Suite roles in architecture hinge on cross-functional embeddedness. Supply chain suites restrict ERP suites to financial reporting, while retail-focused suites demand collaboration with WMS, TMS, and OMS for mature capabilities like inventory management and allocation. These were traditionally considered to naturally reside particularly inside the ERP, sparking debates if hosted elsewhere. In retail, procurement aligns closely with merchandising and planning engines. Conversely, in manufacturing and industrial settings, procurement collaborates more directly with production and accounting, illustrating the diverse nature of suite roles.
In the past, distinctions were blurred, and organizations either didn’t prioritize external supply chain tracking or built custom ERP-based systems for traceability. The evolving landscape of supply chain suites, particularly driven by private equity, has changed this dynamic. Today, previously unattainable possibilities are realized through marketplaces and networks, fostering global insights and collaboration. Technologies like blockchain facilitate seamless global data exchange, transcending international interests. While ESG and e-invoicing are in their infancy, their impact on future architecture remains uncertain. However, it’s likely that a portion of these models will be embedded within the supply chain suite, leveraging networks for collaborative documentation exchange.
As supply chain suites continue to broaden their scope, determining the optimal placement particularly for specific processes within an architecture becomes increasingly complex. While straightforward for pure-play retail or manufacturing models, challenges intensify for businesses with overlapping models, like aftermarket operations blending aspects of both retail and manufacturing. This scenario is particularly applicable to softline and hardline retailers with significant manufacturing exposure. If you’re navigating supply chain suite choices, this list can assist in streamlining your options.
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Dassault Systèmes employs a distinctive approach in its suite, positioned at the crossroads of ERP, CAD, and S&OP. Although tailored for supply chain industries overlapping with process manufacturing and retail, it caters to automotive- and aerospace-centric sectors, necessitating robust supplier collaboration. The suite’s roots lie in plastics, offering integrated tools for plastic-like operations across diverse industries. In contrast, other suites like Blue Yonder may face challenges in these specialized sectors, making Dassault stand out and securing its spot at #10 on our list.
Pros
Integrated with the ERP solution. The biggest plus with Dassault systems is its close alignment with ERP and CAD-centric systems,thus making it ideal for industries heavier on cost tracking, requiring ERP-centric processes, and limiting the role of S&OP to just planning.
Comprehensive suite with PLM/PDM, SCM, and ERP. Integration with PLM and PDM would be friendlier for companies particularly heavier with S&OP processes in their NPD and R&D phases, a critical requirement for process-centric manufacturers.
Compliance pre-baked for automotive and plastic verticals. Compliance processes heavily embedded with supply chain workflows, such as supplier collaboration, would require tight embeddedness of Dassault SCM.
Cons
Technology is not modern. The technology might not be as modern as some of the newer options on this list, such as e2open.
Limited ecosystem. The consulting ecosystem is highly limited, with their reseller channel being heavily crowded with CAD resellers without deeper supply chain expertise.
The network is not part of the suite. They don’t have access to the proprietary network, a critical limitation for demand forecasting, primarily relying on customers’ internal and industry data sources, which are generally substantially off because of inadequacies of their source channels.
9. Trimble
Navigating supply chain planning, particularly in sectors like transportation, construction, and agriculture brings unique hurdles. Transportation prioritizes dispatch and preventive maintenance, influenced by distinctive driver-side compliance processes. Also, agriculture adds seasonal and crop quality factors to the planning mix. In construction, quoting processes wield substantial influence over supply chain planning. Thus, securing the 9th spot on our list, its suite’s specialized approach caters to the demands of these industries.
Pros
A most comprehensive suite containing telematics and fleet management. Most other manufacturing-focused suites might struggle with business models particularly with internal fleets and transportation operations, positioning Trimble uniquely.
Strong in transportation visibility. Their traceability and supply chain equation would be limited to transportation visibility, a strength for transportation-centric industries but a huge limitation for other industries.
3PL-specific planning and data. 3PL-specific planning and data are unique, a limitation with other solutions on this list.
Cons
Not ideal for manufacturing or retail-centric industries. It is not an ideal fit for manufacturing and retail-centric industries, even if they might be using it for the transportation side of the processes.
Primarily focused on transportation execution and compliance. The other execution processes, such as retail, manufacturing, and production, would be highly limiting.
8. QAD
QAD adopts a strategy similar to Dassault’s by integrating CAD/PLM, S&OP, WMS, TMS, and ERP capabilities. Tailored for retail and supply chain-centric industries, it leans towards particularly discrete manufacturing and is less focused on process manufacturing for several industries like automotive and life sciences. QAD’s suite is structured around unique product categories, thus influencing supply chain and production processes across diverse industries. It mirrors the strategies of many supply chain suites, which exclusively focus on the supply chain function, omitting the ERP aspect, therefore making the QAD suite unique. Thus with its distinct attributes, QAD secures the 8th spot on our list.
Pros
Integrated with the ERP solution. The biggest advantage of QAD’s suite is its alignment with ERP-centric processes for cost-focused industries where processes such as cost accounting and production scheduling are critical.
Comprehensive suite with SCM and ERP. It combines the best of both worlds, including most components from the SCM suite, such as WMS and TMS, embedded with ERP processes, as well as CAD and PLM.
Compliance pre-baked for automotive and F&B industries. Compliance processes that require tighter embeddedness with the S&OP processes would find QAD’s suite extremely compelling.
Cons
Backend technology is not modern. The backend technology is not as modern as some of the newer platforms on this list.
Network not part of the suite. QAD would rely on internal and customer-provided external data for its analysis, a substantial limitation compared to other systems owning and maintaining their networks as part of the suite.
7. Manhattan Associates
Manhattan specializes in retail and warehouse execution, tailored for industries tightly integrating physical store planning with warehousing and merchandising processes. These industries, less cost-focused with stable pricing models, don’t demand meticulous cost tracking, as seen in complex industrial sectors. The industries that Manhattan targets adopt a distinctive approach to intricate functions like inventory management, allocation, and omnichannel fulfillment. Its specific applicability to certain industries positions it at the 7th spot on our list.
Pros
Tailored flow for retail merchandisers and planners. Retail merchandising and planning are foundational processes for retailers, collaborating tightly with procurement, new product development, and design teams, requiring unique suites like Manhattan.
Integrated suite, including POS and distributed order management. The POS and DSD-centric business processes require unique architecture, only possible through suites like Manhattan.
Cons
External supply chain planning is limited. The limited focus of Manhattan on retail execution leaves the external supply chain planning outside of the scope of Manhattan.
Network not included. Without a network, the planning components would be dependent upon internal and customer-provided external data, a huge limitation for companies seeking decision-grade data for the entire supply chain.
Körber, akin to Manhattan, adopts a distinct approach with a focus on warehouse and execution components. It caters to 3PL-centric business models, crucial for distribution-focused companies often incorporating 3PL elements. Unlike Manhattan, Körber targets the mid and upper-mid markets, integrating processes like WMS, TMS, and freight claims management. While comprehensive, it lacks certain critical components found in other suites. Its unique approach and more limited applicability position it at the 6th spot on this list.
Pros
Strong warehouse management capabilities. It is one of the strongest cloud-native WMS systems for mid-market companies, covering most aspects of warehouse management relevant to mid-market companies.
TMS capabilities integrated. Industries where the embeddedness of TMS and WMS processes matter, especially for supply chain companies, would find Korber highly attractive.
Strong last mile and parcel capabilities. The last-mile capabilities are uniquely complex because of the scheduling and compliance processes of various industries, making Korber unique for DSD-centric operations.
Network not included. The missing network would not provide the decision-grade data included with other supply chain suites.
No supply chain planning or collaboration. The missing planning or collaboration component might not be the best fit for companies requiring tighter embeddedness of WMS and TMS processes with S&OP.
5. Infor CloudSuite SCM
Similar to Dassault and QAD, Infor CloudSuite SCM adopts a distinctive approach, integrating diverse processes like CAD/PLM, WMS, ERM, and HCM with S&OP processes. It proves ideal for companies with manufacturing-heavy business models where supply chain processes tightly intertwine with new product development and ERP. Pure-play retailers might find other suites more suitable, as S&OP processes may not align with their needs. Given its unique market position, Infor CloudSuite SCM secures the 5th spot on this list.
Great visibility platform with planning. Includes a visibility platform for supplier collaboration and procurement without carrier-focused visibility, generally included in 3PL and retail-centric suites.
Global trade workflows and compliance capabilities. Global trade compliance requires country and geopolitical restrictions that need to be integrated with business processes.
Cons
Weak transportation execution component. Due to the nature of industries Infor CloudSuite SCM targets, the transportation execution component is not as critical for the suite but might be a limitation for diverse operations.
Not proven with enterprise workloads. The enterprises requiring millions of transactions per hour for planning cycles might struggle with it.
Oracle Supply Chain Suite proves ideal for global enterprises with diverse operations and various business models, effectively accommodating the planning cycles of multiple industries. In comparison, industry-specific suites like Infor, QAD, or Trimble may face challenges in handling such diverse operations. Mid-market-focused suites may struggle with the high workload of enterprise-level planning cycles, especially those involving millions of transactions per hour. While limited by its proprietary network, Oracle Supply Chain Suite excels in providing operational capabilities for global enterprises that demand seamless integration across systems such as HCM, ERP, WMS, and TMS with S&OP. Its unique position for large enterprises secures its rank at #4 on our list.
Pros
Comprehensive supply management suite, including global trade management capabilities. The supply chain suite would cover the need for the most diverse operations for global enterprises.
Strong planning platform integrated with execution suite. The planning platform is not industry- or function-specific, providing end-to-end traceability of all planning datasets, including S&OP, human resources, and FP&A.
Pre-integrated with ERP. Embedded processes with ERP, along with a disconnected supply chain suite, can cover both architectures equally well, covering the needs of diverse operations.
Cons
Network not part of the suite. Missing a network would require additional components, and the processes that need to be tightly embedded with the network might struggle.
Not SMB friendly. The enterprise data and process model might be overwhelming for SMBs leaner on their process overhead.
Expensive. Ultra expensive for SMBs looking for cheaper options with learner process and data models.
3. SAP
Like Oracle, SAP Supply Chain Suite is tailored for global enterprises with diverse operations, accommodating planning cycles across various business models. Unlike Oracle, SAP offers friendliness for product-centric industries deeply involved in cost accounting and MRP-driven processes. Mid-market-focused suites may struggle with the high workload of enterprise-level planning cycles, dealing with millions of transactions per hour. Despite its proprietary network limitations, SAP Supply Chain Suite excels in providing operational capabilities for global enterprises, seamlessly integrating systems such as ERP, WMS, HCM, and TMS with S&OP. This unique position earns it the #3 rank on our list.
Pros
Comprehensive supply management suite, including global trade management capabilities. The supply chain suite is comprehensive for highly regulated organizations requiring process tightness and control across systems such as ERP, WMS, TMS, and S&OP.
Strong planning platform integrated with execution suite. The tight integration of the planning suite with execution components allows cross-pollination of business rules, which is highly critical for publicly traded organizations.
Pre-integrated with ERP. The pre-integration with ERP allows exploring diverse warehouse architectures – decoupled or embedded, catering to different business models, being especially friendly for 3PL-centric operations.
Cons
Network not part of the suite. The missing network would struggle with the cross-pollination of business rules, requiring a network.
Not SMB friendly. The overbloated enterprise data and process layers would be overwhelming for SMB companies.
Blue Yonder stands out as a unique suite, akin to Manhattan, offering retail-centric capabilities enriched with robust external supply chain processes and control tower capabilities. In contrast to industry-specific suites like QAD, Infor Nexus, and Dassault, Blue Yonder may not excel in industries requiring seamless integration of business rules from WMS, TMS, and OMS with ERP, particularly those emphasizing cost accounting and MRP-centric processes. Unlike SAP and Oracle, which may lack depth in external supply chain capabilities, Blue Yonder proves more suitable for industries necessitating the decoupling of cost-centric overhead. Differing from e2open, Blue Yonder lacks its proprietary network. Its versatile application across various industries earns it the #2 spot on our list.
Pros
Strongest supply chain suite with planning and execution components. One of the strongest pure-play supply chain suites for retail-centric industries.
Ability to handle a large number of SKUs for enterprise retailers. Enterprise retail workloads require processing millions of transactions per hour for planning loads containing millions of SKUs and location planning.
External supply chain capabilities. One of the strongest supply chain suites for end-to-end supply chain traceability, internal or external.
Cons
ERP is not included as part of the suite. In the processes and business models where cross-pollinations of business rules with ERP is critical, Blue Yonder might not be the best fit.
Network is not part of the suite. With Blue Yonder not owning its own network, it might not have as much control over the third parties providing them network.
Not SMB friendly. The enterprise process and data layers might be overwhelming for SMBs.
1. e2open
e2open takes a unique approach to its suite, straddling the realms of retail and manufacturing and integrating transactional CRM processes. Diverging from Blue Yonder, e2open prides itself on its proprietary network, ensuring precise decision-grade data, a valuable asset for companies contending with demand forecasting challenges and data dependencies on external factors. While exhibiting similarities with QAD or Infor Nexus in various capacities, e2open encounters constraints in architectures necessitating ERP cross-pollination for specific industries. In such contexts, e2open may not be the optimal choice. Nonetheless, its robust enterprise-grade capabilities and deep supply chain processes catapult it to the forefront, securing the coveted #1 rank on our list.
Channel marketing planning and collaboration. One of the unique aspects of e2open is that it has a process for channel-driven organizations with trade rebate planning and several other processes that are relevant for collaborative channels.
Global compliance and e-invoicing support. Along with the capabilities that most suites offer, it also has capabilities for global compliance and e-invoicing support, requiring only one platform for all collaboration and joint planning needs.
Cons
ERP is not included as part of the suite. For industries where planning processes might require cross-pollination with ERP processes, e2open might not be the best fit.
Limited ecosystem. The consulting ecosystem is not as prevalent as some of the other solutions on this list, so finding talent might be harder with e2open.
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Supply chain suites have diverse origins, evolving from various perspectives—some rooted in execution systems, others in planning. Over time, they’ve developed significant overlaps with each other and other enterprise software categories, intensifying architectural challenges. In your quest for a supply chain suite, delineate your business process boundaries and determine their natural placement based on required process embeddedness. This list aims to streamline your options, yet identifying the right suite demands expertise, often provided by independent ERP consultants.
FAQs
What distinguishes supply chain suites from traditional ERP suites?
Supply chain suites are tailored to manage complex supply chain operations, including procurement, production planning, inventory management, logistics, and distribution. Unlike traditional ERP suites, supply chain suites focus on cross-functional embeddedness, restricting ERP suites primarily to financial reporting. Additionally, supply chain suites often demand collaboration with various systems like WMS, TMS, and OMS for mature capabilities such as inventory management and allocation.
How do supply chain suites cater to different industries?
The roles of supply chain suites vary across industries. For example, in retail, procurement closely aligns with merchandising and planning engines, while in manufacturing and industrial settings, procurement collaborates more directly with production and accounting. These differences illustrate the diverse nature of suite roles, highlighting the need for tailored solutions to meet industry-specific requirements.
How do supply chain suites incorporate emerging technologies like blockchain and ESG considerations?
Supply chain suites are evolving to incorporate emerging technologies like blockchain for seamless global data exchange and ESG (Environmental, Social, and Governance) considerations. While the impact of these technologies on future architecture remains uncertain, it’s likely that a portion of these models will be embedded within the supply chain suite, leveraging networks for collaborative documentation exchange. As the landscape continues to evolve, supply chain suites will adapt to integrate these technologies to meet industry demands and regulatory requirements.
Running inventory-centric operations without an S&OP system is nearly impractical. Traditionally, businesses managed operations through complex spreadsheets, merging data from various sources. Despite ERP systems claiming S&OP capabilities, their rigid data structures for transactions hinder analytical workflows. An alternative system with a more flexible structure is needed, one that allows easy manipulation without disrupting core operations.
Tailoring data layers to analytical needs involves flattening and augmenting data based on organizational requirements and speed of insights. Analytical systems, unlike core operational data systems, have a lower impact from changes, such as SKU and BOM structure modifications. External changes may still necessitate adjustments to the data model for accurate correlation and association, ensuring the generation of necessary KPIs and insights for the organization.
The design of S&OP systems is influenced by various factors, with some systems integrating other suites like WMS, TMS, or OMS based on tight analytical workflows and operational requirements. Retail industries, for instance, may require collaboration between merchandising, planning, procurement, and R&D teams, prompting the inclusion of these processes within the S&OP system suite. Corporate strategy and transactional alignment play a crucial role in determining the suitable architecture, emphasizing the need for an S&OP system tailored to unique workflows. Ready to explore the top S&OP systems in 2024? Let’s delve in.
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While various systems cater to different industries, S&OP systems necessitate industry-specific capabilities. In retail, planning varies even between softline and hardline operations. Relex excels in mid-market retail, providing pre-configured workflows for streamlined implementation. Unique features like retail floor planning and planogram optimization, common in larger supply chain suites, make Relex a robust choice for retail operations without displacing existing operational systems like WMS or TMS. Despite requiring closer integration with operational processes, Relex secures its position at #10 on our list.
Pros
Integrated workforce planning. While smaller systems might require an external system for workforce planning,Relex can combine workforce planning as well, making a comprehensive planning engineer combining floor space planning or workforce.
Strong retail planning solutions such as pricing and promotions. The other solutions on this list might not have retail-specific capabilities such as pricing and promotions, requiring substantial efforts to implement them.
Cons
Limited focus. The limited focus on retail might be irrelevant for companies centralizing their analytical processes and data siloes. Equally limited for diverse operations.
Not an integrated suite. Unlike other supply chain suites that are likely to be pre-integrated, Relex might require substantial master data and consulting expertise if the analytical processes need to be tightly embedded with operational processes.
Not meant to be for enterprise workloads. While a great mid-market solution, it’s not ideal for enterprise-level workloads with millions of SKU and location planning requirements.
9. Oracle Demantra
Much like SAP IBP, Oracle Demantra suits companies already using Oracle for various technologies like TMS, WMS, or ERP. Offering seamless integration for analytical processes closely tied to operational workflows, it proves beneficial for diverse businesses seeking robust S&OP capabilities. Particularly suitable for those with substantial implementation budgets to customize industry-specific processes, Oracle Demantra stands out as an excellent choice for large enterprises already integrated with Oracle retail solutions or ERP, securing its position at #9 on our list.
Pros
Designed for enterprise planning workloads. Oracle Demanta is proven for large enterprise workloads where companies may have millions of SKU and location permutations and combinations.
Comprehensive demand forecasting capabilities. While other products may not have as robust demand forecasting capabilities, especially containing enterprise-grade strategies and formulas built, Oracle Demantra has deep capabilities.
Pre-integrated with other Oracle products. The pre-integrated workflows would reduce the consulting and integration time. But don’t forget to vet if the existing integration is good enough for your use case.
Cons
User interface might be clunky. The user interface is not as modern as other modern options, leading to adoption issues among users.
Steep learning curve. The enterprise-grade layers and data model would require substantial learning without prior experience with the product.
Much like Oracle Demantra, SAP IBP caters well to businesses already utilizing SAP for various technologies like TMS, WMS, or ERP. Offering seamless integration for analytical processes closely tied to operational workflows, it proves beneficial for diverse enterprises seeking robust S&OP capabilities. Particularly suitable for those with substantial implementation budgets to customize industry-specific processes, SAP IBP stands out as an excellent choice for large enterprises already integrated with SAP S/4 HANA, earning it the #8 spot on our list.
Comprehensive supply chain planning capabilities. While other solutions might be limited in their capabilities, SAP IBP covers broad capabilities for a variety of industries.
Designed for enterprise workloads. Proven for very large workloads with millions of SKU and location combinations and parallel workflows for enterprise-wide planning workloads.
Cons
Dated user interface. The user interface might not be as modern as some of the other cloud-native platforms.
Expensive. SMBs not caring for enterprise capabilities might find it expensive.
7. e2open
e2open stands out as a holistic suite encompassing supply chain aspects like network, planning, and execution. Its strength lies in the robustness of its network, setting it apart from other platforms. Beyond technical capabilities, e2open excels in delivering vital industrial data, enhancing essential KPIs such as demand forecasting and arrival times. Ideal for businesses seeking a comprehensive suite with S&OP capabilities, e2open secures its position at #7 on our list.
Pros
End-to-end Supply chain capabilities are part of the suite. e2open is perhaps the most comprehensive supply chain suite capable of building industry-wide supply chain planning workloads because of its network and access to industry data.
Richest decision-grade data through its network. The quality of decision-grade data is completely dependent upon the amount and the quality of data available, making it one of the highest quality data crucial for S&OP planning.
Collaboration planning is easy if customers and supplies are already part of the network. The biggest advantage of e2open is the network effect that you have, especially if both suppliers and customers are likely to be part of the same network.
Cons
Expensive. SMBs not caring for enterprise-grade capabilities or networks might find its hefty price tag unnecessarily expensive.
Learning curve. Due to the connected datasets with other execution capabilities, substantial consulting help with data modeling and implementation will be required.
Operating primarily in the prescriptive category, much like Relex, Logility caters to mid-market companies in specific industries. As a standalone S&OP system, Logility doesn’t necessitate the replacement of other transactional or operational components, allowing department-level implementation. The simplicity of data modeling and implementation is an advantage, given its independence from other suite components. However, incorporating Logility into the architecture may demand extensive enterprise architecture expertise for master data governance and integration workflows. Positioned at #6, Logility stands as a compelling prescriptive standalone solution for the mid-market.
Pros
Standalone planning solutions. The standalone nature makes it easier to implement and use at the departmental level without requiring as much consensus with the other departments.
Planning scenarios built up. The planning scenarios are built up, reducing consulting in building workflows from scratch but increasing training and adoption in learning the proprietary knowledge of the platform.
Detailed inventory planning. Comprehensive inventory planning pre-built, requiring substantial consulting expertise to enable the same capabilities on the other platforms.
Cons
Not designed for enterprises. Logility is not proven for enterprise-grade workloads, requiring planning for millions of SKUs and location combinations.
Limiting flexibility. Prescriptive workflows and proprietary knowledge may lack the flexibility analysts enjoy with spreadsheets or other technical platforms.
5. OMP
OMP follows a prescriptive approach similar to Relex or Logility, offering a distinctive solution tailored for industries with intricate inventories like chemicals, life sciences, and metal. Due to the unique planning cycles and data models necessary for these industries, OMP stands out, rendering other industry-agnostic solutions less relevant. However, its industry-specific focus may pose a challenge for businesses spanning diverse sectors. Positioned at #5, OMP emerges as a robust solution for mid-market companies with budget constraints seeking a prescriptive solution.
Pros
Strong in life sciences and metal-oriented inventory planning. These industries have unique requirements to support complex attributes and lot and serial numbers, making them slightly difficult in vanilla platforms if they are not designed for those industries.
Friendlier for Mid-market because of pre-baked functionality. The pre-baked functionality and prescriptive workflows would reduce the consulting costs but increase training time to learn proprietary knowledge.
Cons
Highly technical and would require significant consulting support. The prescriptive nature would require substantial consulting efforts in learning proprietary knowledge and translating current data models to platform data models.
Not designed for enterprise workloads. It might not be the best fit for enterprises planning for millions of SKUs and location combinations, which might be even harder for these industries as the planning may need to be done at the lot or serial number level.
Not the best fit for diverse operations. The focused nature may not be the best fit for companies seeking to manage diverse planning models on the same platform.
4. O9 Solutions
In the competitive landscape alongside enterprise-grade platforms like Blue Yonder and Anaplan, O9 emerges as a top choice for upper mid-market to enterprise companies. It caters to those seeking extensive technical capabilities for enterprise-wide planning, particularly within retail-centric industries. Many mid-market or outdated enterprise solutions may lag in technology investment, lacking advancements in AI and ML crucial for effective S&OP systems. Despite offering enterprise-level capabilities, o9 is not an exhaustive supply chain suite, enhancing ease of implementation at the department level. This position is o9 at #8 on our list.
Pros
Advanced AI and ML capabilities. The enterprise-grade AI and ML are likely to be similar to Blue Yonder or e2open, with the only exception being the included network.
Pre-built planning workflows tailored to specific industries, such as retail. The pre-built and prescriptive workflows would not require as much consulting effort as it would with other vanilla solutions such as Anaplan.
The well-adopted solution in various in large enterprises. The O9 solution is well-proven with very large enterprise logos, which are very similar to Blue Yonder or e2open.
Cons
Not the best fit for smaller businesses. The enterprise layers and consulting expertise required to implement and learn o9 might be overwhelming for SMB companies.
Ecosystem. The ecosystem does not have as many consulting companies as it might be available for other leading platforms such as Anaplan.
3. Anaplan
Anaplan stands out as a highly sophisticated platform catering to enterprise-wide connected planning across FP&A, S&OP, and more. Unlike some prescriptive solutions, Anaplan minimizes the need for industry-specific proprietary knowledge. While its planning models may not match the scalability of Anaplan, it appeals to skilled planners accustomed to extensive spreadsheet use due to its flexible platform. However, leveraging Anaplan may entail a substantial consulting budget for workflows that could be pre-configured in other solutions. Positioned at #3 on our list, Anaplan is a prime choice for enterprises seeking scalable, connected planning without additional platforms.
Pros
Highly customizable for sophisticated planning scenarios. The planning models can accommodate diverse planning models across industries rather than being limited to just one function or industry.
Connected planning, including all planning datasets. Most other focused solutions, such as Relex, Logility, and o9, are likely to require another planning solution. Even the enterprise-grade supply chain suite would crate disconnected planning experience as FP&A and human resources planning are likely to be disconnected with them, making it one of the best candidate planning use cases despite missing the supply chain suite.
Ecosystem. Anaplan has one of the most mature consulting bases compared to all other solutions on this list.
Requires consulting support. The technical platform would require building the business workflows and reports that might already be pre-built with several solutions on this list.
Limited pre-baked industry-specific workflows. Limited pre-baked industry-specific workflows would require substantial help from consulting companies with expertise in building industry-specific planning models.
2. Blue Yonder
Similar to e2open, Blue Yonder offers a comprehensive suite encompassing various supply chain components such as WMS, TMS, and S&OP. Contrasting with e2open, Blue Yonder relies on partners for its network needs instead of having its proprietary network. Although it lacks a proprietary network, Blue Yonder excels in handling enterprise workloads, particularly in the retail sector. Comparing it with a few others, Blue Yonder and Anaplan take divergent approaches to their suites. Anaplan prioritizes connectivity and traceability in planning, whereas Blue Yonder excels when S&OP processes demand tighter embeddedness with operational processes. Positioned at #2 on our list, Blue Yonder proves to be an excellent S&OP system for enterprises seeking a comprehensive suite.
Most tools are part of the suite for retail planners and merchandisers. Retail industries would find Blue Yonder most relatable as most tools related to retail planning are part of the suite, allowing everyone to operate seamlessly on the same data.
Ecosystem. Blue Yonder is widely popular among large consulting firms, allowing customers to find talent easily.
Cons
Expensive. SMB companies not caring for enterprise-grade capabilities might find Blue Yonder unnecessarily expensive.
Not the best fit for 3PL companies. Designed from the perspective of retail companies, it’s not as suitable for companies with 3PL as part of their business model as their planning cycles are uniquely different from retailers.
1. Kinaxis
Compared to other prescriptive options such as Logility or O9, Kinaxis is perhaps the ideal solution, covering many different market segments. Although it doesn’t have the same suite capabilities as Blue Yonder, it also makes it slightly friendlier for companies looking for a standalone S&OP system without requiring alignment with other departments. Like e2open, Kinaxis is perhaps the only other solution that owns a network, providing superior decision-grade data than other platforms. Contrasting with Anaplan, it would not require as much consulting help, especially for manufacturing companies, for which supply chain planning is far more detailed and different. Kinaxis is one of the most versatile options catering to many companies, making it the #1 option on this list.
Pros
Richest pre-baked planning platform with enterprise-grade capabilities for manufacturers and retailers. Manufacturing planning requires traceability and planning at the BOM level, which are very similar capabilities to MRP, requiring far more firepower than for industries planning at the SKU and location level.
Advanced capabilities such as returns and spare parts management. Pre-built return and spare parts management capabilities would not require as much consulting help as building these capabilities on a vanilla platform would.
Proprietary Network. Kinaxis is perhaps one of the few platforms on this list that owns its own network, providing superior decision-grade data than other platforms.
Cons
It may not be the most customizable platform. The prescriptive nature of the platform for analysts seeking a flexible platform to build capabilities atop the vanilla platform.
Expensive. SMBs looking for simpler solutions without enterprise-grade capabilities and layers might find it expensive.
Learn how Frederick Wildman struggled with Microsoft Dynamics 365 ERP implementation failure even after spending over $5M and what options they had for recovery.
Navigating the myriad S&OP systems can feel like solving a puzzle, with each platform adopting a unique approach tailored to traceability and connectivity goals. Industry considerations, including planning cycle nuances, further influence the suitability of each solution. As you contemplate an S&OP system, articulate its scope and collaboration with enterprise data. This clarity aids in selecting the optimal option from the provided list. If this task exceeds your expertise, seeking guidance from independent ERP consultants can be invaluable.
FAQs
Why is running inventory-centric operations without an S&OP system nearly impractical?
Managing inventory effectively requires aligning sales forecasts with production plans, a task nearly impossible without an S&OP system. Traditional methods using complex spreadsheets lack the flexibility and efficiency needed in today’s dynamic business environment.
What factors influence the design of S&OP systems?
Several factors influence the design of S&OP systems, including industry-specific requirements, integration with other operational suites like WMS or ERP, and the need for collaborative planning among various departments such as merchandising, procurement, and R&D.
How can businesses tailor data layers to their analytical needs in S&OP systems?
Tailoring data layers involves flattening and augmenting data based on organizational requirements and the speed of insights needed. This process allows for easier manipulation without disrupting core operations and ensures accurate correlation and association for generating necessary KPIs and insights.
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.
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.
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
The 2025 Digital Transformation Report
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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.
In pursuing greater profitability and scalability, companies know the critical role production plays in transforming raw materials into finished products. However, production is not immune to challenges, ranging from delivery delays to defective units and product returns, which can significantly impact a company’s bottom line.
To tackle these challenges in the manufacturing industry, the role of a production manager is often pivotal, yet the roles and responsibilities can vary significantly across industries. Some companies might integrate this responsibility with an operations manager, while others in the manufacturing sector might have a dedicated position for a production manager. The roles of a production manager might also overlap with quality managers, with their primary responsibilities being managing production, managing schedules, and getting the maximum out of the production floor.
So, which KPIs for production managers are the most critical for the production manager role? To ensure they can keep track of production and maintain records of what is done correctly and incorrectly, a production manager should monitor these 5 specific KPIs for production managers.
Performance KPIs For Production Managers
Performance manufacturing KPIs for production managers include a set of key indicators designed to gauge and enhance the efficiency of the manufacturing process. These metrics serve as quantitative measures that reflect the effectiveness and productivity of the production floor. Within these metrics, three key performance indicators take center stage – production/schedule attainment, changeover time, and takt time. Let’s see what each of these KPIs means and what they indicate.
1. Production/Schedule Attainment
Production/Schedule attainment in manufacturing quantifies the extent to which actual production aligns with scheduled production targets. The manufacturing operation’s efficiency and its ability to meet predetermined production levels are measured by this metric.
Formula: Production attainment = (Actual production / scheduled production) x 100
A higher production attainment score signifies superior performance, indicating that the manufacturing process operates in sync with planned schedules. In practical terms, if a company aims to produce 100 units in a given time frame and achieves 95 units, the production attainment would be 95%, showcasing a commendable alignment with production goals. Conversely, a lower production attainment percentage suggests a divergence from scheduled targets, potentially indicating inefficiencies, delays, or challenges within the manufacturing process.
2. Changeover Time
Changeover time represents the duration required to transition a production line from manufacturing one product to another. This time interval encompasses the various tasks involved in the changeover process, such as equipment adjustments, line reconfigurations, and any necessary preparations to ensure optimal production of the new item.
Formula: Average changeover time = Total time to changeover production lines / # of changeovers
A lower average changeover time indicates a streamlined and efficient changeover process, allowing for increased flexibility in responding to shifts in production demands. For instance, if a manufacturing facility undergoes four changeovers with a total time investment of 240 minutes, the average changeover time would be 60 minutes. On the other hand, a high changeover time suggests inefficiencies in the transition process, potentially leading to production delays, increased downtime, and reduced overall operational agility.
3. Takt Time
Takt time is one of the fundamental performance manufacturing KPIs for production managers. It represents the pace at which a product must be completed to meet customer demand.
Formula: Takt time = Total available production time / average customer demand
A low takt time indicates a faster production pace, allowing the manufacturing process to keep up with or even exceed customer demand. This can signify a responsive and efficient production system, ensuring that products are delivered on time. Conversely, a high takt time suggests a slower pace relative to customer demand, potentially leading to production bottlenecks, delays, and an inability to meet market needs promptly.
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Lean manufacturing KPIs for production managers are designed to evaluate the efficiency, productivity, and overall effectiveness of manufacturing processes within the lean manufacturing philosophy. These metrics are instrumental in identifying areas for improvement, minimizing waste, and optimizing resource utilization. Several critical KPIs fall under the umbrella of lean manufacturing metrics, such as cycle time, first pass yield, capacity utilization, machine downtime rate, material yield variance, and overtime rate. Each of them offers unique insights into different aspects of the production system.
4. Cycle Time
Cycle time refers to the average duration it takes to fulfill a customer order, serving as a crucial metric to gauge operational efficiency and customer responsiveness.
Formula: Cycle time = (Time customer received order – time customer placed order) / # total shipped orders
A lower cycle time suggests that the business can rapidly and effectively meet customer demands, reflecting streamlined processes and efficient workflows. For instance, if a company receives an order on Monday at 10:00 AM and delivers the product to the customer on Wednesday at 2:00 PM, with a total of 50 orders shipped, the cycle time would be (Wednesday 2:00 PM – Monday 10:00 AM) / 50, indicating the average time it takes to process and fulfill an order. On the other hand, a high cycle time may signal inefficiencies, potential delays, and a decreased ability to promptly respond to customer requests, which could impact customer satisfaction and competitiveness in the market.
5. First Pass Yield
First pass yield quantifies the proportion of non-defective products successfully manufactured without rework or scrap.
Formula: First pass yield = # of non-defective products excluding rework and scrap / total # of products manufactured
A high first pass yield indicates a robust and reliable manufacturing process, where most products meet quality standards on the initial attempt. This suggests efficiency, cost-effectiveness, and a minimized need for additional resources to rectify defects. Conversely, a low first pass yield suggests potential issues in the manufacturing process, such as inadequate quality control or inconsistencies in production.
6. Capacity Utilization
Capacity utilization quantitatively measures how much of a plant’s production capacity is actively utilized within a specific timeframe.
Formula: Capacity utilization = (Total capacity used during specific timeframe / total available production capacity) X 100.
A high capacity utilization percentage indicates that the manufacturing facility is operating efficiently and using its resources optimally. For instance, if a factory with a production capacity of 10,000 units produces 9,000 units monthly, the capacity utilization would be 90%. This suggests that the facility is running close to its maximum potential, leaving little room for additional production without expansion. On the other hand, a low capacity utilization percentage may signal underutilization of resources, inefficient production planning, or excess capacity.
7. Machine Downtime Rate
Machine downtime rate is one of the critical KPIs for production managers in manufacturing that quantifies the proportion of time equipment is unavailable for production due to both planned and unplanned downtime. This metric serves as a key indicator of equipment reliability, operational efficiency, and the effectiveness of maintenance practices.
Formula: Machine downtime rate = Total uptime / total uptime + total downtime
A low machine downtime rate suggests that machinery is consistently available for production, minimizing disruptions and ensuring a smooth workflow. Conversely, a high machine downtime rate signals frequent disruptions, potentially leading to production delays, increased costs, and a compromised production schedule.
8. Material Yield Variance
Material yield variance assesses the difference between the actual amount of material used and the standard amount expected for a given production process. This variance provides insights into the efficiency of material utilization during production.
Formula: Material yield variance = (Actual unit usage – standard unit usage) x standard cost per unit
A high material yield variance indicates that more material is being consumed than the predetermined standard, potentially signaling inefficiencies, waste, or deviations in the manufacturing process. Conversely, a low or negative material yield variance suggests that less material is used than the standard, potentially signaling cost savings and raising questions about quality or adherence to specifications.
9. Overtime Rate
Overtime rate measures the proportion of excess hours employees work beyond their regularly scheduled working hours. This metric provides valuable insights into workforce management, labor efficiency, and operational costs.
Formula: Overtime rate = (Overtime hours / total hours worked, including overtime) X 100
A high overtime rate suggests that a significant portion of the workforce is working beyond standard hours, potentially indicating high demand, tight deadlines, or understaffing. While this might signify a committed and flexible workforce, it can also increase labor costs, fatigue, and potential burnout. Conversely, a low overtime rate may suggest effective workforce planning and a balanced workload, contributing to employee well-being and cost control.
Quality KPIs For Production Managers
Quality manufacturing KPIs for production managers are specifically designed to measure and evaluate manufacturing processes’ overall quality and effectiveness. These metrics provide insights into various aspects of the production system, highlighting areas for improvement and ensuring that the final output meets or exceeds quality standards. Several critical KPIs fall under the umbrella, each addressing different facets of the manufacturing quality such as yield, first-time yield, and scrap rate.
10. Yield
Yield in manufacturing quantifies the efficiency of the production process by measuring the overall volume of products manufactured compared to the input of raw materials.
Formula: Yield = (Actual # of products manufactured / theoretical number of maximum possible yield based on raw materials input) X 100
A high yield indicates that the manufacturing process utilizes raw materials effectively, minimizes waste, and maximizes production output. Conversely, a low Yield suggests inefficiencies, waste, or issues in the production process, potentially leading to increased costs and reduced overall productivity.
11. First Time Yield
First time yield is one of the critical quality KPIs for production managers in manufacturing, serving as a key indicator of product quality and the efficiency of production processes. This KPI measures the percentage of non-defective or good units that are released without wasteful rework.
Formula: First time yield = # of non-defective or good units / total # of products manufactured
A high first time yield indicates that most products meet quality standards on the initial attempt, signaling an efficient and reliable manufacturing process. Conversely, a low first time yield suggests that many products require rework or correction, potentially indicating issues with material quality, equipment, or production processes.
12. Scrap Rate
Scrap rate quantifies the proportion of discarded materials during the manufacturing process. This metric provides insights into the efficiency of the production process, waste reduction efforts, and the utilization of raw materials.
Formula: Scrap rate = Amount of scrap material produced during a manufacturing job / total materials intake or put into the process
A low scrap rate indicates effective material utilization, minimized waste, and potential cost savings through efficient resource management. Conversely, a high scrap rate suggests inefficiencies, potentially resulting from production errors, equipment malfunctions, or poor-quality materials.
Maintenance KPIs For Production Managers
Maintenance manufacturing KPIs for production managers are designed to evaluate the effectiveness, reliability, and efficiency of maintenance processes within manufacturing operations. These metrics are instrumental in gauging equipment performance, minimizing downtime, and optimizing the maintenance strategy for enhanced productivity. KPIs like mean time between failure, percentage maintenance planned, percentage planned or emergency work orders, unscheduled downtime, downtime analysis, and machine set-up time, collectively fall under the umbrella of maintenance manufacturing metrics.
13. Mean Time Between Failures(MTBF)
MTBF is a crucial metric that calculates the average time a piece of equipment operates between failures. It provides insights into the reliability of production assets and is particularly useful for predicting maintenance needs.
Formula: MTBF = Operating time in hours / # of failures
A high MTBF suggests a reliable and robust system, minimizing disruptions and ensuring continuous production. Conversely, a low MTBF indicates frequent breakdowns, potentially leading to increased maintenance costs and decreased productivity.
14. Percentage Maintenance Planned(PMP)
PMP compares the total hours spent on planned maintenance activities with the overall maintenance time. It indicates the effectiveness of proactive maintenance planning.
Formula: Percentage planned maintenance = (# of planned maintenance hours / # of total maintenance hours) × 100
A higher PMP signifies a well-organized maintenance strategy, reducing unexpected downtime. Conversely, a low PMP may suggest a reactive approach, leading to increased unplanned downtime and potential production disruptions.
15. Percentage Planned or Emergency Work Orders
This metric compares the percentage of planned maintenance work orders versus those that are emergency or unplanned.
Formula: Percentage planned vs. emergency maintenance work orders = (# of planned maintenance hours / # of unplanned maintenance hours) × 100
A higher percentage of planned work orders indicates effective maintenance planning, reducing disruptions and optimizing resources. Conversely, a higher percentage of emergency work orders suggests a reactive approach, potentially leading to increased downtime.
16. Unscheduled Downtime
Unscheduled downtime measures the duration equipment cannot perform as scheduled due to reliability or equipment issues. It reflects the effectiveness of maintenance plans and the impact on production schedules. High unscheduled downtime can result in lost revenue and customer dissatisfaction.
Formula: Unscheduled downtime = Sum of all unscheduled downtime during specified time frame
17. Downtime Analysis
Downtime analysis is expressed as a ratio, reflecting the time equipment is not operational in relation to its total operating time. This metric is crucial for understanding the overall efficiency of equipment. A higher ratio indicates more downtime, potentially leading to decreased productivity.
Formula: Downtime in proportion to operating time = Total time equipment is down: Total time equipment is in operation
Formula: Machine set-up time = Time required to prepare machine for next run
Efficiency KPIs For Production Managers
Efficiency manufacturing KPIs for production managers are designed to measure and evaluate the effectiveness and productivity of manufacturing processes. These metrics focus on the throughput, work in progress, schedule attainment, and overall equipment effectiveness to ensure optimal performance and resource utilization within a production environment. The KPIs included under efficiency manufacturing metrics are throughput rate, work in process, and overall equipment effectiveness.
19. Throughput Rate
Throughput rate is a key performance indicator measuring the product volume produced within a specified time frame. It provides insights into the efficiency and productivity of a manufacturing process, allowing for analysis and comparison of similar equipment, production lines, or entire manufacturing plants.
Formula: Throughput rate = Total number of good units produced / specified time frame
Work in process refers to goods in mid-production or awaiting completion and sale. This metric includes the raw materials, labor, and overhead costs associated with unfinished goods. WIP provides insights into the efficiency of material usage and the value of partially finished goods in production. A high WIP may indicate overproduction or inefficiencies in the production line, while a low WIP suggests efficient use of resources.
Formula: Work in process (WIP) = (Beginning WIP + manufacturing costs) – cost of goods manufactured
21. Overall Equipement Effectiveness(OEE)
OEE is a comprehensive metric that assesses the efficiency of equipment and machinery in the manufacturing process, considering factors such as availability, performance, and quality.
Formula: OEE = (Good Count × Ideal Cycle Time) / Planned Production Time
A high OEE indicates optimal equipment utilization and overall effectiveness in production. Conversely, a low OEE suggests potential issues in equipment efficiency, leading to increased downtime or reduced quality.
Conclusion
In conclusion, the role of a production manager is undeniably crucial in navigating the challenges of the manufacturing industry. It also ensures the transformation of raw materials into quality finished products. The multifaceted responsibilities of production managers can overlap with operations and quality managers. Thus, highlights the need for effective monitoring through KPIs. The top 5 KPIs for production managers discussed in this blog are performance, lean, quality, maintenance, and efficiency KPIs. They offer a comprehensive toolkit for production managers to gauge and optimize their operations.
By closely monitoring and optimizing these KPIs, production managers can steer their operations toward greater efficiency, improved quality, and enhanced competitiveness in the dynamic landscape of manufacturing. These KPIs for production managers serve as a compass, guiding them to make data-driven decisions, address challenges proactively, and ultimately contribute to their organizations’ overarching goals of profitability and scalability.
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Which KPIs are most critical for production managers in monitoring and improving efficiency?
The most critical KPIs for production managers revolve around performance, lean, quality, maintenance, and efficiency. Production/schedule attainment, changeover time, and takt time are essential performance KPIs. They offer insights into operational efficiency. While lean KPIs like cycle time and first pass yield focus on waste reduction and resource optimization. Quality KPIs such as yield, first time yield, and scrap rate provide a comprehensive view of product quality. Maintenance KPIs like MTBF and percentage maintenance planned help gauge equipment reliability. And efficiency KPIs like throughput rate and overall equipment effectiveness (OEE) measure productivity and workflow optimization.
How do performance manufacturing KPIs like production/schedule attainment impact a company’s bottom line?
Production/Schedule attainment directly influences a company’s profitability by quantifying the alignment between actual production and scheduled targets. A higher production attainment score indicates superior performance, demonstrating that the manufacturing process operates in sync with planned schedules. This alignment is crucial for meeting production goals efficiently and minimizing delays. Conversely, a lower production attainment percentage suggests inefficiencies, potential delays, and challenges within the manufacturing process, which can adversely impact the bottom line by affecting delivery timelines and customer satisfaction.
How can production managers use lean manufacturing KPIs like cycle time to enhance operational efficiency?
Lean manufacturing KPIs like cycle time play a pivotal role in enhancing operational efficiency. A lower cycle time indicates a streamlined process, allowing for faster response to production demands. Production managers can use cycle time insights to identify bottlenecks, streamline workflows, and improve overall efficiency. Conversely, a high cycle time suggests inefficiencies, potential delays, and a decreased ability to respond promptly to customer requests, impacting operational agility and competitiveness.
What is inventory? Inventory can be anything that has a financial value. It can be a product or a service. It is anything and everything that goes on your sales order or purchase order. Now, the second task is to manage your inventory efficiently. Before you know about efficient ERP inventory management best practices, let’s discuss the importance of coded inventory i.e. SKUs.
The Importance of Coded Inventory
So, when you look at your sales order, there will be a bunch of headers and product lines. The product lines are entered by SKUs. The whole idea of SKU is that once you have the ID, you grab the whole product information. You are bundling every single piece of information related to that product under that SKU.
Now, when you look at SKU, obviously there will be SKU numbers along with a lot of different layers. These layers can be either dependent or independent. Let’s understand this with an example. Suppose we have four different SKUs – 1100, 1101, 1102, and 1103 which are independent. Each SKU will further have multiple data points. Suppose the SKU number 1100 has 2000 different data points. What are these data points on the inventory level? These data points are going to be everything that defines that particular inventory, for example, a lot number.
The whole intent of keeping information bundled up is to make sure that your data entry is simplified. Let’s say you want to use this product anywhere in your system or any process. There are going to be 1000 to 2000 data points associated with each SKU. It could be weight, dimension, lot number, or any other attribute related to the product. If you have to enter 2000 different data points, you are going to go crazy. Therefore, you need some sort of description of your inventory that you can grab quickly.
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The way you model these SKUs defines what result you are going to get out of your ERP. Therefore, product modeling is very critical here. Now that we have cleared the basics, let’s dive into types of inventory. There are three kinds of inventory: dimensional inventory, piece inventory, and matrix inventory. Understanding each of them is important as it will make both your ERP selection and ERP implementation easier. Using an ERP system that does not support any one type of inventory might result in planning issues. It might also result in ad-hoc processes and increased admin effort in correlating dimensions on top of raw data.
1. Matrix Inventory
Let’s understand this concept with an example. Suppose there are two shoes and the only difference in the production perspective between them is the pigment used. One is black and the other is red. The way the manufacturing process works is how you organize the information. You reutilize as much as possible. The more you reutilize, the more financial efficiencies you are going to get from the process. So, these shoes could be manufactured in the same way as all their pieces except when it comes to mixing the pigment. But suppose now you want to change the assembly process for the black shoe.
You have to probably go to every black shoe variant and change this information as the data is not interconnected. This becomes a huge problem in industries like fashion and apparel where the demand is driven by style, season, etc. That’s where matrix inventory comes in handy. The whole intent of matrix inventory is to reutilize the information as much as possible by organizing it differently. As the name suggests it is planned exactly like a matrix.
The base SKU remains the same, but you can have other attributes like color, size, etc related to it. Because of this reason, the data related to the SKU is interconnected. So anytime there is going to be a change in the foundational SKU you are not necessarily going to multiple places and changing that.
2. Dimensional Inventory
The problems and intent of dimensional and matrix inventory are very much similar with few differences. Let’s understand this with two examples. So, whenever you go to a grocery store, you can scan a barcode and it gives all the details of the SKU. Let’s say you have chicken in the meat section of the store. Chicken no. 1 with SKU 1101, chicken no. 2 with SKU 1102, etc. These are very similar chickens with the only difference of the dimension – weight. Now, if the SKU of these chickens is not blended with the dimension weight, you cannot sell it. This is because you need to know this information while packaging when sold and charge the customers accordingly.
Now, for the second example. Let’s say you have a sheet metal and you are trying to cut it into different pieces of different dimensions for car manufacturing. The sheet metal will have an SKU, and so will each of its parts. But just the SKU won’t be enough and you are going to need some sort of attributes to be able to plan at the attribute level. So you are going to create some sort of attribute here, like heat number, and plan the inventory accordingly. It is similar to how the matrix inventory works in the retail industry but won’t have as many permutations and combinations as there are in retail.
3. Piece Inventory
Piece inventory comes in continuation of the dimensional inventory. Let’s take the same example of the sheet metal mentioned above. Now let’s say after entering the dimensions, you need the machine to cut the sheet metal into ten different pieces. But logically the machine can only cut the sheet metal into twelve pieces and not ten. So now, you have to decide what you do with those two pieces. What are the possibilities? One possibility is that you can simply throw it in the scrap. If you throw there is a financial value attached to it, which will make your pieces far more expensive. Another possibility could be you put these two extra pieces for some next job. Now this decision might create friction as it affects the entire production line.
This is where piece inventory should be planned. What do you do with these pieces? How do you organize these pieces? There is a functionality inside ERP in which once pieces are recognized, you have some flexibility in how they will be accounted for. So when you define this nesting process, the system already knows that it is going to create these two extra pieces. So whatever you define in this part of the algorithm, you can define them in advance so that you don’t have to impact your production process.
ERP Inventory Management Best Practices
Now that you know the difference between these three types of inventory it will help you design your inventory accordingly. Based on the industry types this will help in devising the ERP inventory management best practices for maximum financial efficiency. Below are the top 4 ERP inventory management best practices that you should always keep in mind before you design your inventory.
1. Mimic The Physical Process
Designing inventory systems that closely mirror the physical manufacturing process is one of the fundamental ERP inventory management best practices. By aligning the digital representation of inventory with its real-world counterpart, you can ensure seamless integration and a more accurate reflection of your operational reality. This strategy involves breaking down the manufacturing process into modular components, just as you would in the physical production of goods.
The goal here is to replicate and optimize the flow of materials and products throughout the entire supply chain. By doing so, you can identify bottlenecks, streamline workflows, and maximize resource utilization. This approach not only enhances efficiency but also minimizes discrepancies between digital records and the actual state of inventory, ultimately leading to more accurate forecasting and planning.
2. Balancing Data Entry
Balancing data entry from the user’s perspective is one of the critical ERP inventory management best practices. It ensures the accuracy and reliability of inventory information. While it’s essential to capture comprehensive data for each inventory item, a balanced approach avoids unnecessary complexity that may arise from overloading the system with redundant information. Prioritizing user-friendly data entry methods not only reduces the risk of errors but also enhances the speed of data input.
You should aim to strike a balance between collecting essential information for effective inventory management and ensuring that the data entry process remains intuitive for users. This strategy helps maintain data accuracy, streamlines processes and facilitates smoother collaboration among your teams involved in inventory management.
3. Expert Review of SKU Design
Engaging independent ERP consultants to review and optimize your SKU design aligned with ERP planning is one of the most effective ERP inventory management best practices. SKU design goes beyond mere identification codes; it involves structuring product information in a way that aligns with the broader goals of the ERP system. Subject matter experts in the field can provide valuable insights into industry best practices, ensuring that SKU design maximizes the capabilities of the ERP platform. This strategy involves considering not only current operational needs but also anticipating future requirements. Through expert review, you can fine-tune your SKU design to enhance scalability, flexibility, and overall adaptability to evolving market demands.
4. Multiple Rounds of Testing During ERP Implementation
Conducting multiple rounds of testing during the ERP implementation is considered crucial as one of the ERP inventory management best practices. This process involves simulating real-world scenarios to ensure that the inventory module functions effectively and aligns with the specific needs of the business. Testing helps identify potential issues, discrepancies, or inefficiencies before the system is fully deployed, reducing the risk of disruptions to day-to-day operations.
Independent ERP consultants play a critical role in this strategy by leveraging their knowledge to anticipate future requirements and forecast potential risks. Rigorous testing not only validates the functionality of the inventory module but also provides valuable insights into system performance, helping you to make informed decisions and adjustments before the ERP system becomes an integral part of your operational infrastructure.
Conclusion
If you are looking to implement ERP inventory management best practices, you must understand the type of inventory you need to design based on your industry. Each of them has its own merits when utilized efficiently for the desired results from the ERP systems. The whole intent here is to figure out what is the best way to organize the SKUs of your inventory. Understanding these concepts will also help reduce manual data entry, which reduces time spent on SKU maintenance and ultimately helps increase the financial margins. This list aims to offer potential options for your further evaluation with independent ERP consultants.
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What is the significance of SKUs in ERP inventory management?
SKUs, or stock keeping units, serve as unique identifiers for products within a sales or purchase order. They consolidate comprehensive product information, streamlining data entry and simplifying inventory organization. Utilizing SKUs enhances efficiency, reduces data entry complexities, and ensures quick retrieval of necessary information for various business processes.
How does matrix inventory benefit industries like fashion and apparel?
Matrix inventory facilitates efficient production planning by organizing product information in interconnected matrices. For industries driven by style and seasonal demands, such as fashion and apparel, matrix inventory allows for the reuse of information. This minimizes the need for repetitive data entry when making changes to foundational SKUs, addressing challenges associated with varying product attributes like color and size.
Why is conducting multiple rounds of testing crucial during ERP implementation for effective ERP inventory management?
Conducting rigorous testing during ERP implementation is vital to simulate real-world scenarios, identify potential issues, and ensure the seamless functionality of the inventory module. This proactive approach helps mitigate risks, reduces the likelihood of disruptions to daily operations, and provides valuable insights for making informed decisions and adjustments before the ERP system becomes an integral part of your operational infrastructure.
HCM software holds a unique position in the architecture. Although some believe ERP should encompass HCM processes, regulatory challenges necessitate a dedicated HCM system. Smaller companies may initially rely on payroll software. However, as they grow, the complexity of HR demands sophisticated HCM solutions to navigate compliance and regulatory issues. Notably, the confidentiality requirements for HR data, encompassing compensation and personal information, pose significant challenges. The challenges are dictated by varying state and country regulations.
There’s a significant overlap between HCM, CRM, and ERP software, given their interconnected nature. Companies with union reporting requirements may need ERP processes embedded with employee data, while those with production scheduling needs require employee data integrated into shop floor processes. Certifications and availability are also crucial, ensuring the allocation of the right skill set for specific jobs.
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.
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UKG Ready stands out among the top HCM software for SMBs, suitable for global organizations with basic HCM needs. Positioned between smaller solutions like BambooHR and ZohoHR and larger ones like Workday and SuccessFactors, UKG Ready offers a more accessible adoption for smaller organizations. Unlike larger counterparts, it doesn’t require configuring enterprise-level approvals, making it user-friendly. Companies headquartered in the U.S., Canada, Mexico, the U.K., France, the Netherlands, Belgium, New Zealand, and Australia can leverage UKG Ready for employee support in over 85 countries.
However, UKG Ready may not suit larger organizations with specific needs like succession planning, flexible benefits, and intricate compliance reporting requirements.
9. Zoho HCM
Zoho HCM is tailored for SMBs in sectors like IT, media, education, healthcare, and finance, particularly advantageous for those already using other Zoho apps. With a budget-friendly licensing price, it’s accessible for startups and smaller companies, complemented by strong support for DIY usage.
Zoho HCM’s simplified design suits their business model but may not be ideal for industries with intricate reporting or compliance needs. Larger companies with complex benefits management requirements may find it lacking. Additionally, Zoho HCM supports around 20 languages, limiting its global reach compared to UKG Ready.
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Infor WFM is tailored for larger manufacturing organizations with union workers, catering to industries like automotive, aerospace, hospitality, public sector, and healthcare. It addresses specific employee reporting requirements governed by OSHA and other relevant regulatory organizations in specific countries.
Infor WFM, being a relatively costly product, is not an ideal fit for SMBs. It is best suited for larger companies with a minimum revenue of $250 million and a substantial workforce. The solution is particularly advantageous for organizations already utilizing Infor products like Infor LN or M3, as it seamlessly integrates with them. This integration facilitates the embedding of employee data into service and procurement scheduling workflows.
7. Ceridian Dayforce HCM
Ceridian Dayforce HCM is designed for SMB companies in manufacturing, retail, hospitality, the public sector, and healthcare. While it shares similarities with Infor WFM, Dayforce is more tailored for smaller organizations with a significant focus on blue-collar and hourly workers.
The solution lacks advanced features like benefits management, what-if scenarios, and succession planning, making it unsuitable for companies needing intricate approval processes or robust security workflows.
6. ADP Vantage HCM
ADP Vantage provides an integrated suite featuring HR Payroll, Workforce Management, Benefits, Recruiting, and Talent Management. Tailored for large enterprises with 1000+ employees, it is particularly advantageous for those already using ADP for payroll, offering separation of duties and accommodating various management layers.
For smaller companies, setting up and maintaining ADP Vantage can be complex, given the additional overhead of separation of duties. Communication issues among different modules, particularly between benefits management and payroll, can pose challenges for real-time interactions, as reported by our customers.
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BambooHR, geared towards SMBs with basic HCM needs, competes closely with ZohoHR. Both target similar industries and startups with smaller HR departments and limited implementation budgets. With a total implementation cost as low as $3-5K, BambooHR provides support directly from Bamboo HR or through one of its partners.
The solution has limited reporting capabilities and may necessitate add-ons for advanced features like time clocks. In contrast, more advanced products such as Ceridian offer these capabilities out-of-the-box.
4. UKG Pro
UKG Pro, the flagship product in the UKG portfolio, caters to mid-large organizations with a need for enterprise workflows, separation of duties, and comprehensive workforce management. It seamlessly integrates with UKG Dimension products for advanced workforce management, positioning itself as a full-suite product akin to Workday, SAP SuccessFactors, and Oracle HCM. With native localization in over 100 countries, it eliminates the need for add-ons or partner-provided functionality to support diverse global requirements.
UKG Pro faces a challenge in its ecosystem with a limited number of available partners for product support, especially when compared to industry counterparts like Workday, SAP SuccessFactors, and Oracle Cloud HCM.
3. Oracle Cloud HCM
Designed for larger enterprises with complex management structures and approval flows, Oracle Cloud HCM is ideal for industries like technology, media, telecommunications, and healthcare. It offers additional advantages for organizations already utilizing other Oracle products, such as Oracle Cloud ERP.
Despite its strengths, Oracle Cloud HCM presents challenges, particularly with its user interface, which relies on legacy products like Taleo. Smaller companies may find its complex workflows and data setup overwhelming. Moreover, it may not be the optimal choice for industries employing blue-collar workers, emphasizing the importance of considering these factors when evaluating the solution.
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Tailored for enterprises, the SuccessFactors HXM suite is an ideal choice for companies utilizing other SAP products, notably SAP S/4 HANA. Boasting support for 43 languages and over 45 localizations, it provides a holistic solution. With a dynamic ecosystem of consultants, it meets the varied requirements of manufacturing and trade-related industries, presenting a compelling option for businesses deeply rooted in the SAP ecosystem.
SAP SuccessFactors seamlessly integrates with other enterprise-grade SAP products like Qualtrics for comprehensive employee experience workflows. However, its extensive capabilities and costs might be overwhelming for smaller companies.
1. Workday
Workday caters to enterprise-level companies requiring intricate management workflows, particularly in complex hire-to-retire and benefits compensation processes. Its strength lies in industries like technology, media, telecom, insurance, and financial services, aligning with sectors where Salesforce is prominent. Workday is frequently deployed alongside Salesforce, FinancialForce, and ServiceNow to address comprehensive IT management and workflow automation needs. A key advantage of Workday is its cloud-native UI and seamless integration with other suite products, including EPM and Financials.
Despite its strengths, Workday Financials is not always a fully matured product and is sometimes overpromoted by its partners, leading to instances of failed implementations. Success with Workday requires careful selection and expertise in enterprise architecture.
Final Words
Given the variations in labor laws across states and countries, selecting and implementing HCM products demands a deeper level of expertise, such as that of independent ERP consultants. HCM workflows are often intricately linked with ERP, MES, and Service Scheduling modules. Consequently, HCM software selection can have wide-ranging implications on the overall enterprise architecture, potentially influencing operational efficiencies.
When incorporating HCM software into your architecture, it’s essential to clearly define roles and responsibilities for each system interfacing with the HCM software. This list aims to assist you in shortlisting potential options that align with your architecture needs.
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.
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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.
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<span data-metadata=""><span data-buffer="">2025 Digital Transformation Report
This digital transformation report summarizes our annual research on ERP and digital transformation trends and forecasts for the year 2025.
