A Enterprise Resource Planning system (ERP) is truly an amazing tool and one of the reasons for being a great tool is the mere fact that you can use it to tracking your operational goals. While this is not a straight forward process, it should be the ultimate goal for all current and future ERP users.
And that’s the topic for today.
Before we begin, I would like to invite you to keep these two questions in mind – (1) “Tracking using ERP” and (2) “Operational Goals”.
Don’t worry if you’re not familiar, bit and pieces of today’s article will highlight touch on them bit by bit. With that, let’s begin.
1. Everything is Recorded
The most underrated part about an ERP system is that it stores ALL the records that you need about your organization.
Yes, let me repeat that. Every activity that you’ve ever ran in your organization is recorded and stored somewhere in the system. And that’s mainly because an ERP system is supposed to be an end-to-end system for your business.
Sure, you might argue that not all organization fully utilizes their ERP system. Hence, you don’t have that sort of luxury. However, think about it, for those you who actually maximized your system, you can find records and audit logs of your organization from your purchasing activities all the way to your goods receivable, from your sales all the way to your delivery activities and from your finance all the way to your HR activities.
You get what I mean, don’t you?
I’m sure you (those of you who do fully use your ERP system) would agree with me.
Because, in an ERP system, all transactional records are kept within your database and they are accessible within a few clicks of a buttons.
For those who have not really dwell on this before, here’s a few more things to consider:
- All your records are traceable.
- All your records have an auditable trail for verification purposes.
- All your records are linked with each other.
If you truly understand these points, then, whenever you want to measure the performances of your organization, it is one of the more reliable places to review it.
2. Modern ERPs are Tracking Much More
With the birth of the internet in the last few decades, and now the existence of a concept called Internet of Things (read more here), the modern-day ERP systems are now reaching out much further than it used to.
That means, not only are organizations tracking mundane operations, with the extension of the internet, companies can now reach out to customers and stakeholders much more than it used to.
Let’s break this down a little bit more.
A few months ago, I had a client who wanted a delivery management system to track their dispatch drivers, manage the security related to that as well as to manage any pre-delivery scheduling.
After discussing this requirement, they had an “aha” moment and realized that, with the system that is being built, they can use the exact same features to manage the visitors that they have.
So, instead of the tracking the activities from the drivers and dispatch, they can now monitor the traffic flow of their visitors. As they are a big manufacturing firm, the data that they now own can be complemented with their branding and marketing campaigns.
This is especially useful when they know that their visitors are arriving on-site for the first time. They can now prepare goodies or merchandises that are relevant.
3. Data is Gold
Now that you understand that ERP system is a powerful tool for records and that records tracking are much more extensive than it used to be (assuming you’re using a Modern Day ERP), then here’s the next thing to note – data is Gold.
Yes, it truly is.
Yet, most of the time, it is just an unpolished metal that is not sparkling. However, that does not mean it cannot be transformed into a bright and shinning piece of precious metal.
You understand what I’m mean (metaphorically)?
Well, I hope you got you excited. More importantly, how do we transform a unpolished metal to become a sold precious piece?
Before I can answer you that, let me make a slight detour.
Structured Vs Unstructured Data
You see, there’s all kind of data that is stored in the ERP system. Generally, data can be grouped into two main categories – structured and unstructured (see below for definition).
The problem is that many people only see the structured data from the ERP system. However, and unfortunately, the first problem is that most people can only get hold of structure data – assuming they are tech savvy enough.
While that itself is a challenge, the second but even bigger issue here lies in the fact that there is A LOT MORE unstructured data than structured one. And these unstructured data have the potential of converting to useful information.
Sadly, many companies don’t know where they can get hold of data. On the other hand, many ERP owners don’t really look into understanding the data that they have. Hence, they don’t realise how much information they can harness and track.
Thus, the general users are probably only harnessing 40-50% of the value of data. Which is why, there is a larger and larger demand for Data Scientist – the people who can convert unstructured data into powerful information.
Note: In case you’re not familiar with the terms, here’s a short explanation of the two types of data (source: samanage.com)
“Most IT workers are used to structured data. It is written in a format that’s easy for machines to understand, though it baffles most people unless they’re programmers. Structured data is easily searchable by basic algorithms. Examples include spreadsheets and data from machine sensors.
Unstructured data is more like human language. It doesn’t fit nicely into relational databases like SQL, and searching it based on the old algorithms ranges from difficult to completely impossible. Examples include emails, text documents (Word docs, PDFs, etc.), social media posts, videos, audio files, and images.”
That’s Why Data is Precious
Now that you understand the difference between both types of data, can you now see what many ERP users are missing out from? Can you see why many people are missing out on the power of ERP?
Of course, many people don’t know what they don’t know. Hence, there is no urgency or rush to jump into getting an ERP system. Yet, for those who truly understand it, they are definitely busy transforming the hidden gem that they own.
4. Predicting your Performance
Now the next level on utilizing your ERP system come from not only extracting useful information. More than that, you want to be able to create management information for forecasting and predictive purposes.
Now, what do I mean by that?
Extending the Line
If you have heard of the word data extrapolation, then you would probably have seen a simple chart like this (below).
As shown above, if you have sufficient historical data, you should be able to extrapolate your data (green line) to the right. That means, based on specific patterns you are able to predict what would happen within reasonable grounds.
When you have a enough forecasting information, you can then compare your expected outcome against your actual outcome. While this is a typical exercise done by accountants (known as Variance Analysis), the same methodology can be applied to your operations.
Apply in Operations
If you agree to the above, then here are some ideas where you can already track your operational performances:
- Delivery punctuality
- Packing and storage time
- Sales and customer retention
- Customer service effectiveness
- Customer satisfaction level
- Branding and marketing performance
I can really go on and on with this but I hope you get the idea already.
Note: If you’re interested to know more, this is what is known as leading and lagging goals tracking.
There are lots of good analytical tools out there. Unfortunately, many of them do not have convenient and easy access to data. Yet, many ERP users do not truly leverage on the data they have.
I truly hope that today’s article can give you some useful ideas and insight on how you can benefit from an ERP system especially in the area of tracking operational goals.
Thank you for reading and feel free to post any questions below.