managers can utilize this KPI to identify areas for improvement in warehouse processes, implement training programs, and enhance overall order accuracy.
34. Order Lead Time
Order lead time measures the time it takes from order placement to delivery, encompassing various stages. Short lead times indicate operational efficiency and customer responsiveness, while extended lead times may result in customer dissatisfaction and increased operational costs. Operations managers can utilize this KPIs to streamline processes, optimize workflows, and improve overall supply chain agility.
35. Receiving and Put-Away Cycle Times
Receiving and put-away cycle times evaluate the efficiency of receiving and storing goods upon arrival. Short cycle times indicate streamlined processes, reducing delays in inventory availability.
Prolonged cycle times, on the other hand, may result in operational bottlenecks and increased storage costs. Operations managers can utilize these KPIs to streamline receiving and storage processes, reducing bottlenecks and improving overall warehouse efficiency.
36. Transportation Costs
Transportation costs quantify the expenses associated with moving goods from suppliers to the distribution center and, eventually, to customers. High transportation costs may suggest inefficiencies or suboptimal route planning, impacting overall supply chain profitability. Operations managers can utilize this KPI to optimize transportation routes, negotiate favorable agreements with carriers, and reduce overall distribution expenses.
Formula: Transportation Costs = Cost per Mile x Total Miles Travelled
37. Transportation Delivery(SLA)
Transportation delivery (Service Level Agreement) measures the adherence to agreed-upon delivery timelines. High SLA compliance ensures reliability and customer satisfaction, while low compliance rates may lead to service disruptions and potential damage to customer relationships. Operations managers can utilize this KPI to monitor carrier performance, negotiate improved delivery terms, and ensure the timely arrival of goods.
38. Quote to Cash Cycle Time
Quote to cash cycle time calculates the duration from the initial customer quote to receiving payment. A shorter cycle time indicates a streamlined order-to-payment process, contributing to improved cash flow. Conversely, a prolonged cycle time may result in delayed revenue recognition and increased working capital requirements. Operations managers can utilize this KPI to streamline sales and billing processes, reducing cycle times and improving overall financial performance.
Finance KPIs For Operations Managers
39. Account Receivables Turnover
Accounts receivables turnover is a finance operations KPI that gauges the efficiency of a company in collecting payments from customers. A high turnover indicates a swift conversion of receivables into cash, reflecting strong cash flow and effective credit management.
Formula: Account Receivable Turnover = Net Credit Sales/ Average Accounts Receivable
40. Days Sales Outstanding
Days sales outstanding is a metric that quantifies the average number of days it takes for a company to collect payments after a sale has been made. It serves as a critical finance operations KPI, representing the efficiency of a company’s credit and collection processes.
Formula: Days Sales Outstanding = (Accounts Receivable/ Net Credit Sales) × Number of Days in Period
41. Operating Cash Flow
Operating cash flow is a finance operations KPI that measures the cash generated or used by a company’s core operating activities. It provides insights into a company’s ability to generate cash from its regular business operations. A positive operating cash flow indicates financial health, liquidity, and the capacity to cover operating expenses.
Conversely, a negative operating cash flow may signify liquidity challenges. Operations managers can utilize this KPI to ensure there is sufficient cash to fund ongoing operations, invest in growth opportunities, and meet financial obligations.
Formula: Operating Cash Flow=Net Income+Non-Cash Expenses+Changes in Working Capital
42. Quick Ratio
The quick ratio also known as the acid-test Ratio, is a finance operations KPI that measures a company’s ability to meet its short-term obligations using its most liquid assets. It is a more stringent measure than the current ratio as it excludes inventory from current assets.
A high quick ratio suggests strong liquidity and an ability to cover short-term liabilities promptly. Conversely, a low quick ratio may indicate potential difficulties in meeting short-term obligations. Operations managers can utilize this KPI to assess short-term liquidity and make informed decisions about managing current liabilities.
Formula: Quick Ratio = (Cash + Marketable Securities + Receivables)/ Current Liabilities
43. Accounts Payable Turnover
Accounts payable turnover assesses how efficiently a company manages its accounts payable by measuring the number of times a company pays its average accounts payable during a specific period.
A high turnover suggests effective management of payables and efficient cash flow, while a low turnover may indicate potential liquidity challenges or delayed payments. Operations managers can utilize this KPI to optimize payment processes, negotiate favorable credit terms, and enhance overall financial efficiency.
Formula: Accounts Payable Turnover = Net Credit Purchases/ Average Accounts Payable
44. Cash Conversion Cycle
The cash conversion cycle measures the time it takes for a company to convert its investments in inventory and other resources into cash flow from sales. It reflects the efficiency of a company’s working capital management.
Operating profit margin is a finance operations KPI that measures the profitability of a company’s core operating activities. It is expressed as a percentage and indicates the proportion of revenue that remains as operating profit after deducting operating expenses.
A high operating profit margin suggests operational efficiency and effective cost management, while a low margin may indicate potential challenges in controlling expenses. Operations managers can utilize this KPI to assess the efficiency of core operations, identify cost-saving opportunities, and enhance overall financial performance.
Net profit margin measures the overall profitability of a company by expressing net profit as a percentage of total revenue. It provides insights into a company’s ability to generate profit after all expenses, including taxes and interest.
Formula: Net Profit Margin = (Net Profit/Net Sales) ×100
Manufacturing KPIs For Operations Managers
47. Product Development Costs and Time-to-Market
Product development costs and time-to-market in manufacturing operations KPIs refer to the expenditures incurred and the time taken to bring a new product from conceptualization to market availability. This KPI indicates the efficiency of the product development process, reflecting a company’s innovation speed and cost-effectiveness.
A high value may suggest prolonged development cycles and increased costs, potentially impacting competitiveness. Conversely, a low value signifies swift development and cost control, enhancing market responsiveness. Operations managers can utilize this KPI to streamline innovation processes, optimize resource allocation, and align product releases with market demands.
48. Job Cost and WIP Reporting
Job cost and work-in-progress (WIP) reporting represent the total cost incurred for completing a specific manufacturing job and the ongoing value of work in progress. This KPI indicates the financial efficiency and progress of manufacturing processes, with a high value signaling potential cost overruns or delays.
A low value implies effective cost control and timely job completion. Operations managers can leverage this KPI to manage production costs, improve resource utilization, and optimize workflow.
49. Scrap and Yield Quantities and Costs
Scrap and yield quantities and costs measure the volume of defective or wasted products in comparison to the total produced, along with associated costs. This KPI reflects the efficiency of production processes and product quality.
A high value indicates a high level of waste, which can result in increased costs and reduced profitability. Conversely, a low value signifies efficient production with minimal waste. Operations managers can utilize this KPI to identify areas for quality improvement, optimize production processes, and reduce costs.
50. Manufacturing Labor Efficiency
Manufacturing labor efficiency is a KPI that gauges the productivity of labor in the manufacturing process. This KPI indicates how effectively labor resources are utilized in manufacturing. A high value suggests efficient use of labor, minimizing costs per unit.
Conversely, a low value may indicate inefficiencies, leading to increased labor costs. Operations managers can leverage this KPI to optimize workforce management, identify training needs, and enhance overall production efficiency.
Formula: Manufacturing Labor Efficiency = (Actual Production Output/Standard Production Output) x 100
51. Machine and Resource Throughput
Machine and resource throughput in manufacturing operations KPIs measure the rate at which machines or resources complete tasks within a given time period. This KPI reflects the operational efficiency of machinery and resources.
A high value indicates optimal throughput and resource utilization, contributing to increased productivity. On the contrary, a low value may signal bottlenecks or underutilized resources. Operations managers can use this KPI to identify areas for improvement, allocate resources effectively, and enhance overall production capacity.
52. Production Schedule Attainment
Production schedule attainment is a KPI that assesses the extent to which actual production matches the planned production schedule. This KPI provides insights into operational reliability and adherence to timelines.
A high value suggests a consistent and reliable production schedule, contributing to customer satisfaction. Conversely, a low value may indicate challenges in meeting production targets, potentially affecting customer relationships and order fulfillment. Operations managers can utilize this KPI to optimize production planning, improve resource allocation, and enhance on-time delivery performance.
Formula: Production Schedule Attainment = (Actual Production Output/Planned Production Output) x 100
53. Resource Capacity Utilization
Resource capacity utilization measures the extent to which available resources are utilized in production. This KPI indicates the efficiency of resource allocation and utilization.
A high value suggests optimal utilization, contributing to cost-effectiveness. On the other hand, a low value may indicate underutilized resources, leading to increased per-unit costs. Operations managers can use this KPI to optimize resource allocation, identify areas for improvement, and enhance overall operational efficiency.
Formula: Resource Capacity Utilization = (Actual production Output/Maximum Possible Production Output) x 100
54. Changeover Time
Changeover time is a critical manufacturing operations KPI that measures the time taken to transition from producing one product to another. This KPI indicates the efficiency of changeover processes and the ability to adapt to different production requirements swiftly.
A high value suggests prolonged changeover times, potentially causing production delays and impacting overall efficiency. Conversely, a low value signifies quick and efficient changeovers, enhancing production flexibility. Operations managers can utilize this KPI to optimize production schedules, reduce downtime, and enhance overall operational agility.
55. Overall Equipment Efficiency (OEE)
Overall equipment efficiency is a comprehensive manufacturing operations KPI that assesses the performance, availability, and quality of equipment in the production process. OEE provides a holistic view of equipment effectiveness, with a high value indicating optimal equipment performance.
Conversely, a low value suggests potential areas for improvement, such as increased downtime or reduced production speed. Operations managers can use OEE to identify and address equipment-related inefficiencies, improve maintenance strategies, and enhance overall production effectiveness.
56. Sub-Contractor Performance
Sub-contractor performance is a KPI that evaluates the effectiveness and reliability of subcontractors engaged in the manufacturing process. This KPI indicates the impact of external contributors on overall operational success. A high value signifies dependable subcontractors contributing positively to production.
In contrast, a low value may indicate challenges such as delays or quality issues introduced by subcontractors. Operations managers can utilize this KPI to make informed decisions about subcontractor relationships, optimize supply chain partnerships, and ensure consistent production quality.
57. Capable-to-Promise (CTP)%
Capable-to-promise is a manufacturing operations KPI that evaluates a company’s ability to commit to fulfilling customer orders based on current production capabilities. This KPI indicates how effectively a company can meet customer expectations regarding order fulfillment.
A high CTP% value suggests a robust production system capable of accommodating customer demands. Conversely, a low value may indicate challenges in meeting order commitments, potentially affecting customer satisfaction. Operations managers can leverage this KPI to enhance production planning, optimize inventory levels, and improve customer order fulfillment.
Formula: CTP% = (Available-to-Promise/Total Demand) x 100
Construction KPIs For Operations Managers
58. Safety/Incident Rate
Safety/Incident rate is a crucial construction operations KPI that measures the frequency of safety incidents or accidents on a construction site. This metric is defined as the number of incidents (injuries, accidents, or near misses) per a specific unit of measurement. It is often expressed per 100,000 work hours.
A low safety/incident rate is indicative of a safe work environment, emphasizing the success of safety protocols and measures. Conversely, a high rate may signal potential hazards, prompting operations managers to reassess safety procedures. Operations managers can utilize this KPI to prioritize and enhance safety measures. Also, ensuring the well-being of the workforce and compliance with safety regulations.
59. Request for Information Win Rates
Request for information(RFI) win rates assesses the success of winning contracts or projects after responding to requests for information. A high win rate indicates effective bidding strategies and a competitive edge in the market. While a low rate may signify areas that require improvement. Operations managers can utilize this KPI to refine bidding approaches, better understand market dynamics, and optimize resource allocation.
Formula: Request for Information(RFI) Win Rates = (Number of Projects Won/Total Number of RFIs Submitted) x 100
60. Job Cost, Revenue, and Profitability
Job cost, revenue, and profitability are vital construction operations KPIs that gauge the financial performance of construction projects. The total expenses incurred during a project are job costs, the income generated is the revenue, and profitability is the net profit derived from subtracting costs from revenue.
High job costs relative to revenue can indicate financial inefficiency, while low profitability may signal unsuccessful project management. Operations managers can utilize these metrics to assess project financial health, and identify areas for cost optimization.
61. Quality Defects, Rework Costs and Time, Number of Inspections
Quality defects, rework costs and time, and number of inspections are interconnected construction operations KPIs. They measure the quality and efficiency of construction projects. On one hand quality defects represent deviations from project specifications. While rework costs and time quantify the resources spent on correcting defects. The number of inspections measures how frequently quality checks are conducted.
Low quality defects, rework costs, and inspection frequency indicate efficient project execution. While high values may suggest the need for improved quality control. Operations managers can utilize these KPIs to streamline project processes, enhance quality control, and minimize unnecessary expenditures.
62. Employee Retention
Employee retention measures the percentage of employees who remain with the construction company over a specific period. High employee retention signifies a positive work environment, skilled workforce, and effective management.
Conversely, low retention rates may signal issues with workplace satisfaction or leadership. Operations managers can utilize this KPI to implement strategies for talent retention. They can also foster a positive workplace culture, and address any underlying concerns.
Formula: Employee Retention Rate = (Number of Employee Retained/Total Number of Employees at Start of Period) x 100
63. Labor Efficiency/Utilization
Labor efficiency assesses how effectively labor resources are utilized on a construction project. High labor efficiency indicates optimal resource utilization, while low efficiency may suggest underutilization or inefficiencies in project planning. Operations managers can utilize this KPI to optimize workforce allocation, improve project scheduling, and enhance overall labor productivity.
Subcontractor inventory is a construction operations KPI that evaluates the availability and efficiency of subcontractors for construction projects. It is defined as the number of qualified subcontractors available for hire at any given time.
High subcontractor inventory indicates a robust network of qualified subcontractors, facilitating flexibility in project staffing. On the other hand, a low inventory may lead to delays and increased costs. Operations managers can utilize this KPI to ensure a reliable pool of subcontractors, manage project timelines effectively, and mitigate risks associated with subcontractor availability.
Professional Service KPIs For Operations Managers
65. Average and Realized Bill Rates
Average bill rate represents the average price charged for professional services, while realized bill rate is the actual revenue generated per billable hour. These metrics provide insights into the pricing structure’s effectiveness and how well it aligns with the market. High rates indicate value perception, but if too high, it may lead to client dissatisfaction. Low rates may attract clients, but it could impact profitability.
66. Employee Utilization/Billable Rate
Employee utilization/billable rate gauges the percentage of an employee’s time spent on billable client work. High utilization rates signify efficient resource allocation, but excessive rates may lead to burnout. Low rates suggest underutilization, potentially impacting revenue. Operations managers can optimize team productivity by balancing utilization rates.
67. Billable Revenue Per Resource
Billable revenue per resource measures the average revenue generated per service professional. A high figure indicates efficient resource utilization, while low figures may signify inefficiencies. Operations managers can use this metric to assess team productivity and adjust staffing levels to meet demand.
68. Project Estimate Accuracy
Project estimate accuracy reflects how closely initial project estimates align with the actual effort and cost. High accuracy signifies effective project planning, leading to client satisfaction and profitability. Low accuracy may result in cost overruns and strained client relationships.
69. Project/Service Revenue, Profitability, Deal Size, and Bid-to-Win Ratios
These encompass a suite of metrics evaluating project or service success. Revenue and profitability showcase financial performance, deal size indicates project scale, and bid-to-win ratios highlight the effectiveness of securing new projects. High values across these metrics indicate successful project management and business development.
70. SaaS Contract Metrics (ARR, ACV, and Churn)
Annual recurring revenue (ARR), Annual contract value (ACV), and churn rate are very important metrics for SaaS contracts. ARR and ACV showcase subscription revenue, while Churn measures customer retention. High ARR and ACV are favorable, while low Churn indicates satisfied customers. Operations managers can use these metrics to refine subscription pricing, improve service, and ensure long-term customer relationships.
Formula:
ARR = Monthly Recurring Revenue (MRR) x 12
ACV = Average Monthly Contract Value (MCV) x 12
Churn Rate = (Number of Customers Lost/Total Customers at Start of Period) x 100
From the intricate details of retail operations, such as gross margins and inventory turnover, to the intricacies of human resources, including absenteeism rate and employee turnover, and extending to the critical domains of sales, IT operations, manufacturing, finance, construction and distribution, each KPI paints a distinct picture of efficiency, effectiveness, and overall operational health. These KPIs for operations managers act as instruments, finely tuned to provide insights into the complex landscape of operational facets.
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KPIs (key performance indicators) for an operations manager may include a range of metrics across different areas such as retail, human resources, IT, finance, marketing, sales, distribution, manufacturing, construction, and professional services.
How do you measure operations manager performance?
Operations manager performance can be measured by assessing their effectiveness in achieving key objectives and targets related to the specific KPIs relevant to their role. This involves monitoring and evaluating their contributions to the success of the organization in areas such as cost management, efficiency, employee management, and overall operational excellence. Regular performance reviews, feedback sessions, and data-driven assessments based on KPIs can be used to gauge their effectiveness.
What are KPIs to improve operational performance?
To improve operational performance, organizations can focus on key performance indicators that highlight areas for enhancement and growth. Some overarching KPIs to consider for improving operational performance include retail, human resources, IT, finance, marketing, sales, distribution, manufacturing, construction, and professional services KPIs respectively.
A skilled inventory manager is one who carefully balances customer satisfaction with efficient capital management. Inventory managers take on the central role, overseeing the seamless flow of goods, optimizing stock levels, and ensuring the availability of the right products at the right time. Their responsibilities span from managing warehouse operations to refining procurement strategies, all geared towards enhancing the company’s overall performance.
Assessing the effectiveness involves measuring the KPIs for inventory managers, which act as valuable metrics for evaluating the success of inventory-related processes. Precision and efficiency are paramount in inventory management, necessitating to track specific KPIs for inventory managers which can provide insights into various facets of their operations. These metrics not only pinpoint areas for improvement but also empower inventory managers to make informed decisions that positively impact the company’s bottom line.
The inventory turnover rate is one of the sales KPIs for inventory managers that measures the number of times a company’s inventory is sold and replaced over a specific period, usually a year. A high turnover rate indicates that products are selling quickly, which is beneficial for cash flow and minimizing the holding costs of unsold items. Conversely, a low turnover rate suggests slow-moving inventory, tying up capital and potentially leading to obsolescence. This KPI is crucial for an inventory manager as it reflects the efficiency of stock management, helping them adapt strategies to align with market demands and optimize capital usage.
Inventory turnover rate = cost of goods sold / average inventory
2. Days on Hand
Days on hand is a sales KPI that measures the average number of days or weeks it takes to sell the current inventory. A low value signifies quick inventory turnover, which is positive for cash flow and reduces holding costs. On the other hand, a high value may indicate overstocking or slow-moving products, leading to potential obsolescence and tying up capital. These KPIs are vital for an inventory manager as they provide insights into the balance between stock levels and sales velocity, enabling strategic adjustments to align with market demands.
Days of inventory on hand = (average inventory for period / cost of sales for period) x 365
3. Stock to Sales Ratio
The sales KPI for inventory managers that compares the amount of stock on hand to the current sales volume is known as the stock to sales ratio. A high ratio may indicate overstocking, tying up capital, and potentially leading to increased holding costs. A low ratio could suggest potential stockouts, impacting customer satisfaction and sales revenue. For an inventory manager, maintaining an optimal stock to sales ratio is essential for ensuring inventory aligns with sales demand, minimizing holding costs, and maximizing profitability.
Stock to sales ratio = $ inventory value / $ sales value
4. Sell-through Rate
The sell-through rate is responsible for measuring the percentage of available inventory sold during a specific period. A high sell-through rate indicates efficient sales, minimizing the risk of overstocking and reducing holding costs. Conversely, a low sell-through rate may signify slow-moving inventory, potentially leading to obsolescence. This KPI is crucial for an inventory manager as it guides decisions on product promotions, pricing, and inventory replenishment strategies to optimize sales and prevent overstock.
Sell-through rate = (# units sold / # units received) x 100
5. Backorder Rate
This sales KPI for inventory managers measures the percentage of customer orders that cannot be fulfilled immediately due to insufficient stock. A low backorder rate indicates efficient inventory management, enhancing customer satisfaction. Whereas, a high backorder rate may result in lost sales and dissatisfied customers. For an inventory manager, minimizing the backorder rate is crucial for meeting customer demand, retaining business, and optimizing sales revenue.
Backorder Rate = (# delayed orders due to backorders / total # orders placed) x 100
6. Accuracy of Forecast Demand
The accuracy of forecast demand, a sales KPI for inventory managers evaluates how closely the forecasted demand aligns with actual sales. High accuracy suggests effective forecasting, minimizing stockouts and overstock situations. On the other hand, low accuracy may lead to inefficient inventory levels and potential lost sales. This KPI is vital for an inventory manager as it influences purchasing decisions, warehouse operations, and overall inventory optimization, ensuring resources are allocated efficiently.
Accuracy of Forecast Demand = [(actual – forecast) / actual] x 100
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The rate of return measures the percentage of sold items that are returned by customers. A low return rate indicates customer satisfaction and product quality. Conversely, a high return rate may suggest issues with product quality, leading to potential financial losses. For an inventory manager, monitoring the rate of return is crucial for maintaining customer satisfaction, identifying product issues, and implementing corrective measures to optimize sales and minimize returns.
8. Product Sales
Product sales is a sales KPI that represents the total units of a specific product sold within a given period. High product sales indicate strong market demand and successful product positioning and, low product sales may suggest the need for marketing adjustments or potential product obsolescence. This KPI is important for an inventory manager as it informs decisions on inventory replenishment, marketing strategies, and overall product lifecycle management.
9. Revenue per Unit
Revenue per unit calculates the average revenue generated by selling one unit of a product. High revenue per unit suggests effective pricing strategies and profitable product offerings. On the contrary, low revenue per unit may require pricing adjustments or a reevaluation of the product’s market positioning. For an inventory manager, understanding revenue per unit is crucial for optimizing pricing strategies, maximizing profitability, and making informed decisions about product offerings.
Revenue per unit = total revenue for period / average units sold for period
10. Cost per Unit
Cost per unit measures the average cost incurred to produce or purchase one unit of a product. Low cost per unit indicates efficient cost management, contributing to higher profit margins. Conversely, high cost per unit may impact profitability and require cost reduction strategies. For an inventory manager, monitoring cost per unit is essential for optimizing procurement strategies, negotiating with suppliers, and ensuring cost efficiency in the production or purchasing process.
Cost per unit = (fixed costs + variable costs )/ # units produced
11. Gross Margin by Product
Gross margin by product is a sales KPI for inventory managers which calculates the percentage of revenue retained after deducting the cost of goods sold for a specific product. A high gross margin indicates profitability, while a low margin may require a reevaluation of pricing or production costs. This KPI is vital for an inventory manager as it guides decisions on product pricing, procurement strategies, and overall product profitability, contributing to the company’s financial success.
Gross margin = [(net sales – cost of goods sold) / net sales] x 100
12. Gross Margin Return on Investment (GMROI)
Gross margin return on investment (GMROI), a sales KPI for inventory managers, evaluates the profitability of inventory investments by comparing the gross margin to the average inventory investment. A high GMROI indicates efficient use of capital and inventory profitability while a low GMROI may suggest the need for inventory optimization strategies. This KPI is essential for an inventory manager as it guides decisions on inventory investment, product assortment, and overall profitability, maximizing returns on capital employed.
Gross margin return on investment = gross margin / average inventory cost
Warehouse KPIs For Inventory Managers
13. Time to Receive
Time to receive is a warehouse KPIs for inventory managers which measures the average time taken to receive and store incoming inventory. A low time to receive indicates efficient warehouse operations, reducing the time products spend in transit. Conversely, a high time to receive may lead to delays in inventory availability. This KPI is important for an inventory manager as it impacts inventory replenishment speed, reducing the risk of stockouts and optimizing overall operational efficiency.
Time to receive = time for stock validation + time to add stock to records + time to prep stock for storage
14. Put Away Time
Put away time is a warehouse KPI for inventory managers that measures the average time taken to place received inventory into its designated storage location within the warehouse. A low put away time indicates efficient warehouse operations, reducing the time products spend in transition between receiving and storage. On the other hand, a high put away time may lead to delays in making inventory available for order fulfillment. This KPI is vital for inventory managers as it directly impacts the speed at which products become accessible for sale, minimizing the risk of stockouts and optimizing overall warehouse efficiency.
Put away time = total time to stow received stock
15. Supplier Quality Index
The supplier quality index is a warehouse KPI that assesses the quality of products received from suppliers. A high index indicates reliable and high-quality suppliers, reducing the risk of defects and returns. Conversely, a low index may suggest issues with product quality and supplier reliability. This KPI is crucial for an inventory manager as it influences supplier selection, inventory quality, and overall customer satisfaction, ensuring a seamless flow of high-quality products.
Supplier quality index = (material quality x 45%) + (corrective action x 10%) + (prompt reply x 10%) + (delivery quality x 20%) + (quality systems x 5%) + (commercial posture x 10%)
Operational KPIs For Inventory Managers
16. Lost Sales Ratio
The lost sales ratio is an operational KPI for inventory managers that measures the percentage of potential sales lost due to stockouts. A low lost sales ratio indicates effective inventory management, minimizing revenue loss. Whereas, a high ratio suggests the need for inventory optimization to prevent lost sales opportunities. This KPI is vital for an inventory manager as it highlights the impact of stockouts on revenue and guides decisions on inventory replenishment strategies.
Lost sales ratio = (# days product is out of stock / 365) x 100
17. Perfect Order Rate
Perfect order rate evaluates the percentage of orders that are fulfilled without errors. A high perfect order rate indicates efficient order processing and customer satisfaction. On the contrary, a low rate suggests issues with order accuracy, potentially leading to customer dissatisfaction and increased operational costs. This KPI is important for an inventory manager as it reflects the overall effectiveness of order fulfillment processes and guides improvements to enhance customer experience.
Perfect order rate = [(# orders delivered on time / # orders) x (# orders complete / # orders) x (# orders damage free / # orders) x (# orders with accurate documentation / # orders)] x 100
18. Inventory Shrinkage
Inventory shrinkage is an operational KPI for inventory managers that measures the loss of inventory due to theft, damage, or errors. A low shrinkage rate indicates effective security and inventory control measures. Conversely, a high rate suggests vulnerabilities in inventory management, impacting profitability. This KPI is crucial for an inventory manager as it guides decisions on security measures, inventory control, and loss prevention strategies, ensuring the integrity of the inventory.
Inventory shrinkage = ending inventory value – physically counted inventory value
19. Average Inventory
Average inventory calculates the average value of inventory during a specific period. A low average inventory suggests efficient stock turnover and capital usage. Whereas, a high average inventory may indicate overstocking and tie up capital. This KPI is vital for an inventory manager as it provides insights into the balance between stock levels and operational efficiency, guiding decisions on inventory optimization strategies.
Average inventory = (beginning inventory + ending inventory) / 2
20. Inventory Carrying Cost
Inventory carrying cost calculates the total cost of holding and storing inventory. A low carrying cost indicates efficient inventory management, minimizing expenses tied up in unsold stock while, a high carrying cost may suggest the need for inventory optimization to reduce financial impact. This KPI is crucial for an inventory manager as it influences decisions on inventory levels, storage solutions, and overall cost efficiency.
Inventory carrying costs = [(inventory service costs + inventory risk costs + capital cost + storage cost) / total inventory value] x 100
21. Customer Satisfaction Rate
Customer satisfaction rate measures the satisfaction of customers with the company’s products and services. A high satisfaction score indicates positive customer experiences, contributing to brand loyalty and, a low score may suggest areas for improvement to prevent customer dissatisfaction. This KPI is important for an inventory manager as it reflects the impact of inventory management on customer satisfaction, guiding improvements to enhance overall customer experience.
Customer satisfaction score = (# positive responses / # total responses) x 100
22. Fill Rate
Fill rate measures the percentage of customer orders fulfilled from available stock. A high fill rate indicates efficient order fulfillment, enhancing customer satisfaction. Conversely, a low fill rate may lead to backorders and customer dissatisfaction. This KPI is vital for an inventory manager as it guides decisions on inventory levels, order processing efficiency, and overall customer service improvement.
Fill rate = [(# total items – # shipped items) / # total items] x 100
23. Gross Margin Percent
Gross margin percent calculates the percentage of revenue retained after deducting the cost of goods sold. A high gross margin percentage indicates profitability, while a low margin may require adjustments to pricing or cost reduction strategies. This KPI is crucial for an inventory manager as it guides decisions on pricing strategies, procurement efficiency, and overall profitability, contributing to the financial success of the company.
Gross margin percent = [(total revenue – cost of goods sold) / total revenue] x 100
24. Order Cycle Time
Order cycle time measures the average time taken to fulfill a customer order from initiation to delivery. A low order cycle time indicates efficient order processing and quick delivery, enhancing customer satisfaction. Conversely, a high cycle time may lead to delays and customer dissatisfaction. This KPI is important for an inventory manager as it guides improvements in order processing efficiency, reducing lead times and optimizing overall operational performance.
Order cycle time = (time customer received order – time customer placed order) / # total shipped orders
25. Stock-Outs
Stock-outs measure instances where products are not available when customers demand them. A low occurrence of stockouts indicates effective inventory management, minimizing revenue loss and customer dissatisfaction. On the other hand, frequent stockouts may suggest issues with inventory optimization strategies. This KPI is vital for an inventory manager as it reflects the impact of inventory availability on customer satisfaction and guides decisions on inventory replenishment strategies.
Stock-outs = (# items out of stock / # items shipped) x 100
26. Service Level
Service level measures the percentage of customer demand that a company can fulfill. A high service level indicates effective inventory management, meeting customer demand, and enhancing satisfaction while a low service level may lead to lost sales and dissatisfaction. This KPI is crucial for an inventory manager as it guides decisions on inventory levels, order fulfillment strategies, and overall customer service improvement.
Service level = (# orders delivered / # orders received) x 100
27. Lead Time
Lead time measures the time taken from placing an order to receiving the inventory. A low lead time indicates efficient supply chain operations and quick product availability. Conversely, a high lead time may lead to delays in order fulfillment and potential stockouts. This KPI is important for an inventory manager as it guides decisions on supplier relationships, order planning, and overall supply chain efficiency.
Lead time = order process time + production lead time + delivery lead time
28. Dead Stock/Spoilage
Dead stock/spoilage measures the percentage of inventory that has become obsolete or spoiled. A low dead stock/spoilage rate indicates effective inventory management and minimizes financial losses. Whereas, a high rate may suggest issues with product demand forecasting or storage conditions. This KPI is vital for an inventory manager as it guides decisions on inventory levels, product lifecycle management, and overall inventory optimization.
Dead/spoiled stock = (amount of unsellable stock in period / amount of available stock in period) x 100
29. Available Inventory Accuracy
Available inventory accuracy measures the precision of inventory records in reflecting the actual available stock. High accuracy ensures reliable inventory information for decision-making while low accuracy may lead to errors in order fulfillment and operational inefficiencies. This KPI is crucial for an inventory manager as it guides decisions on inventory tracking systems, technology investments, and overall data accuracy, ensuring reliable information for optimal inventory management.
Available inventory accuracy = (# counted items that match record / # counted items) x 100
30. Internal WMS Efficiency
Internal WMS efficiency measures the effectiveness and accuracy of the internal warehouse management system. High efficiency ensures smooth warehouse operations and accurate inventory tracking. Conversely, low efficiency may lead to errors in order fulfillment and operational disruptions. This KPI is important for an inventory manager as it guides decisions on technology investments, system optimizations, and overall warehouse management, enhancing operational efficiency.
Internal WMS efficiency (ROI) = (gain on investment – cost of investment) / cost of investment
Conclusion
In conclusion, mastering the art of effective inventory management is essential for businesses. Skilled inventory managers play a central role in achieving this delicate balance between customer satisfaction and capital efficiency. The intricate responsibilities they shoulder, from overseeing seamless product flow to optimizing stock levels, contribute significantly to a company’s overall success.
Assessing the effectiveness of inventory management involves delving into KPIs for inventory managers. These are indispensable metrics that serve as a compass for evaluating the triumphs of inventory-related processes. These metrics serve not only to pinpoint areas for improvement but also to empower inventory managers with informed decision-making capabilities. Thus, ultimately influencing the company’s bottom line positively.
This blog has delved into the top 30 KPIs for inventory managers, categorized into three main dimensions: sales KPIs, receiving/warehouse KPIs, and operational KPIs. By comprehending and strategically leveraging these metrics, inventory managers can navigate the intricate landscape of inventory management. They can streamline processes, elevate customer satisfaction, and contribute substantially to the holistic success of the company.
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Why is the inventory turnover rate important for an inventory manager?
The inventory turnover rate is a crucial sales KPI for inventory managers as it measures the number of times a company’s inventory is sold and replaced over a specific period. A high turnover rate indicates efficient stock management, benefiting cash flow and minimizing holding costs. Conversely, a low turnover rate suggests slow-moving inventory, tying up capital. This KPI helps inventory managers adapt strategies to align with market demands and optimize capital usage.
What does the lost sales ratio indicate, and why is it important for inventory managers?
The lost sales ratio is an operational KPI that measures the percentage of potential sales lost due to stockouts. A low ratio indicates effective inventory management, minimizing revenue loss. A high ratio suggests the need for inventory optimization to prevent lost sales opportunities. This KPI is vital for inventory managers as it highlights the impact of stockouts on revenue and guides decisions on inventory replenishment strategies.
How does internal WMS efficiency (ROI) contribute to effective inventory management?
Internal WMS efficiency measures the effectiveness and accuracy of the internal warehouse management system. High efficiency ensures smooth warehouse operations and accurate inventory tracking. This KPI is important for inventory managers as it guides decisions on technology investments, system optimizations, and overall warehouse management, enhancing operational efficiency and contributing to effective inventory management.
What exactly is a TMS system? The interpretation can vary depending on who you ask. In the transportation and 3PL sectors, a TMS essentially functions as their ERP, overseeing up to 90% of their processes. Historically, TMS packages excluded accounting, relying on external accounting software like Sage or Microsoft GP. With the advent of cloud-based TMS systems, a comprehensive solution, including accounting, is now possible. This complexity adds an extra layer of challenge to the process of selecting a TMS system.
Similar to WMS, TMS systems come in various forms. At times, they function as tools for supply chain consulting firms to oversee their transportation clients. Given that certain TMS vendors may not exclusively be technology-focused, political considerations influence carrier participation in their network. These factors play a role in determining the quality of the rating algorithm and the insights derived from AI and ML.
Additionally, the scale of TMS systems can differ depending on their size. For example, smaller TMS systems may serve as basic shipping add-ons, offering streamlined features like rate shopping. In contrast, larger TMS systems not only encompass all transportation modes but may also include a carrier network and other integrated supply chain capabilities. So for those seeking a TMS solution, grasping the impact of these layers on TMS scope is crucial. Now, let’s explore the top 10 TMS systems in 2024.
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Overall market share/# of customers: How large is the market share of this TMS product? TMS vendors‘ overall market share is irrelevant for this list if they have multiple TMS products in their portfolio.
Ownership/funding: Who owns the TMS vendor? Is it a private equity company, a family or a group of families, or a wealthy corporate investor?
Quality of development (legacy vs. legacy dressed as modern vs. modern UX/cloud-native): How modern is the tech stack? Not clunky! How aggressively is the TMS vendor pushing cloud-native functionality for this product? No fake clouds! Is the roadmap officially announced? Or uncertain?
Community/Ecosystem: How vibrant is the community? Social media groups? In-person user groups? Forums?
Depth of native functionality (for specific industries): Last-mile functionality for specific industries natively built into the product?
Quality of publicly available product documentation: How well-documented is the product? Is the documentation available publicly? How updated is the demo content available on YouTube?
Product share and documented commitment (of the publisher through financial statements): Is the product share reported separately in financial statements if the TMS vendor is public?
Acquisition strategy aligned with the product: Are there any recent acquisitions to fill a specific hole with this product? Are there any official announcements to integrate recently acquired capabilities?
Maturity of the Supply Chain Suite: How mature are other capabilities that would augment TMS, such as WMS, S&OP, and the network?
User Reviews: How specific are the reviews about this product’s capabilities? How recent and frequent are the reviews?
Must be a TMS product: Must be a recognized TMS product by several analyst firms with a proven track record and market share.
10. CH Robinson/Navisphere TMS
Navisphere, a TMS solution provided by supply chain consulting firm CH Robinson, is tailored for companies seeking both supply chain subject matter expertise and a technical solution. However, it may not be the ideal choice for those solely seeking a TMS solution without managed services. So opt for CH Robinson if you require a TMS solution supporting multiple transportation modes, including managed services from a single vendor.
Pros
Network strength of CH Robinson. A notable advantage is the robustness of CH Robinson’s proprietary network, influencing rates and providing quality insights.
Comprehensive supply chain services. CH Robinson serves as a one-stop shop for various supply chain needs, particularly excelling in the food and produce market.
Cons
Potential conflict of interest. Some may perceive CH Robinson’s pricing algorithm as biased, leading to concerns about carriers avoiding collaboration due to potential conflicts of interest.
Not a pure TMS solution. While smaller companies exclusively working with CH Robinson might find it suitable as a TMS solution, it may not be the best fit for those collaborating with multiple vendors.
Limited to the CH Robinson network. A significant limitation is that the solution is confined to the CH Robinson network
9. Trimble TMS
Trimble, a robust TMS solution tailored for transportation companies, stands out with its features for driver compliance, reporting, and monitoring. While an excellent fit for the trucking or 3PL industry managing internal fleets, Trimble TMS may not be suitable for businesses with non-transportation-centric models, such as retail or manufacturing.
Opting for Trimble is advisable if you operate in the trucking or 3PL sector, particularly with an internal fleet. However, for cloud-native solutions, especially in industries with different business models, exploring other options may be more appropriate. Choose Trimble if you are in the trucking or 3PL industry with an internal fleet, but look elsewhere for cloud-native solutions, especially in industries without transportation-like business models.
Pros
Maps and telematics. Trimble facilitates accurate data collection from drivers, minimizing errors and operational overhead.
Tailored for trucking companies. Designed with unique TMS capabilities essential for trucking operations, including dispatch, scheduling, and batch load planning.
Pre-built compliance for trucking. Compliance requirements are seamlessly integrated into operational workflows, reducing administrative efforts for trucking companies.
Cons
Legacy technology. While functionally strong, Trimble’s solution relies on legacy technology.
Limited industry focus. Due to its industry-specific focus, Trimble may not be the optimal choice for diverse companies.
Not fully independent. Similar to CH Robinson, Trimble provides managed services, making it less independent than some solutions on this list.
8. Descartes TMS
Descartes proves to be an excellent choice for companies seeking multi-modal capabilities within their international supply chain networks. It also has another TMS platform in its portfolio tailored for trucking companies and 3PL providers, providing options for multiple market segments.
Opt for Descartes if you require a best-of-breed TMS solution with multi-modal capabilities and operate within a large enterprise setting. Descartes might also have options for smaller trucking companies as well as 3PL with smaller operations.
Pros
Managed services available. Descartes TMS provides managed services, offering support for international regulatory and compliance requirements.
Comprehensive TMS with international data analytics. The solution is a comprehensive TMS featuring extensive capabilities, including a visibility platform for the international supply chain.
Options for multiple Market Segments. Descartes has specific solutions for different market segments, covering their unique needs without pushing them for solutions that are one-size-fits-all.
Cons
Not completely independent. Similar to CH Robinson, Descartes relies on managed services, which may limit its independence.
May not be SMB-friendly. SMB companies seeking a cost-effective solution might find Descartes to be relatively expensive.
Not a complete suite with WMS, etc. As a best-of-breed TMS solution, Descartes requires integration with external systems, such as WMS and S&OP, to achieve parity with other solutions on this list.
7. Mercury Gate
Mercury Gate, a cloud-native TMS solution, caters to SMB companies transitioning from smaller shipping add-ons like Pacejet or ShipStation. However, it may not be the optimal choice for large enterprises or businesses with international supply chains.
Consider Mercury Gate if you are an SMB DTC or CPG company seeking a cloud-native solution. On the contrary, if you are an enterprise or have an international supply chain, Mercury Gate may not align with your requirements.
Pros
Fleet management and last-mile capabilities. Particularly beneficial for companies in the CPG and DTC space.
Cloud-native UI. Attractive for companies using cloud-native ERP solutions like NetSuite or Acumatica.
Cons
Limited to North America. Mercury Gate currently focuses solely on North America, which may be restrictive for companies with international supply chains.
Not integrated with other platforms such as WMS. As a standalone TMS solution, it lacks integration with a complete suite, including pre-integrated WMS or S&OP, posing a limitation for budget-conscious companies.
Limiting reporting capabilities. Users have reported that the reporting capabilities are not as pre-configured compared to some other platforms.
6. 3Gtms TMS (Pacejet)
3Gtms, tailored for SMB trucking companies and bolstered by the Pacejet acquisition, expands its capabilities to cover not just LTL and FTL but also parcel shipments. However, it’s not the ideal choice for large enterprises.
Consider 3Gtms if you seek a TMS solution encompassing all transportation modes—LTL, FTL, and parcels—for domestic shippers with some international presence. Nevertheless, if you are in pursuit of a cloud-native experience with a sophisticated supply chain suite, 3Gtms might not align with your requirements.
Pros
SMB-friendly. The solution offers advanced dispatch and load management capabilities, catering to the needs of SMBs.
Complete shipping solution. Encompassing all transportation modes for domestic shippers, 3Gtms provides a comprehensive shipping solution, albeit with a focus on SMBs.
Ideal for light TMS needs. Particularly useful for companies with light shipping requirements, especially those seeking a native or hybrid experience within SMB ERP ecosystems like Acumatica or Infor CloudSuite Industrial (Syteline).
Cons
Not enterprise and integrated suite. Lacking components found in larger supply chain suites, 3Gtms is not the best fit for large enterprises.
May require add-ons for advanced capabilities. Advanced features may necessitate third-party add-ons or customization, potentially limiting applicability to all business models.
Patchy User Experience. While the PaceJet solution is cloud-native, the older components remain legacy, potentially affecting the overall user experience.
5. e2open (BlueJays/Cloud Logistics)
e2open stands out as the most comprehensive suite, offering balanced capabilities in execution, planning, and network. It caters to enterprises seeking a pre-integrated suite with robust planning and forecasting, leveraging AI and ML. However, it may not be the ideal choice for smaller companies.
Consider e2open if you are a large enterprise utilizing SAP or Oracle, seeking an enterprise-grade supply chain suite to manage international supply chains, especially if collaborative planning and forecasting with suppliers are essential.
Pros
All Modes. The execution component covers road, rail, ocean, and air, boasting strong enterprise-grade capabilities.
Global Reach. e2open spans a broad geographic reach, encompassing most regions worldwide, providing an advantage over smaller solutions.
Ideal for Collaboration-Centric Businesses. With robust capabilities for channel-centric businesses and integrated TMS capabilities, e2open suits companies seeking a comprehensive, pre-integrated suite.
Cons
Not as Complete as Some Competitors. While highly comprehensive, e2open may not boast the strongest TMS solution compared to others on this list, especially in areas like in-house fleet and driver compliance.
Limited Ecosystem. Being relatively new in the market, e2open has a somewhat limited ecosystem compared to more established solutions.
4. Manhattan Associates
Manhattan is renowned for its WMS but also integrates TMS capabilities into its Supply Chain suite, which is particularly beneficial for industries with substantial retail store traffic like apparel, footwear, or grocery. Ideal for those already using Manhattan WMS, it provides integrated TMS functionality, though not recommended for SMBs.
Choose Manhattan TMS if you are currently utilizing or considering Manhattan as part of your architectural framework.
Pros
Pre-Integrated with WMS. Simplifies operations for companies with limited IT capabilities or a constrained budget, although pre-integrated workflows should be thoroughly assessed based on specific use cases.
Suited for Retail-Centric Industries. Manhattan’s focus on retail ensures robust TMS workflows for high-volume grocery, apparel, and shoe verticals.
Cons
TMS as an Add-On. TMS is not Manhattan’s primary offering, potentially lacking the mature capabilities found in best-of-breed TMS systems.
Not for SMBs. Tailored for upper-mid market and enterprise segments, it may overwhelm SMBs with its extensive features.
Expensive. Geared towards enterprises, Manhattan’s premium offering might be costly for SMBs not requiring advanced enterprise features.
3. SAP Transportation Management
SAP transportation management solutions cater primarily to companies already entrenched in SAP technologies, especially SAP EWM, seeking to build their entire tech stack on SAP. These solutions are well-suited for large enterprises with product-centric operations and distributors, especially with complex business models such as 3PL.
Smaller companies may find SAP’s offerings overwhelming. Opt for an SAP transportation management solution if you need an execution component pre-integrated with SAP technologies, compatible with other enterprise-grade solutions like e2open or Project44.
Pros
Pre-Integrated with SAP Suite. SAP TM seamlessly integrates with other SAP offerings within the SAP S/4 HANA suite, particularly EWM, though careful vetting is essential to ensure compatibility with unique use cases.
Ideal for Large Enterprises (> $10B). Companies exceeding $10 billion in size, requiring global compliance and transactional traceability, stand to gain the most value from SAP transportation management.
Ideal for Complex Business Models. Companies with intricate business models, such as distributors with 3PL operations or 3PL firms needing comprehensive billing functionality, will find SAP’s solution compelling.
Cons
Relies on Descartes for Carrier Communication. External communication and document management may not be as advanced as other solutions, necessitating additional expenses, such as Descartes, for carrier communication.
Requires Add-Ons for Comparison with Manhattan and Blue Yonder. Achieving parity with other components of a supply chain suite may demand several costly add-ons not readily available with SAP.
Not Suitable for SMBs. SMBs may find SAP’s capabilities not only overwhelming but also cost-prohibitive due to their alignment with more mature functionalities.
2. Blue Yonder
Blue Yonder boasts one of the most robust supply chain suites, encompassing various facets, including planning and execution, with a particularly robust execution component for transportation management.
Notably, Blue Yonder distinguishes itself from e2open by leveraging network and data from partners, while e2open operates on its proprietary network. Blue Yonder stands out with a significant number of enterprise-grade installations compared to other vendors. Opt for Blue Yonder if you need a fully integrated supply chain suite, specially tailored for retail-centric industries, covering diverse areas, from execution to planning.
Pros
Comprehensive Supply Chain Suite. Blue Yonder offers one of the most comprehensive supply chain suites, aligning particularly well with retailers due to its data model.
Ideal for Enterprises. Enterprises aiming for supply chain process maturity will find Blue Yonder’s capabilities valuable, designed to seamlessly integrate global supply chain processes.
Not for SMBs. SMBs seeking simpler solutions may find Blue Yonder overwhelming.
Not Ideal for Standalone TMS Needs. The integrated suite might be excessive for companies seeking straightforward capabilities to manage transportation and logistics processes independently.
Expensive. Companies seeking simpler solutions might perceive Blue Yonder’s mature capabilities as costly.
1. Oracle TMS
Much like SAP, Oracle excels in providing enterprise-grade execution components for transportation management, particularly in industries where tight collaboration with other Oracle solutions like ERP or RMS is essential.
This is especially beneficial for sectors with stringent compliance and regulatory requirements, such as international trade compliance and reporting. So opt for Oracle TMS if you require enterprise-grade transportation solutions with a dynamic ecosystem integrating best-of-breed capabilities for other components of the supply chain suite.
Pros
Pre-Integrated with Oracle ERP. Oracle TMS offers a seamlessly embedded experience with WMS, RMS, and ERP, a feature not available in standalone systems.
Ideal for Retail and Transportation-Centric Industries. With a strong presence in retail and transportation verticals, Oracle’s R&D focus caters to the unique needs of these sectors.
Global Supply Chain Capabilities with Control Tower. Oracle TMS spans all transportation modes globally, ensuring end-to-end traceability of the execution component and featuring control tower capabilities.
Cons
Not for SMBs. SMBs seeking simpler solutions may find Oracle’s enterprise capabilities overwhelming and unnecessary.
Not Ideal for Standalone TMS Needs. Companies desiring straightforward standalone TMS solutions without impacting other departments or processes might find Oracle to be too comprehensive.
Learn how Frederick Wildman struggled with Microsoft Dynamics 365 ERP implementation failure even after spending over $5M and what options they had for recovery.
Much like other enterprise software categories, TMS systems come in various configurations. The suitability of a TMS system for a business largely depends on how it aligns with the enterprise architecture and business model.
If you’re considering a TMS system, it’s crucial to distinguish between systems provided by consulting firms and those by pure-play technology firms. Delve into your business model and enterprise architecture to evaluate which system aligns best with your needs. This list aims to offer potential options for your further evaluation with Independent TMS consultants.
FAQs
Which is the best TMS system?
Every TMS solution is crafted for a distinct purpose, industry, and transaction volume. What suits one company may not be the ideal fit for another. The key to finding the right TMS solution is conducting a comprehensive analysis of your specific needs and selecting a system tailored to your industry and transaction volume.
If a TMS system is not included in this list, should companies consider that as a potential solution?
Absolutely. The absence of a solution from this list doesn’t imply it wouldn’t suit your needs. Every solution has its place in the market. Our list is curated based on factors like market share and maturity, potentially omitting newer solutions with unique capabilities.
Should I select a TMS system based on this list?
No, absolutely not. We strongly advise engaging with a seasoned independent selection consultant to conduct a comprehensive analysis of your requirements, formulate criteria, and customize rankings aligned with your specific needs. While our list may offer a starting point, the rankings based on your unique needs may diverge significantly.
The HCM market is generally divided into three segments based on company size: (1) organizations with up to 100 employees, (2) those with 100 to 1,000 employees, and (3) enterprises with over 1,000 employees. Each segment has distinct needs, and HCM solutions are typically tailored to reflect those requirements. For smaller companies—those with fewer than 100 employees—simplicity is key. These organizations often prefer solutions that are easy to implement without the need for consulting support, favoring a DIY deployment model. Such platforms prioritize user experience, often featuring flatter data structures and minimizing complex hierarchies to reduce implementation friction.
The next tier of HCM solutions adopts a suite-centric approach, often paired with managed services. In the mid-market segment, managed services are especially critical, as most organizations lack the resources to monitor and stay compliant with the complex and ever-changing labor laws across multiple counties, states (or provinces), and countries. Managed services are also a key differentiator for solution providers, allowing them to demonstrate more value compared to their larger peers.
Larger solutions offer a broader range of technical capabilities to support diverse compensation structures, labor profiles, and business models. However, they may not be as user-friendly or easy to implement, as they prioritize data integrity—an essential factor for large companies focused on enhancing HR operational efficiency and minimizing administrative overhead. While mid-market solutions often include localizations for multiple countries, their vendor partner ecosystem tends to be less robust, limiting consulting options.
Selecting an unsuitable HCM software that is not tailored to your industry can impact your enterprise architecture. This list aims to outline the pros and cons of the leading HCM software options available in the market.
10. UKG Ready
UKG offers two main HCM products tailored to different business sizes. It is built for small to mid-sized organizations, with a focus on ease of use and lower implementation costs. It stands out by offering managed services and better reporting capabilities compared to many entry-level products. While not ideal for very small startups, it provides a middle ground between lightweight platforms like BambooHR and more complex systems like Workday. UKG Ready also supports global operations, with coverage across over 85 countries.
Is your business looking for simplicity without giving up reporting power? Do you need a global HCM system, or are you managing a U.S.-focused workforce? How important is ease of implementation versus advanced features like succession planning? Understanding where UKG fits in the HCM landscape is key to being successful with this product. For a deeper look at how it compares to other platforms, download the Top HCM Software in 2025 report now.
9. Zoho HCM
Zoho HCM serves SMBs across industries like IT, education, media, and finance. It works especially well for companies already using other Zoho products. One of its biggest strengths is its bundled pricing. You get access to multiple apps for the price of just one from other vendors. The platform also supports advanced features, including complex benefits rules and employee type management—features not always found in mid-market solutions.
Are you already using Zoho apps and considering expanding into HCM? Do you need more robust recruiting and workflow tools without jumping to a full enterprise solution? How important are managed services and global payroll support in your decision? Zoho HCM may be a good fit if your needs include strong recruiting capabilities and customization flexibility. For a full breakdown of where it stands in 2025, download the Top HCM Software in 2025 report now.
8. Infor WFM
Infor WFM targets industries that need strong scheduling features, especially healthcare and retail. It supports complex compensation setups and works well for managing branch-level operations. However, its overall HCM suite is not as broad as some competitors. To fill those gaps, companies often need third-party tools. It’s a solid choice for enterprises already using other Infor products, but not ideal for smaller businesses or organizations needing an all-in-one HCM.
Does your organization require tightly integrated scheduling within your HR system? Are you in healthcare or a similar field where staffing rules are complex? How important is having managed services bundled with your HCM platform? If your answers lean toward niche workflows and deep scheduling needs, Infor WFM might be the right fit. For a full look at how it ranks and where it shines, download the Top HCM Software in 2025 report now.
7. BambooHR
BambooHR is built for small to mid-sized businesses with straightforward HR needs. It offers a simple setup, which keeps implementation quick and cost-effective. Its easy-to-use interface supports tasks like onboarding, training, and document management. However, it relies on partners for managed services and may lack the depth some businesses need. While great for startups, it doesn’t offer robust reporting or built-in tools for more advanced functions like time tracking.
Is your team looking for a lightweight HCM that’s easy to adopt? Are advanced reporting or built-in time tracking essential to your workflows? Would you prefer a system that reduces your reliance on consultants? If your priorities align with simplicity and fast deployment, BambooHR might be a strong match. To compare BambooHR with other top platforms, download the Top HCM Software in 2025 report now.
6. ADP Vantage HCM
ADP Vantage is built for large enterprises needing a full suite of HR, payroll, and workforce management tools. It’s especially valuable for companies already using ADP payroll, with strong support for complex org structures. Its real strength is in payroll and benefits administration—so much so that even other vendors rely on ADP for these functions. However, the platform’s modular history can lead to a fragmented user experience and added complexity during setup and integration.
Are you managing a large workforce and need a system with strong payroll capabilities? Do you already use ADP services and want tighter integration? Or are you weighing the trade-off between robust functionality and ease of use? For a deeper look at how ADP Vantage compares to other top HCM platforms, download the Top HCM Software in 2025 report now.
5. Dayforce HCM (Previously Ceridian)
Dayforce is one of the few HCM platforms that caters to both SMBs and large enterprises. While it started in the SMB space, it now supports organizations with tens of thousands of users. It may not match the scale of legacy enterprise systems, but its modern design and faster deployment make it attractive for companies wanting to avoid lengthy implementations. Dayforce is particularly strong in payroll, WFM, and benefits—especially for companies using Microsoft ERP systems.
Is your business in a sector where scheduling and compliance are critical? Are you using Microsoft ERP and looking for a more complete HCM experience? Does your team need strong payroll tools but not managed services? If so, Dayforce might be worth a closer look. Download the Top HCM Software in 2025 report now to explore how Dayforce compares to other leading platforms.
4. UKG Pro
UKG Pro serves mid-sized and enterprise organizations. It strikes a balance between broad features and ease of use. Managed services are a key part of its value, helping companies without large HR teams manage compliance and labor regulations across borders. Pre-built integrations speed up deployments and reduce the need for custom setups.
Do you need support for complex workflows without the heavy lift of a traditional enterprise system? Are you looking for a platform with strong global capabilities and built-in regulatory tools? Do managed services matter to your HR team? If so, download the Top HCM Software in 2025 report now to see how UKG Pro stacks up against other top platforms.
The 2025 Digital Transformation Report
Thinking of embarking on a ERP journey and looking for a digital transformation report? Want to learn the best practices of digital transformation? Then, you have come to the right place.
Oracle Cloud HCM targets large enterprises. It supports complex org structures, approvals, and global compliance. Industries like tech, telecom, and healthcare benefit most—especially those already using Oracle ERP. Its native integration offers value but can increase costs and complexity, particularly where tight HCM-ERP alignment is a must.
Does your organization need advanced support for compensation models and large-scale workflows? Do you already rely on Oracle for other business systems? Are you equipped with the IT resources to manage a high-touch platform? If so, download the Top HCM Software in 2025 report now to see how Oracle Cloud HCM compares across enterprise needs.
2. SuccessFactors
SAP SuccessFactors HXM Suite caters to large, global companies. It supports high volumes, complex business models, and multiple geographies. With support for 43 languages and more than 45 localizations, it meets the needs of multinational workforces. Like Oracle Cloud HCM, it may require a strong IT team and consulting support, especially when configuring workflows or compliance processes.
Does your company operate across many regions with complex HR needs? Do you need industry-specific extensions or plan to integrate with other SAP tools? Are you ready to invest in a platform that brings deep localization and enterprise-grade functionality? Download the Top HCM Software in 2025 report now to see how SuccessFactors stacks up against leading HCM platforms.
1. Workday
Workday remains a top choice for large enterprises. It offers strong tools for managing complex HR processes. Its architecture is modern, and the interface is easy to navigate. However, Workday adoption in the mid-market has been slower. Many mid-sized companies prefer platforms with bundled managed services, which Workday doesn’t offer directly. Without strong IT support, mid-sized firms often struggle during implementation.
Is your organization dealing with complex compensation or benefits workflows? Do you need a scalable solution that integrates with tools like Salesforce or ServiceNow? Are you prepared for the technical depth Workday demands? Download the Top HCM Software in 2025 report now to see how Workday compares to other leading platforms.
Final Words
Due to differences in labor laws across regions, choosing and implementing HCM products requires specialized expertise. HCM workflows are often closely integrated with ERP, MES, and Service Scheduling modules. As a result, selecting the right HCM software can significantly impact the overall enterprise architecture and affect operational efficiency.
When integrating HCM software into your system architecture, it’s important to define the roles and responsibilities of each system interacting with the HCM software. This guide will help you narrow down options that best align with your architectural requirements.
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FAQs
Why can’t companies manage their HR processes inside the ERP systems?
HR is a distinctive function with specific requirements for employee confidentiality. Data such as compensation, gender, and marital status may have unique compliance and reporting needs for each country. Storing such HR data within the ERP system not only adds unnecessary data but also entails costly customizations for HR reports, which might be available with dedicated HR software out of the box.
Which datasets need to be exchanged for HCM software to be integrated with the ERP?
The HR software can stay isolated unless one of the HR datasets affects operational workflows. For instance, if employee data needs synchronization with the scheduling module, integrating employee data into the shop floor module becomes necessary. Otherwise, HCM software can remain isolated.
How does the need for HCM software vary across industries?
The choice of HCM software depends significantly on industry-specific needs. Industries with a high concentration of blue-collar and temporary workers have distinct requirements compared to those predominantly hiring white-collar workers. A key distinction in software targeting blue-collar industries lies in its comprehensive support for union reporting requirements.
Looking for an ERP consultant who might be able to answer every question you might have? Well, unfortunately, just like different skill sets exist in a house construction project, ERP projects are no different with their need for digital transformation roles and skill sets. In fact, at a much bigger scale. Also, the more components you have in your architecture, the more skillsets you might require. Because the underlying technologies may be different, and they require years of training and specialization – to hit the ground running from day one, as that would be the expectation from ERP consultants.
Additionally, their educational backgrounds vary. The person who studied Supply Chain is likely to be deeper in the Supply Chain role. The same could apply to accounting and sales processes as well. A weaker chain (or an inexperienced resource) might slow down the whole project as they would need to be coached at every step of the way. Think of coaching basic ERP concepts such as the difference between a receipt and a voucher – and their implications on the process if interchanged. Their decision-making might not be sound either, which might have catastrophic consequences for the project.
So, understanding the importance of each of the digital transformation roles is critical for the success of your digital transformation initiatives. Most digital transformation initiatives fail because of a missing skillset. Or assigning unqualified resources to crucial positions. This is especially important for key cross-functional roles such as project manager or sponsor. These roles are typically more critical than the others, such as subject-matter experts. This list will help you understand the different digital transformation roles that might be required for your unique project.
The 2025 Digital Transformation Report
Thinking of embarking on a ERP journey and looking for a digital transformation report? Want to learn the best practices of digital transformation? Then, you have come to the right place.
The change management consultant drives the entire change management process (and is among one of the most critical digital transformation roles). It starts with the identification of change, creating a business case to justify the change, exploring several change initiatives, and finally, implementing and monitoring changes. Depending on your budget, you might hire a dedicated change consultant or work with an independent ERP consultant. The independent consultants might bundle change management offerings along with their ERP selection, implementation, and integration expertise.
Irrespective of the approach, change management is absolutely essential for the success of your technology initiatives. The technical vendors (and your internal teams) will struggle with change management due to the “power struggle.” So an external change management consultant is recommended. Depending upon the structure of your organization (and the scope of this role), you might need up to 20-25% of their time allocated to the project. With more involvement during the pre-selection phase, as well as the training phase.
9. Best-of-breed Apps and Add-on Experts
The role of best-of-breed apps and add-on experts is to provide the functional and technical expertise of these add-on products. Most ERP consultants are unlikely to have depth with each add-on or application.
So you might need at least part-time resources that are familiar with these apps. The more apps you have in your architecture, the more skill sets you might require. And the more part-time resources you are likely to have as part of your project, the harder the scheduling will be, driving the overall costs of the project. Depending upon the structure of your organization (and the scope of this role), you might need a couple of hrs of their time as and when needed. Since these resources could be a true bottleneck to the project planning, you might want to pre-allocate some of their capacity. Or identify areas where their input might be required early in the process to ensure that they are not a showstopper for the project.
8. ERP Integration Consultants
Most ERP applications are huge in size and have thousands of tables and modules. The traditional ERP consultants are divided into two streams: functional and technical. ERP technical consultants specialize in Windows and proprietary database programming for that application. Also, traditional ERP applications were not service-oriented architecture-based. So, ERP consultants didn’t have as strong integration skills. The integration consultants specialize in API integrations, enterprise integration patterns, master data governance, and enterprise architecture.
If you have multiple applications in your architecture, you will need specialized ERP integration consultants. Depending upon the complexity of your architecture and integration requirements, you might need part-time or full-time integration consultants. The integration consultants might also require time from ERP technical or functional consultants – to get help on cross-functional testing (as they might not be as deep functionally with each application in the architecture). So their availability can’t be the bottleneck, similar to other cross-functional roles mentioned below.
7. ERP Technical Consultants
ERP technical consultants are the technical experts of specific applications. Each product may have its own technical specialist. For example, technical consultants who focus on NetSuite might not have experience with Oracle Fusion Cloud. Or vice versa. The technical consultants are also extremely weak in their functional knowledge. And they can’t act as a functional consultant due to their limited knowledge. Their educational background is in software engineering, while the ERP functional consultants are likely to have an accounting, industrial engineering, supply chain, or mechanical engineering degree.
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Even among technical consultants, there might be several skill sets, such as a report writer, form designer, DBA, or data migration consultants. They each have different expertise and skill sets. Depending upon the customizations expected, the need for technical consultants might vary. Heavier customization would typically require a higher allocation of technical consultants. However, technical consultants might not be required for the entire duration of the project. Their need would be more critical during the development phase. Once the customizations stabilize, the functional consultants should be able to handle the project – without their help.
6. ERP Functional Consultants
ERP functional consultants specialize in specific functional areas. The larger the products, the more complex the functional processes are likely to be. And the more consultants you are likely to need. For example, Smaller systems such as NetSuite or Acumatica may require only one functional consultant. Systems such as SAP S/4 HANA, Oracle ERP Cloud, and Microsoft Dynamics F&O, on the other hand, may require several functional consultants with a specialization in each functional area, such as accounting, supply chain, manufacturing, sales, etc.
Depending upon the complexity of your project, you might need full-time or part-time functional consultants – to test the configurations and resolve functional issues. Their role will also be to assist the principal functional/technical consultant (and project manager) with research and recommendations. Their role would be relevant during the implementation phase, with minimal involvement during the pre-selection phase.
5. Vendor- and Solution-agnostic ERP Consultant/Enterprise Architect/Principal Functional Consultant
Just like you need architecture for your home or kitchen, you also need for your software and IT applications. Architecture is a blueprint that clearly describes the boundaries of each system and its role in enterprise architecture. It also describes the interaction flows, with a clear agreement between data producers and custodians. Finally, it defines the model for reconciliation between different systems – should there be a conflict among systems.
Most teams and vendors are likely to create architecture from their perspective. And this often results in application silos, duplication of efforts, overengineering of components, and data issues. This one is perhaps among the most critical digital transformation roles for your project. Some independent ERP consultants might be able to include this role along with their change management expertise. However, an external consultant is recommended for this role. Depending upon the complexity of your architecture, you might need at least a part-time resource who acts as the advisor or oversees the overall process. This role is the longest-serving role of the ERP project, starting from the beginning of the project to the post-implementation phase.
4. Internal Subject Matter Experts
These subject matter experts should be the focus of your implementations. Why? Because they need to drive the training and evangelize the change for their internal teams. It’s critical that they appreciate and embrace the new platform. These are your internal operational users (such as supply chain managers, ops managers, and sales managers) who have the most depth in the business processes. They provide crucial details that strategic business process owners need to make key decisions.
You need to allocate at least 10-20% of their time for the entire project. And involve them during the selection, process re-engineering, solution design, UAT, and training.
3. Internal Business Process Owners
These are your business processes executives such as VP of Sales, VP of Ops, VP of Engineering, VP of Supply Chain, and VP of Finance who are responsible for making crucial decisions for their respective functions.
They work in conjunction with subject matter experts and make decisions with a strategic perspective in mind. You will need their few hours allocated every week to be part of weekly demos and monthly steering committee meetings, along with any detailed meetings that may require their input for the to-be state.
2. ERP Project Manager
The ERP project manager is perhaps the second most critical role in your transformation. And ideally must be served by controllers, VP of Finance, CFOs, and sometimes by the CEOs for smaller organizations. They might hire a project coordinator to hand off some of the operational responsibilities if they are too busy with their day jobs.
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This person is responsible for driving the project and keeping the project under budget and on time. This person must be comfortable negotiating with business process owners in the event of a conflict among different functions. Depending upon the size of the organization, allocate either full-time or 50% to ensure he/she is not the bottleneck for the project.
1. ERP Sponsor
The ERP sponsor is either the CFO, COO, or CEO, depending upon the size of the organization. The role of the sponsor is to set the vision for the project, provide resources, set KPIs to measure success, and help business process owners make key strategic decisions.
Their role is not to make decisions for them. But to ensure that the decisions are consistent with the original vision and the interests of all functions are equally represented in the architecture. The ERP sponsor must participate in the monthly steering committee meetings and will need a few hours of their time each month.
Final Words
Building an ERP project team is an art and science, with the expertise to be able to foresee showstoppers before it’s too late. The issues could be related to the team or technology. They each impact the cost and scheduling of the project.
While you will get better with your team-building expertise and experience, don’t underestimate the importance of any of the roles mentioned on this list. The primary reason why most organizations struggle with digital transformation initiatives is that they underestimate the effort involved with these initiatives – and try to “outsmart” the process, which fires back more often than not. So be really informed with each of your decisions – as you build your core project team that is capable of delivering on your vision.
FAQs
Why do we need so many different skill sets for a digital transformation project?
Think how many skill sets you would need to run your company. The enterprise transformation projects touch every business function. And requires deep functional expertise to standardize processes – and build models that would yield business results. This expertise is nearly impossible to find in one person. And that’s why you need many skill sets.
Which role is the most critical for ERP projects?
The vendor-agnostic consultant who acts as the principal functional and technical consultant, as well as the project manager, is perhaps the most critical role for ERP projects. These roles are responsible for cross-functional alignment, as well as resolving conflicts among functional leaders while removing risks for any technical showstoppers.
Why is the involvement of the CEO a must for ERP projects?
The CEO is perhaps the only cross-functional leader in most SMB organizations. The CEO also has the authority and influence over the functional leaders to resolve any conflicts and if they try to pull the processes (and architecture) in their direction.
Who would not like to find the “secret” recommendations for digital transformation? Unfortunately, with enterprise-wide transformation projects, there is no checklist that can be followed. These projects require careful preparation and alignment of several areas. And they all, collectively, drive the success of your digital transformation projects.
Also, with enterprise transformation projects, technology alone can’t solve business issues for you. You will need to align the compensation structure along with KPIs and enterprise architecture. Also, even if you have invested in substantial efforts with your pre-selection and business process reengineering, things might fall off during the implementation phase unless you have controls in place for code, master data, and architecture review (and compliance).
Finally, most departments typically try to pull the architecture in their direction. This often results in the “loudest” departments being more represented in the architecture. Implications? Both overengineering and under-engineering issues will cause a disjointed experience for users. And they might end up with siloed applications or spreadsheets – defeating the overarching purpose of transformation initiatives. Following these recommendations for digital transformation will set you up for a successful transformation project.
The 2025 Digital Transformation Report
Thinking of embarking on a ERP journey and looking for a digital transformation report? Want to learn the best practices of digital transformation? Then, you have come to the right place.
People often forget that your architecture is more important with enterprise-grade transformations than the technologies used. While it might appear promising at the surface, new software very rarely would solve your business problems. But why? Because unless there is a clear alignment in current gaps and process changes, the new system might not be as effective. It might even cause disruptions to your current operational processes if not planned well.
Your chances of success will be higher if you redefine a vendor-agnostic architecture tailored to current operational limitations. First, improvement opportunities with the current architecture were identified. Then, only if it makes sense, replace a system where it’s a clear misfit based on your business model and growth ambitions. Assessing your architecture requires deep subject matter expertise with your systems, processes, and data – in order to perform an informed assessment. This assessment helps understand if the changes would make sense for your architecture (and at the stage of your business).
2. Centralized Transformation, Change, and Budget Management
Due to the lack of perceived short-term benefits (and risks for business process leaders), enterprise transformation initiatives typically take the backseat. So what’s the solution? Form a centralized digital transformation team and allocate a corporate budget for enterprise-wide transformation.
What else? Identify change opportunities that impact your current systems and processes. Manage them centrally. And Define the blueprint for each changeset and assess its impact. Anything else? Yes, prioritize them and design phases including release strategy, And then execute them based on feasibility. Recommendations for digital transformation such as this help your vision take the front seat and resolve conflicts easily.
3. Compensation and KPI design
Have KPIs that are not only departmental. However, they should be aligned with the strategic priorities as well. Most corporations focus on short-term results. And that comes at the expense of the lack of interest in long-term strategic investment and initiatives such as enterprise-wide transformation.
Impact of the short-term mindset? It results in duplicated efforts across departments and information silos. These silos are typically counterproductive for the overall success and financial health of the organization.
4. Don’t Ask Your Technology Vendors to Define Your Enterprise Architecture
Your enterprise architecture is essentially your business model. While technology vendors such as SAP or Oracle and their resellers might provide great technical capabilities, they are experts at tools in their portfolio. Their role should be limited to defining system architecture once the other architecture has been well-defined.
So, what are these other architectural pieces? Business, process, and data architecture. And they all must be designed in a technology- and vendor-agnostic fashion. Who can help with this design? Qualified consultants with multi-system and multi-ERP expertise are better positioned to offer recommendations for digital transformation architectural components and their interactions.
5. Invest in Pre-selection Phase
The software development lifecycle requires you to go through the four critical phases of software implementation. Namely, requirement, design, test, and implementation. While buying enterprise software can save you a ton of effort and risk, these phases are equally relevant even for enterprise software implementation. Sometimes, even more so.
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The pre-selection phase identifies requirements and process states. It also provides visibility into the as-is and to-be workflows for each department. Then it helps focus on the right critical success factors along with identifying gaps and development efforts required.
6. Get help from Independent ERP and Digital Transformation Consultants
Most executives go through 3-5 digital transformation initiatives in their careers. So designing the state of the system and processes based on this limited experience would not provide enough data and sample size to learn the architectural best practices. And forecast the possibility of each decision.
The independent ERP and digital transformation consultants work with many different businesses. And they have already seen the mistakes that you are likely to make with your next transformation. Are consultants too expensive? Hire them at least to vet your plans and mentorship if you are on a tight budget.
7. Don’t Let Developers/IT Managers or Functional Subject Matter Experts Design the Architecture
Designing an enterprise system is similar to engineering functions in manufacturing. How so? The skill set that might be good with operational execution might not be the best for strategic and engineering design. Also, the developers and IT managers typically don’t have the visibility and business background to be able to negotiate process changes with functional stakeholders.
The same applies to functional leaders. While they might know a lot from the business perspective, the technical perspective is equally important in assessing performance and process issues due to poorly coded and integrated processes. You need someone who has a deep background in designing enterprise-grade systems, along with deep business expertise and education.
8. Try to Reduce the Amount of Code You Own
With custom software, you might own 100% of the code, whereas with an ERP implementation, you might own roughly 30%. This might include any customizations, home-grown integrations, or proprietary systems. While software development might appear cheaper on its surface, owning and maintaining code over time requires economies of scale. So unless the custom code is part of your commercial offering, owning it will always be more expensive.
So are there any components that are better suited for internal ownership? Yes, the components that change frequently such as EDI integration. Or the ones that may require substantial manual inputs from business users during the processing of transactions. The rest of the components can easily be bought at a much cheaper price from enterprise software vendors.
9. Invest in Master Data Governance
Most organizations end up reimplementing the same ERP system at least 2-3 times even within 5-10 years of the upgrade cycle. Most times it’s the mismanagement of master data that is the culprit. Poor master data management often leads to ad-hoc processes, adoption issues, and the need for external systems.
The successful management of master data requires clearly defined roles and responsibilities for each system. And functions controlling the data and its interaction flow. It also requires forming a centralized function responsible for designing and maintaining master data compliance.
10. Be ready to “Kill Your Darlings”
Fragmented and siloed operations often result in proprietary applications. These applications might make sense in a siloed and fragmented architecture. But not in the context of enterprise architecture.
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The legacy and proprietary applications might drive the customizations and additional unnecessary integration flows to accommodate their shortcomings. It might be cheaper to replace these proprietary systems and use components that might be pre-integrated with the new solution.
Final Words
There are no secrets to digital transformation. It’s the structured approach along with the alignment that makes or breaks ERP implementation. With the increased number of channels driven by customer experience, the importance of architecture can’t be underestimated.
The digital transformation initiatives were never meant to be this difficult. But they do require expertise and thoughtful execution. Also, cultural and process changes have a direct impact on digital transformation initiatives. By following these recommendations, you will be set up for success with your digital transformation initiatives.
FAQs
Wouldn’t cloud systems provide higher ROI than legacy technologies?
Unfortunately, with technical architecture, there are so many variables that are typically in play. So while the new technologies would be easier to use, you might still not get business results from your systems. Why? The alignment of processes, data, architecture, and business model is essential to get business results from your technology investments.
Why is vendor-agnostic architecture important for the success of digital transformation?
The vendor-agnostic architecture helps us decouple vendors’ dependencies on the architecture. Most ERP vendors like to control the architecture by using most of their products in the architecture – regardless of whether the products will be the right fit for your use case. So how does vendor-agnostic architecture help? By creating the right boundaries for vendors and helping with faster debugging.
How can a centralized budget strategy improve the success of digital transformation initiatives?
With the departmental budget, most of the functions are busy meeting their short-term goals. And this comes at the expense of the long-term organizational goals. The centralized budget and KPIs help ensure that most departments are aligned with organizational goals. And not pulling architecture in their direction.
Most executives are afraid of digital transformation. And I don’t blame them–with the amount of undertaking required for such projects. Not to mention that it took a long time for companies to understand – that digital transformation projects are not meant to be technology projects (The initiatives that developers can code in their backyard. The ones that can provide a crystal ball that can solve all your business performance issues). In reality, digital transformation failure typically has more impact on your businesses than most other disruptions (Unless it’s a full nuclear war). So why are some projects more successful than others?
There are millions of variables that could be responsible for failure. Team. Technologies. Vendors. Project managers. Change Management. Also, with so many variables involved, everyone is likely to have their own theories. There is no clear consensus, which makes it confusing for first-time buyers. While it’s much harder to find why a specific digital transformation project may have failed, it’s much easier to analyze the successful ones. One thing that successful teams do differently is that they don’t underestimate the efforts involved with these projects.
That’s probably the reason why the larger companies with multiple ERP implementations under their belt are likely to be more successful than the smaller companies. There are smaller companies that are likely to be successful as well. However, in their case, the executives must have experience leading multiple ERP implementations at larger companies. While this is one factor, there are more layers to what makes them successful (as per our study done with more than 200 executives suggests). Excited to review the results?
1. Misalignement in scope
Misalignment in scope is perhaps the #1 reason for digital transformation project failure. Some people might blame the “invisibility” aspect of software development – to claim that there will always be surprises with software implementation. Also, there is a common misconception that there is no point in planning if there are going to be surprises anyway. Following this approach is an “extreme” thinking mindset where you don’t prepare for an exam – just because there might be a chance of failure.
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Software implementation projects require the same amount of engineering processes. As much as manufacturing or construction. Sure, there have been advancements in methodologies – such as agile – to uncover risks earlier. However, the fundamentals of software engineering still apply. They require careful analysis and design by qualified ERP consultants (the consultants that regularly implement for various industries and business processes).
Also, unfortunately, analyzing at “100K-foot” levels (the mindset that going too deep into technical analysis may be a waste of time) approaches aren’t good enough to be successful with these projects. It’s a careful balance of high and low-level needs. A balance that will help you find the scope with an iterative process and a scope that will likely not have any misalignments. Or surprises (Don’t we like surprises?).
2. Unrealistic Expectations
The only reason why unrealistic expectations lead to ERP implementation failure is to underestimate the amount of effort required. In fact, unrealistic expectations and misalignment in scope are so interdependent that they could be each other’s cause (Wait, what? Have I confused you enough yet?).
The root cause for unrealistic expectations is the “mindset” that maybe there is an easier way. Maybe the “consulting companies” are in the business of overcharging their customers. Maybe consultants have a tendency to overcomplicate things so they can make more money. While, as with any profession, there might be some bad apples out there, the issue is typically with the companies who don’t have enough experience under their belt in leading digital transformation initiatives.
The best way to mitigate such issues is to be patient with the process and do as much research as possible to understand the core issues. Also, recommended is not ignoring the advice of your consultants. The more implementation you have under your belt, the more conservative you will be with these projects. And the higher chances you will have of success with such projects. The only way to succeed is to be realistic (and extremely conservative) with these projects.
The 2025 Digital Transformation Report
Thinking of embarking on a ERP journey and looking for a digital transformation report? Want to learn the best practices of digital transformation? Then, you have come to the right place.
3. Inability to re-engineer processes (aligned with the capabilities of new system architecture)
Constructing a house based on how your old house appears today is likely to result in the same “old” house – with not much improvement (Isn’t that what we all want? The constructive ways of wasting our money? For all practical purposes, no!). Constructing an improved house requires you to have a deep reflection on the old house as well as the root cause of each issue you had in the old house. Along with the “mental model” (I prefer a blueprint on a piece of paper) of the new house based on your new needs. This task is way harder than you would think.
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Being successful with it would require a solid knowledge of several different ERP systems and implementation experience in several industries. So, you have enough data points to identify the right model that will be successful, given the constraints of this new house. Without business process reengineering, companies mistakenly assume “old and broken” processes as their needs. And hand it over as requirements to the technical teams.
Given the constraints, the technical team might spend months customizing these needs. And even after successful technical implementation, they might never work for users as they might deviate from the system’s optimal state. Skipping the crucial step of business process reengineering results in ERP implementation failure. Along with adoption and change management issues due to the limited understanding of the rationale for change.
4. Over-customization of the software
Most companies with limited experience with ERP implementation have a tendency to underestimate the effort involved in customizing software. The customization not only results in the core system’s sub-optimal performance. But it also causes user adoption issues due to the alteration of systems’ natural state.
Also, most organizations that may have promoted their developers to IT operations managers too early to a CIO role are likely to customize the software heavily (Also, they hate dollar conversations, which is perhaps the bread and butter for a CFO) The business rules in ERP are so nested that even if you implemented a feature successfully (for your own use case), it’s likely to break for other departments.
So, customization of software will always have a much higher chance of implementation failure. The best strategy to save an ERP implementation because of over-customization is to perform a thorough gap analysis during the selection and get recommendations from implementation architects in terms of the effort involved – in implementing each gap. If the effort seems too high, most likely, you have selected the wrong software. Or your process needs to be simplified further (You also have the option to pray. They always work with digital transformation). Thorough scrutiny and deep probing of each gap will help you understand that you are customizing only when it’s absolutely essential.
5. Usage of too many poorly written bolt-ons (impacting operational performance)
Most systems’ design assumes their natural state for optimal performance. While they all might allow customization, the system may have never been tested with the overlapping boundaries of add-ons. The add-ons might also be poorly written – and might cause performance implications.
There is also a misconception that no-code technologies can help you integrate anything and everything. Yes, that is true. But when it comes to mapping data flows and identifying sources of authority, the fewer variables you have in your model, the higher chances you would have with your digital transformation initiatives. (You want one thief to steal your money. So you kind of know who stole what)
Using too many add-ons is a major factor in digital transformation failure. This is due to the increased number of variables that are controlled by multiple vendors, their technologies, and release cycles. Having too many add-ons is a clear red flag that there might be better options out there. And a factor that you should watch closely while signing your software contract.
6. Organizational change management
Underestimating the importance of change management results in digital transformation failure. But change management is typically the first symptom (Like a fever is an expression of inner rage) that you might notice regardless of the underlying issues that might be driving poor adoption. For example, change management issues could be a result of poor training, suboptimal system design, and workflows – or misfit technical systems.
“Business consultants” with very little background in formal software engineering have a tendency to believe that you can solve all change management issues with superior training. Well, it’s almost like saying that you can solve all sales performance issues with the right “mindset.” Can you?
Sure, “mindset” and “training” play a huge role in change management. But it’s not just the training that is responsible for the success of digital transformation initiatives. It’s the synergy of systems, technologies, design, processes, and motivations that make digital transformation initiatives successful. But the most important factor for effective change management would always be the ability of change management consultants to work with the technical teams – to ensure that there is no misalignment in strategy and execution.
7. Lack of maturity of enterprise architecture
The lack of maturity in enterprise architecture is a leading cause of digital transformation failure. Most SMB companies don’t even understand the number of components that might be included as part of the software contract. Just like manufacturing, a critical part can halt your product line, and a weak component of your “software BOM” could lead to digital transformation failure.
Irrespective of whether you buy or build – or how many ever add-ons you have in your architecture – enterprise architecture is extremely critical. The enterprise architecture encompasses four different perspectives: 1) business architecture 2) process architecture 3) data architecture 4) system architecture.
When most companies think of enterprise architecture, they see it as a “technical” concept. But just like an org chart is to people, enterprise architecture is to systems. And the success of your enterprise architecture relies on having clear boundaries of systems and processes. Because they each play a role in defining cross-functional processes So not having a clearly defined enterprise architecture is the surefire way of failing your digital transformation initiatives.
8. Poor governance of master data
Master data forms the foundation of your enterprise architecture. Without having a clear interaction model of each dataset, the systems are likely to have duplicated data in multiple systems. The inefficiencies caused by duplicate data and data silos lead to more fragmented systems. Ultimately causing even more data silos. Tracing data dependencies in your enterprise architecture might feel like a confused mouse in a maze.
Even developers and technical architects struggle to understand the concept of sources of truth. The most common misconception is about the multiple sources of truth. Some people believe that multiple sources of truth mean keeping duplicate data in multiple systems. Sure, are there any systems that can be implemented by completely decoupling data dependencies? Yes. But is that architecture going to be appropriate for every single dataset? Probably not. And most certainly not for the architecture containing financial systems and processes.
Implementing event-driven architecture with completely decoupled datasets works when the reliability of data is not as important a concern. Think of social media messages or error logs published by remote devices. What’s a big deal if we might lose an error or social media message? No big deal right? But with financial data where the books need to be reconciled to pennies, the reliability of data is extremely critical. And the data architecture that allows you a high degree of relatability and traceability is a crucial requirement.
9. System selection gone wrong
Selecting appropriate systems requires you to have updated knowledge of architectural patterns – and several enterprise software categories, including ERP, HCM, CRM, and eCommerce. The software systems available in the market have extremely overlapping boundaries – with substantial duplication in code bases. And this is only going to get worse! Also, it is equally critical to have profound expertise and advanced knowledge of your industry and business model.
Without a comprehensive knowledge of systems and processes, your gap analysis is likely to miss critical gaps that command the highest amount of dollars — and lead to ERP implementation failure. Also, prior to investing in technology, you need to invest in defining the other three legs of the stool: 1) business architecture 2) process architecture 3) data architecture. Selecting a poorly fit system will lead to over-bloating of processes and systems, resulting in serious adoption issues. Don’t sign a software contract without performing an exhaustive search of all systems available in the market.
10. Past results = Future success (With digital transformation initiatives)
You might never be proud of the first home that you bought. As you develop deeper recognition of your own needs, you are likely to do a lot more planning and “sketching” with your next purchase. The same principles apply to digital transformation. First-time executives are likely to be most optimistic about finding “cheaper” and “smarter” approaches to digital transformation (unfortunately, poker strategies don’t work very well with digital transformation initiatives).
As you implement more systems, the deeper will be your analysis. And more conservative will be your approach. The conservative approach to system design and planning leads to digital transformation success. So make sure you don’t cut corners in hiring the right expertise to lead your digital transformation initiatives.
11. Ability to work with technology vendors
Just like an engineer must be able to connect and relate with your shop floor workers, your ERP core team must be able to connect and relate with your developers and technical consultants. This relatability requires you to speak their language in the format they understand (and with digital transformation implementation, God will not translate for you).
Not listening to their concerns or ignoring their advice with the attitude of “too much into weeds” will lead to ignoring critical issues that might have disastrous consequences on your enterprise architecture. They also require translating business vision and priorities into technical architectural components that will help them connect the dots. Several years of experience working with technology vendors helps in building the right rapport with technical teams – and leads to digital transformation success.
12. Poorly written test scripts (and the missing framework for test compliance)
Writing good test scripts takes years of practice. With ERP systems, it’s even harder. Because you need to segment the functionality that is pre-tested and provided by OEMs – from your custom configurations and customizations. To do this, you need to have a deep understanding of the core ERP functionality. And The more lines of code you own – the more testing you need (like the more money you own, the more stress you will have).
The main issues with enterprise-grade systems are data dependencies and the length of enterprise transactions. That makes documenting and tracking test cases and results much more difficult. It takes years of practice for ERP testers to identify the right test scripts. That will help uncover critical issues early in the process. And avoid showstoppers later in the release cycle. The showstoppers that typically lead to digital transformation nightmares.
13. Uncontrollable issues
Because of the “invisibility” issue of software implementations, you will always find uncontrollable issues. However, it is the thorough planning and early detection of critical technical and process issues that help minimize uncontrollable issues. It is also the research that has gone into each issue to minimize the impact on time and budget.
But sometimes, finding a fine balance between the time required to perform research and the budgetary implications of showstoppers is key. Investing too much time in issues that might never surface may be a pure waste of time and resources. This is why consultants who have deep experience in executing large programs are better equipped to identify these issues much earlier in the process – and save digital transformation nightmares.
14. Not having a dedicated internal skilled project manager
The most challenging part of a digital transformation project is the missing cross-functional link. Typically, in SMB organizations, the CEO has the most cross-functional understanding. And the only person who is qualified to negotiate with each department in executing or organization’s vision. The problem may be more difficult with organizations with multiple subsidiaries.
And unfortunately, the CEO very rarely has time to get into the “weeds” of the project (who cares for a neglected weed anyways?). Or mediate conversations when there is a conflict among functional or BU leaders. This is where the project mangers’ role is absolutely critical for the success of the project.
The project manager must have several ERP implementations under his/her belt and have a formal educational background in business or supply chain. Also, one of the most critical skills of a project manager is to be unbiased (except when it comes to preference for their coffee) and spend time working closely with executive teams. Hiring an intern or a “generalist” project manager with no formal background in Supply Chain and software engineering is a sure recipe for disaster.
15. Treating digital transformation projects as a technical implementation
While the major component of digital transformation initiatives is technology, it alone can’t solve all your problems (with solitude, it’s independence; with digital transformation, it’s interdependence). It has to be the synergy of processes, data, organizational structure, compensation plans, and systems.
Treating your digital transformation project as a technical project typically leads to over-customization of workflows, overengineering of processes, and data siloes. They all lead to poor adoption – and, ultimately, digital transformation failure. Involving your business users from day one through the process of business process re-engineering will help them understand the technical challenges and articulate their needs in a technically feasible manner. This will also help forecast the challenges they might expect when they are live on a system.
Final Words
There are several factors that could lead to digital transformation failure. It’s never one vendor. Or a system. But one surefire way to fail your digital transformation would be – to underestimate the amount of effort involved with digital transformation and ignore the pre-selection phase. This sets the tone for how badly the digital transformation initiative will fire back. Because they always fire back unless carefully planned.
Digital transformation initiatives are like going for heart surgery. The first time will always be the most painful. As you get used to surgeries — and how to mentally prepare for the surprises with each one – hopefully, you won’t be as afraid with your next surgery.
FAQs
Would custom development have a higher success rate than buying an ERP system?
With these projects, the major costs would be in the long-term maintenance of the owned components. When you buy off-the-shelf products, you typically own 30% of the code. When you build it from scratch, you would end up owning 100% of the code. The more code you own, the higher chances would be of failure.
Why is there such a high failure rate with digital transformation projects?
In most cases, it’s because of the limited experience with the transformation initiatives. Companies also underestimate the amount of effort required and the importance of each role. Finally, these projects require alignment of people, processes, and technology, which requires attention from the executive teams and the CEO.
What can be done to improve the chances of digital transformation failure?
The first thing that companies could do to improve the chances of these digital transformation initiatives would be to plan carefully, the way you would plan for a manufacturing or construction project. Then go through the engineering phase, and reengineer your data as well as process and build the vendor-agnostic architecture. And then finally select the technical components.
2024 turned out to be another slower year, following the trend of previous years. While there were hopes for a boost in the second half of the year, most companies remained cautious. They were cautious due to uncertainties surrounding the U.S. elections, ongoing geopolitical conflicts, and macroeconomic challenges. Despite some optimism that the new administration would be more business-friendly, the uncertainty will persist through 2025. Uncertainty is primarily due to tariff disputes and geopolitical tensions. With this outlook, most CFOs will be conservative with budgets for initiatives with uncertain short-term returns.
One promising factor expected to drive the economy is the ongoing investment in AI technologies. Many tech companies have significantly increased their spending on AI in hopes of boosting product prices and maintaining market share. These advancements, as a result, will transform interaction models for enterprise applications, improving lead and cycle times for most commercial transactions. The improved lead and cycle times, consequently, would offer a significant competitive edge for companies. Ultimately, this trend is likely to accelerate the replacement of legacy systems, making them AI-ready and driving digital transformation initiatives.
While AI’s broader influence is set to greatly impact the enterprise software market, policy changes associated with the potential implications of AI technologies may lead to stricter reporting requirements. These reporting requirements would affect not only tech providers but also other industries. This could result in higher financial and compliance costs, presenting opportunities for enterprise software vendors. Despite these challenges, expect a positive shift in 2025 if market conditions improve in the second half of the year. On the other hand, with the uncertainty surrounding tariffs and policy decisions, 2025 may be just as slow as 2024. Regardless of the outcome, these trends are likely to shape digital transformation initiatives and the enterprise software market.
The 2025 Digital Transformation Report
Thinking of embarking on a ERP journey and looking for a digital transformation report? Want to learn the best practices of digital transformation? Then, you have come to the right place.
1. AI-Augmented Agents and AI Governance Platforms
Throughout 2025, enterprise software companies will face mounting pressure to justify their pricing. The most immediate opportunities for value creation and revenue generation will likely surface from AI agents integrated into various software categories. These agents will power use cases such as customer service and “generative insights” for complex systems.
As AI agents become increasingly proficient at specialized tasks, how will businesses leverage agent-to-agent orchestration engines to enable smooth collaboration between AI and humans? What impact will the rise of fully autonomous workflows have on business operations, and how can organizations ensure they remain ahead of these advancements? Moreover, with evolving policies and regulations, how will new AI governance platforms emerge, and how can businesses navigate these changes? To gain insights into how AI is shaping the future of business, download the full top 15 digital transformation trends for 2025 report now.
2. Chat-GPT Induced Revised Search Patterns and Consumer Behavior
ChatGPT could give rise to a new wave of search engines with multi-modal capabilities, posing a threat to Google’s market dominance. As these emerging competitors gain traction, Google would be compelled to integrate generative AI into its search workflows. This shift would also disrupt paid media as search engines explore new monetization strategies centered around ChatGPT-driven interactions.
As consumer behavior evolves with the rise of AI-driven search engines, how should businesses adjust their content strategies to balance both organic and paid visibility? What role will these shifts play in transforming business processes and influencing the future of enterprise software? To uncover more about how these changes will impact your organization in 2025, download the full report on the top 15 digital transformation trends now.
3. Continued Consolidation of the Enterprise Software Industry
The consolidation of enterprise software categories accelerated in 2024 and is expected to continue in 2025. This consolidation would lead to broader, more overlapping product offerings. More confusion! A trend that will drive significant pricing and architectural shifts for customers. Depending on the acquirer’s strategy, certain features may be phased out, or entire products may be discontinued.
With the ongoing changes in the enterprise software landscape, how can businesses prepare for unexpected pricing adjustments that might trigger unplanned upgrade projects? Think surprise bills! What steps should organizations take to mitigate potential disruptions and ensure smooth transitions? To stay ahead of these trends and better navigate the challenges of 2025, download the full report on the top 15 digital transformation trends now.
4. Cloud/Saas Expense Reduction and Saas Licensing Price Pressure
As businesses grapple with cash constraints, many will look to cut costs by optimizing their SaaS spending. They would also reduce costs by eliminating unused software. Shelfware! In response to these cost-cutting measures—and amid a challenging purchasing environment—software vendors are likely to raise prices. We’ve already seen this trend with platforms like Smartsheet and ActiveCampaign, where small pricing adjustments significantly increase overall customer costs.
As private equity acquisitions continue to influence the market, how should businesses prepare for ongoing pricing shifts that are expected to persist into 2025? What strategies can organizations implement to manage these changes and maintain budget control? To learn more about the trends shaping pricing strategies and digital transformation in 2025, download the full report on the top 15 digital transformation trends now.
5. Surge in M&A Activities and Deal Flow
With interest rate cuts and changes in the U.S. administration, M&A activity is expected to accelerate in 2025. Since M&A trends closely align with ERP and digital transformation initiatives, the digital transformation sector is likely to see increased deal activity.
With a slightly improved outlook for 2025, how will software vendors allocate resources to R&D and innovation to stay competitive in an evolving market? What impact will this shift have on the development of new solutions and the digital transformation landscape? To gain a deeper understanding of these trends and their potential effects, download the full report on the top 15 digital transformation trends in 2025 now.
6. Continued Reallocation of Skill Sets and Their Impact on Business Processes
AI is rendering several skill sets obsolete, a trend that will persist in 2025 as its effectiveness across various use cases becomes clearer. At the same time, the rise of AI governance platforms and AI agents will create demand for new skills.
How will the ongoing shifts in technology and business strategies reshape traditional business processes, requiring the reconfiguration of business process software and driving architectural changes? What new software categories are likely to emerge as a result of these transformations? To explore these insights and stay ahead of the curve, download the full report on the top 15 digital transformation trends in 2025 now.
7. Geopolitical Impact on Business Processes
With the risk of new conflicts and the escalation of existing ones, geopolitical tensions are expected to persist in 2025. As global economies struggle, the cost of living remains high, and real estate markets reach unsustainable levels, new and unexpected supply chain disruptions are likely to emerge.
As governments respond to evolving global challenges, how will new regulatory measures and policy changes aimed at controlling information, currency, and monetary flows impact business processes, reporting requirements, and enterprise architecture? To better understand these developments and how they may affect your organization, download the full report on the top 15 digital transformation trends in 2025 now.
8. More Disruptions Caused by Software Supply Chain and Cybersecurity Issues
Recent disruptions, such as the CrowdStrike incident, have highlighted the risks posed by software supply chain vulnerabilities. This has prompted companies and governments to reassess their impact. As AI enhances the ability of malicious actors to identify and exploit these weaknesses, policy changes around software supply chain security are inevitable.
How will new regulations introduce accountability measures for open-source software impact pricing models and software architectures in the coming years? To explore how these regulatory changes will shape the future of enterprise software, download the full report on the top 15 digital transformation trends in 2025 now.
9. Collaborative Partnerships and Continued Acquisition of Networks Producing Data
As data remains the key driver of AI effectiveness, 2024 saw partnerships forming even between competitors, such as the collaboration between Salesforce and Workday.
How will the continued trend of acquiring and integrating data-generating networks, such as Blue Yonder’s acquisition of One Network Enterprises, affect the future of enterprise software and digital transformation? Find out more about this evolving trend and other top digital transformation insights by downloading the full report on the top 15 digital transformation trends in 2025 today.
10. (No More) Breakup of Large Corporations and Antitrust Laws Blocking Large Deals
The incoming U.S. administration is expected to take a less stringent approach to scrutinizing mega-mergers compared to the current one. Deals like Google’s acquisition of HubSpot are likely to proceed, and the idea of breaking up large corporations, such as Google, will likely be off the table. Had such breakups occurred, they would have significantly impacted both front-end and enterprise processes for many organizations.
How will this shift lead to the acceleration of consolidation among large enterprise software companies, resulting in an even greater overlap of capabilities? To learn more about this and other emerging trends that are shaping the future of digital transformation, download the report on the top 15 digital transformation trends in 2025 today.
11. Continued Digital Transformation Failures and Focus on Enterprise Architecture
The consolidation-driven overlap will result in duplicated capabilities across enterprise software categories. This would create significant challenges for executives managing transformation initiatives. Companies like SAP have already begun focusing heavily on enterprise architecture. Smaller vendors are expected to adopt similar approaches.
How will this trend drive acquisitions in key areas like process mining, digital adoption platforms, and enterprise architecture visibility tools? To uncover more insights on this and other transformative trends, be sure to download the report on the top 15 digital transformation trends in 2025 today.
12. Energy-Efficient Algorithms and Computing
AI capabilities are currently constrained by infrastructure and energy limitations. As a result, significant investment will be directed toward data center energy technologies and energy-efficient algorithms.
How might this trend lead to the development of new models that surpass current ones, offering even more advanced and powerful capabilities? To explore this and other emerging trends shaping the future of digital transformation, download the report on the top 15 digital transformation trends in 2025 today.
13. Revised Processes for Sustainability and E-Invoicing
ESG and sustainability will remain key priorities for both governments and consumers. Policy changes in these areas will lead to new reporting requirements, which many software vendors will prioritize to capitalize on emerging trends.
As the ESG sector continues to evolve, with solutions competing for market share and overlapping capabilities, how will these developments influence business strategies? Additionally, with governments pushing for more efficient tax revenue collection through the evolution of e-invoicing processes, what impact will this have on reporting requirements and system architecture? To stay ahead of these trends, download the report on the top 15 digital transformation trends in 2025 now.
14. Omnichannel, Collaborative Experience, and Operational Intelligence Platforms
Companies excelling in omnichannel solutions, collaborative platforms, and operational intelligence will keep growing. The MACH ecosystem and real-time experiences are becoming mainstream. Tools like SmartSheet, Monday.com, Airtable, ClickUp, and Notion are redefining collaboration. Palantir is shaping operational intelligence. As these trends evolve, market leaders will gain more traction.
As emerging technologies continue to reshape the business landscape, how will legacy companies like Atlassian, Snowflake, and traditional commerce vendors adapt to stay competitive? Will they successfully catch up with the latest advancements or face challenges in their efforts? To explore how these shifts will impact the digital transformation journey, download the report on the top 15 digital transformation trends in 2025 today.
15. Race to Quantum Technologies
AI is driving demand for advanced infrastructure and computing power. This accelerates quantum technology development. Despite risks like q-day and post-quantum cryptography, investment in quantum is likely to grow, as seen before.
Could the advancements in quantum technology lead to the emergence of entirely new technologies and software categories? What potential breakthroughs can businesses expect in the near future as quantum developments accelerate? To dive deeper into this and other key trends shaping the digital landscape, download the report on the top 15 digital transformation trends in 2025 today.
Final Words
The year 2025 is expected to carry a level of uncertainty similar to that of 2024, resulting in a cautious approach for most CFOs. A potential catalyst for advancing the enterprise software market could be innovations powered by AI. Nevertheless, translating AI initiatives into tangible business outcomes may require time for companies to grasp fully.
For those contemplating digital transformation initiatives in 2024, allocate resources to a strategy aimed at mitigating financial and technical risks. Doing so will not only enhance your chances of securing the trust of financial executives but also guard against unforeseen challenges that may arise in the absence of such a plan.
What are the major themes for digital transformation trends for 2025?
2025 is likely to be as conservative a year for digital transformation initiatives, with AI-driven initiatives drawing the most attention. However, it might take a while before companies understand how to drive business outcomes from AI-driven innovations.
How are cost-focused digital transformation initiatives different from growth-focused ones?
When companies are going to be growth-focused, they are likely to focus on the initiatives that will result in higher revenue. The revenue is likely to be a challenge in a downturn like the one we might experience in 2025. So, they will be focusing on initiatives that will help them save cash.
How can IT managers be successful with digital transformation pitches in 2025?
The IT managers need to focus on the initiatives where they can help companies save cash. For example, increased automation might lead to a reduction in headcounts. Getting more output from machines, or moving some of the on-prem workloads to the cloud.
While many associate digital eCommerce platforms with coupons scattered across websites, the scope of digital commerce extends beyond that perception. Even if your transactions don’t occur online, your website’s contact form serves as a digital commerce element, acting as a vital source for lead acquisition. Complete traceability of customer journeys depends on robust digital commerce capabilities, emphasizing their broader significance.
While understanding the scope of eCommerce is straightforward, selecting and implementing the right eCommerce platform for your digital objectives poses challenges. Issues like integrating payment and shipping providers, ensuring optimal site speed, and minimizing bounce rates are crucial for capturing a significant share of web traffic. As the number of channels continues to expand, evaluating pre-built integration capabilities becomes essential to prevent cost overruns. With increasing transaction volumes, the necessity for enterprise-grade features like digital asset management, approval flows, and a comprehensive digital experience management platform becomes evident. Additionally, operating in a regulated environment adds complexity, introducing compliance requirements that impact your transactions.
The 2025 Digital Transformation Report
Thinking of embarking on a ERP journey and looking for a digital transformation report? Want to learn the best practices of digital transformation? Then, you have come to the right place.
Ultimately, even if a platform functions effectively with lower transaction volumes, the inability to scale with concurrent sessions—characteristic of enterprise-grade systems—can lead to missed opportunities. These factors contribute to the complexity of choosing eCommerce platforms. To navigate this challenge, consider initiating your journey by shortlisting a couple of options from the leading eCommerce platforms in 2024.
Criteria
Overall market share/# of customers. The higher the market share of the eCommerce platform, the higher it ranks on our list.
Ownership/funding. The more committed the management to the product roadmap of the eCommerce capabilities, the higher it ranks on our list.
Quality of development (legacy vs. legacy dressed as modern vs. modern UX/cloud-native). The more modern the development stack, such as headless and React-based development, the higher it ranks on our list.
Community/Ecosystem. The larger the community with a heavy presence from eCommerce companies, the higher it ranks on our list.
Depth of native functionality for specific industries. The deeper the publisher-owned out-of-the-box functionality, the higher it ranks on our list.
Quality of publicly available product documentation. The poorer the product documentation, the lower it ranks on our list.
eCommerce market share and documented commitment (of the publisher through financial statements). The higher the focus on eCommerce, the higher it ranks on our list.
Ability to natively support diversified business models. The more diverse the product to support different business models and business processes, the higher it ranks on our list.
Acquisition strategy aligned with eCommerce. The more aligned the acquisitions to deepen eCommerce capabilities, the higher it ranks on our list.
User Reviews. The deeper the reviews from eCommerce users, the higher the score for a specific product.
Must be an eCommerce platform. It can’t be a module of an ERP or CRM product. It can’t be an app that might support eCommerce and POS processes. At a minimum, the product must support CMS and website development for different business models.
10. WooCommerce
WooCommerce primarily caters to small, content-focused companies aiming to augment their static websites with commerce capabilities, which are particularly appealing to entrepreneurs familiar with WordPress. However, businesses surpassing the $5-10 million revenue mark might encounter limitations in WooCommerce, making it more suitable for content-driven companies with lighter eCommerce requirements.
Despite its widespread popularity and numerous installations, WooCommerce’s commerce capabilities face substantial limitations, leading to conflicts among plugins. The security architecture isn’t tailored for commerce transactions, potentially causing failed eCommerce projects. While debates about transaction and commercial fees persist, ongoing maintenance and development efforts are comparable to both open-source and commercial platforms. Due to these considerations, we’ve significantly downgraded WooCommerce in this year’s ranking, replacing the Microsoft Commerce platform, which no longer features on the list due to limited developments in its ecosystem.
Strengths
Price. WooCommerce offers budget-friendly pricing for startups, supported by a robust ecosystem of plugins and developers.
Open-source. As an open-source platform, WooCommerce benefits from a vibrant developer community, eliminating licensing fees.
Superior Content Management System. Leveraging WordPress, WooCommerce provides an excellent content management system with extensive plugin options.
Weaknesses
Clunky User and Permission Management. Dependency on WordPress for user and role management poses challenges in handling complex B2B and B2C workflows. The workflows, especially those that involve multiple user personas.
Data Model. Suited for content-centric operations, WooCommerce’s weaker data model may result in data integrity and maintenance issues compared to other platforms on the list.
9. Kibo Commerce
Kibo Commerce, an omnichannel and microservices-based eCommerce platform, empowers businesses to launch enterprise-scale commerce experiences that would traditionally require custom development. Its API-first and microservices-based design aligns with modern headless commerce platforms, enabling businesses to meet customer demands with agility.
The platform adopts an integrated approach, encompassing Order Management System (OMS), eCommerce, and subscription commerce. However, it faces competition from larger peers like Manhattan and IBM Sterling Commerce, which offer more integrated options within the same stack, including Warehouse Management System (WMS) and Transportation Management System (TMS).
While Kibo’s OMS effectively maintains a centralized statistical inventory, financial perspectives are often disconnected from the operational layer. In eCommerce and retail models, decoupling transactions for subsequent financial reconciliation is a common practice due to higher transaction volumes. Although Kibo excels in front-end experiences, it may encounter challenges with backend integration and supply chain issues, earning it the #9 spot among the top digital commerce platforms in 2024.
Strengths
Enterprise Scalability. The microservices architecture facilitates individual scaling of commerce layers, ensuring enterprise scalability for peak shopping scenarios.
Integrated OMS and eCommerce. Kibo offers pre-baked integration of eCommerce and OMS, saving considerable costs compared to building from scratch.
Subscription Commerce. The platform includes built-in subscription workflows, a challenging feature to develop on vanilla platforms.
Weaknesses
Limited Commerce Solution. Unlike competitors like Manhattan and Blue Yonder, which integrate a Warehouse Management System (WMS) and Transportation Management System (TMS), Kibo’s offering may not be as embedded.
Limited Ecosystem and Consulting Base. Kibo’s consulting base is limited, affecting documentation and community support for their product.
Cost. Positioned as a best-of-breed integrated commerce and OMS platform, Kibo tends to be more expensive than mid-market alternatives like BigCommerce or Shopify.
8. SAP Hybris Commerce
SAP Hybris Commerce targets larger enterprises with robust requirements, especially those already integrated into other SAP systems. This strategic alignment enables businesses to capitalize on integration synergies by exclusively partnering with a single vendor.
The eCommerce platforms landscape witnessed significant transformations in 2023, driven by the anticipated discontinuation of Oracle Commerce. This development sparked concerns about the potential sunset of legacy platforms like SAP Hybris, HCL Commerce, and Intershop.
Despite these challenges, SAP Hybris has made noteworthy advancements in its headless technology stack, contributing to its improved ranking this year. While it may no longer be a frontrunner, SAP Hybris remains a viable choice for companies seeking an embedded and regulated experience, particularly with its CPQ and configurator layer. For these reasons, SAP Hybris Commerce secures the #8 position on our list.
Strengths
Integration with Other SAP Products. SAP Hybris Commerce is particularly advantageous for enterprise companies in regulated industries, ensuring audit readiness for compliance standards like GDPR.
Greater Control Over Infrastructure. The deployment suite of SAP Hybris Commerce offers comprehensive CI/CD capabilities, empowering IT teams to manage release and production support processes effectively.
Deployment Flexibility. SAP Hybris allows deployment on the preferred cloud, providing greater control over infrastructure design and costs—a valuable feature for larger companies with high eCommerce site traffic.
Weaknesses
Lagging in Headless Capabilities. SAP Hybris doesn’t boast strong out-of-the-box headless capabilities compared to other platforms on the list, coupled with a limited ecosystem of partners.
Clunky Interface. The Hybris CMS exhibits a clunky interface resembling a customer portal rather than a modern eCommerce platform.
Reliance on Legacy Technology. SAP Hybris still relies on legacy programming languages like Spring and Java, lacking robust support for out-of-the-box enterprise-grade features such as an asset management platform.
7. HCL Commerce
HCL Commerce, the enhanced iteration of IBM’s flagship product, IBM Commerce, inherits and advances its capabilities for modern headless development after acquiring it from IBM. Notably, it excels in offering enterprise-grade commerce features, allowing access to all of the commerce layers, including DAM assets, search, and cart, through APIs.
While HCL Commerce introduces headless, React-based composable commerce capabilities, it primarily targets B2C brands. As a new entrant on our list, it replaces other eCommerce platforms like Oracle Commerce.
Strengths
Headless Content Workflow and Management. HCL Commerce facilitates the retrieval and programmable publishing of DAM assets, leveraging enterprise versioning capabilities inherited from IBM Commerce. This supports intricate workflows for content collaboration.
React-based Storefront Capabilities. With modern React-based composable commerce features, HCL Commerce enables the construction of omnichannel storefronts tailored for various geographical locations.
Enterprise Scale Ready. Having proven its mettle with enterprise-grade commerce workloads over decades, HCL Commerce is an ideal choice for teams familiar with IBM Commerce, eliminating the need to learn a new data model and platform from scratch.
Weaknesses
Legacy Programming Language and Architecture. Despite a redesigned front end, the back end still relies on legacy Java and Spring boilerplate, coupled with IBM’s intricate development practices, which might be less user-friendly for web developers.
Limited B2B Capabilities. HCL Commerce’s data model isn’t optimized for industrial B2B use cases, making it more suitable for high-volume B2C companies. B2B companies might need significant investments in custom development.
Limited CDP Capabilities. For B2C companies seeking personalization capabilities based on deterministic identity, HCL Commerce falls short compared to platforms like SAP Hybris, Sitecore, and Salesforce Commerce.
6. Episerver Digital Commerce
Episerver Digital Commerce/Optimizely is tailored for mid-to-large B2B companies seeking comprehensive B2B capabilities within a suite, minimizing the need for costly add-ons and extensive IT resources. Particularly advantageous for industrial businesses, it falls short of a fit for larger organizations requiring the robust enterprise-grade capabilities offered by bigger eCommerce platforms.
Unlike some SMB platforms dependent on add-ons for digital experimentation, Episerver integrates the ability to build features and A/B tests seamlessly into its suite. It excels in providing deep features for intricate channels, encompassing partner management, product-based variants, and rule-based promotions.
Strengths
Content Management Platform. Episerver’s CMS stands out for its flexibility, allowing marketers to execute intricate layout changes swiftly, enhancing the overall content management experience.
Digital Experimentation Platform. In contrast to SMB platforms relying on additional components for digital experimentation, Episerver enables the creation of features and A/B tests seamlessly within its suite, ensuring full traceability across channels.
Natively Supported Rich B2B Features. Episerver impresses with its provision of deep features catering to complex channels, including partner management, product-based variants, and rule-based promotions.
Weaknesses
Ecosystem. Unlike the thriving communities surrounding platforms like Shopify or BigCommerce, Episerver faces limitations in terms of its ecosystem.
Too Big for Smaller Brands. Geared toward larger companies, Episerver may overwhelm smaller brands due to its steeper learning curve.
Expensive. Smaller brands with simpler needs might find Episerver’s pricing to be on the higher side.
5. Commercetools / Frontastic
commercetools, a startup valued at over $2 billion and backed by Accel, has garnered attention from major automotive brands like Audi, Volkswagen, Porsche, and Bentley for its customizable commerce experience. Pioneering a true microservices-based architecture, commercetools is a key advocate of the MACH alliance.
Although the MACH and headless concept is relatively nascent, businesses prioritizing customized and composable experiences will find commercetools compelling. However, commercetools doesn’t offer the same bundled enterprise solutions as some competitors, potentially requiring several best-of-breed options for a comparable experience.
Strengths
True MACH Platform. commercetools embodies the MACH principles—Microservices, API-first, Composable, and Headless—differentiating itself from platforms with mere APIs claiming to be headless.
B2C-Friendly. Tailored for B2C companies, particularly in industries like automotive, commercetools boasts a data model conducive to interactive commerce experiences, with enterprise-grade B2C features embedded in its platform.
Enterprise Scale. Proven in handling complex, multi-brand sites with billions of hits, commercetools has successfully secured clients that traditionally leaned towards legacy platforms like Oracle ATG, Hybris, or IBM Commerce.
Weaknesses
Limited Head Capabilities. While commercetools provides robust APIs for the quick development of omnichannel heads, marketing practitioners may find its head limitations notable, even with the acquisition of Frontastic.
Limited Bundle Offerings. While ideal for best-of-breed platform users, commercetools might be less appealing to organizations seeking bundled offerings available in tools like Sitecore or Salesforce Commerce, especially those favoring seamless integrations.
Limited B2B Capabilities. Although commercetools is expanding B2B features, the distinct data model requirements for B2B may limit its applicability for industrial distributors and B2B companies.
4. Salesforce Commerce
Salesforce strategically targets larger enterprise companies seeking sophisticated eCommerce workflows, particularly those already leveraging other Salesforce products like CRM and Pardot. While it excels in catering to enterprise scenarios with a vibrant developer ecosystem and involvement in the React and headless communities, it may not be the optimal choice for smaller businesses. Salesforce Commerce stands out for supporting both B2B and B2C models, providing deep capabilities and robust product recommendations through its AI engine.
Maintaining its position from the previous year, Salesforce Commerce’s commitment to the eCommerce market is evident, backed by ongoing investments in eCommerce-centric capabilities through Salesforce ventures. Notably, it remains the sole platform on this list with equally profound capabilities for both B2B and B2C. However, its pricing structure may be considered expensive for SMB companies.
Strengths
Ecosystem. Salesforce boasts one of the most vibrant developer ecosystems, actively participating in the React and headless communities. Additionally, it offers integration with modern headless platforms, facilitating the development of progressive web applications.
Enterprise-grade Capabilities. Catering to both B2B and B2C models, Salesforce Commerce provides deep capabilities for enterprise scenarios, complemented by seamless integration with other Salesforce products.
Robust Merchandising and Product Recommendation Capabilities. Distinguishing itself from other SMB products, Salesforce Commerce delivers robust product recommendation and merchandising planning capabilities through its AI engine.
Weaknesses
Price. The pricing structure of Salesforce may be perceived as expensive by most SMB companies. Unlike competing products that include these capabilities in their suite, Salesforce Commerce employs separate pricing for its products, making total cost of ownership computation more challenging.
Headless. While options for a headless experience are available on the Salesforce app marketplace, the platform lags behind in its headless journey compared to competitors like commercetools or VTEX.
Challenging for Smaller Brands. The steep learning curve associated with Salesforce Commerce may overwhelm smaller companies that are less focused on enterprise-grade features.
3. Adobe Commerce/Magento
Adobe Commerce caters to mid-large enterprise companies with intricate eCommerce workflows, particularly those with complex needs for both B2B and B2C business models. However, it may not be the most suitable option for smaller companies. While Adobe Commerce/Magento offers an open-source version, many companies may opt for the enterprise edition for features like RMA and promotion permission, which are not available in the community edition. Noteworthy is Magento’s capability to run large-scale consumer-focused commerce sites with millions of daily visitors, though this scale typically requires the enterprise edition.
Maintaining its position from the previous year, Adobe Commerce is recognized for its commitment, backed by Adobe, and continues to attract an expanding customer base.
Strengths
Enterprise-grade Functionality for B2B and B2C. Adobe Commerce/Magento boasts an exceptionally rich data model tailored for enterprise workflows, providing robust support for both B2B and B2C business models.
Open-source. While an open-source offering is available, many companies opt for the enterprise edition to access features like RMA and promotion permission, which are unavailable in the community edition.
Scale. Distinguishing itself from other platforms, Magento successfully powers large-scale consumer-focused commerce sites with millions of daily visitors, necessitating the enterprise edition.
Weaknesses
Inflexibility. Magento’s data model exhibits tight data integrity with a prescriptive approach to eCommerce, aiming to prevent maintenance issues in the long run. However, this level of inflexibility may not be appreciated by developers.
Overwhelming for Business Users. Business users may find the platform less user-friendly compared to some alternatives due to the complexity of Magento’s data model.
Challenging for Smaller Brands. Adobe Commerce/Magento may prove overwhelming for smaller brands that are less focused on advanced eCommerce features and are in need of developer support.
2. BigCommerce
BigCommerce focuses on meeting the deep functionality needs of B2B SMB organizations, particularly those lacking internal IT capabilities for designing and supporting eCommerce operations. However, it may not be the ideal choice for larger companies. With an underlying data model tailored for B2B organizations, BigCommerce can accommodate complex product mixes and variants, which is especially critical for B2B organizations, with some B2C organizations requiring similar features as well.
Despite its popularity among smaller merchants, the growing BigCommerce ecosystem and capabilities might prove limiting, necessitating the use of multiple add-ons. While the platform offers pre-baked integrations with POS and ERP systems, building an omnichannel architecture could pose challenges due to the number of required add-ons. Additionally, BigCommerce has limited headless capabilities. Nevertheless, it maintains its previous ranking due to its momentum.
Strengths
Deep Capabilities for B2B. BigCommerce’s underlying data model is designed to support the complex needs of B2B organizations dealing with intricate product mixes and variants.
User-Friendly. While catering to the needs of B2B organizations, the platform is not as overwhelming as some enterprise-grade alternatives, requiring less training for business users.
Flexible Pricing Options. BigCommerce provides companies with various pricing options at different stages of their journey.
Weaknesses
Limited Enterprise-grade Features. The core suite may lack certain enterprise-grade features such as product recommendations, digital asset management, and digital experimentation management, requiring additional add-ons and incurring extra costs.
Not Tailored for B2C Experiences. The distinct B2B data model might overwhelm companies primarily focused on B2C experiences, making it less suitable for such scenarios.
Pricing Structure. Companies disliking GMV-based pricing may find BigCommerce’s pricing model less appealing, especially if they have internal IT capabilities for support.
1. Shopify
Shopify caters to B2C SMB organizations with products that don’t require intricate configurations, making it ideal for brands seeking omnichannel and DTC experiences without heavy IT infrastructure investments or developer assistance. Its ecosystem is a significant advantage, offering diverse options, and the Hydrogen on Oxygen headless platform has gained favor among the development community.
However, Shopify’s drawback lies in transaction fees and the need for add-ons to access complex B2C and B2B features. Despite these considerations, its thriving ecosystem ensures it maintains the top rank.
Strengths
Simplicity for B2C. Shopify’s user-friendly data model suits B2C companies, providing flexibility and simplicity accommodating various payment providers and shipping options.
Omni-channel Commerce. With pre-integrated POS, Shopify facilitates seamless data and inventory sharing across digital and physical channels, enabling a hassle-free omnichannel experience without costly custom integrations.
Vibrant Ecosystem. Shopify boasts one of the most active developer ecosystems, heavily engaged in modern tech stacks and Javascript-based communities.
Weaknesses
B2B Limitations. Although Shopify recently introduced B2B capabilities, they may be limited and more suitable for companies supporting both business models. Industrial distribution companies might find these capabilities restrictive.
Transaction Fees. Companies uncomfortable with GMV-based pricing might perceive Shopify’s fee structure as unfavorable.
Enterprise-grade Features. Unlike competitors offering bundled enterprise features, Shopify requires add-ons or third-party products for digital asset and experience management.
Conclusion
Selecting an eCommerce platform poses challenges. A profound grasp of financials is essential for comprehending total ownership costs, coupled with the expertise of independent eCommerce consultants to estimate custom functionality efforts. Additionally, this decision impacts overall architecture and operational efficiency, necessitating a comprehensive approach to eCommerce platform selection.
FAQs
What are the advantages of an eCommerce platform vs. building a website from scratch?
If you are a small business, you might not have the bandwidth and resources to maintain a custom-built website. While building a website is easy, maintaining and scaling it over a period of time is hard. Also, when you build your custom website, you still pay for infrastructure and hosting.
Which eCommerce platforms are better: SaaS or Open Source?
Open source could be a great option if you want to avoid the licensing fee and instead spend those savings on maintaining your own infrastructure. Also, when you are at a smaller scale, you might be able to get managed hosting options that encapsulate the IT infrastructure issues for smaller businesses. Once you outgrow it, either you might have to manage on your own or use one of the SaaS options.
What is the difference between B2C and B2B eCommerce platforms?
The B2B and B2C business models are transactionally different. The B2B businesses have a much deeper data model with their customer hierarchies, channels, and pricing structure. The B2C business model, on the other hand, has a much higher volume in terms of the number of hits and the payment and shipping options that you need to have to support a large set of consumers.
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2025 Digital Transformation Report
This digital transformation report summarizes our annual research on ERP and digital transformation trends and forecasts for the year 2025.
