ERP ROI Calculator
Introduction
This Return On Investment (ROI) tool will guide you through the benefits that are possible to achieve through the implementation of an ERP (Enterprise Resource Planning) System. You can navigate the pages by clicking on the tabs below, or by using the Previous and Next buttons at the bottom of each page. There are 3 steps to complete the tool, and instructions on each step are detailed below.
Step 1 Provide Input: The first step is to answer each of the questions on the Client Input page. Default values have been provided for you, and explanations and guidance can be found by mousing over the red comment indicators on each field. By responding to these questions, you can tailor the ROI analysis to your specific environment. Step 2 View Analysis: After you've completed the Client Input page, you can view the ROI analysis on the ROI Detail page, which has also been summarized on the ROI Summary tab. The calculations themselves are spelled out for you in the help text. If you do not agree with any of the figures we have calculated, you are welcome to override the results directly on these pages. Step 3 Print Your Analysis: Finally, be sure to print your complete analysis by selecting Print from the File menu, and selecting the "Entire Workbook" option.
Kocer Consulting & Engineering, PLLC offers this calculator "as is." Kocer Consulting & Engineering, PLLC does not guarantee the performance, accuracy or results of this calculator. You acknowledge that you are using this calculator at your own risk. You may want to obtain advice from qualified professionals. Kocer Consulting & Engineering, PLLC hereby expressly disclaims any and all warranties, express or implied. You agree and acknowledge that Kocer Consulting & Engineering, PLLC and its agents or representatives shall not be liable to you or any third parties for any damages whatsoever arising out of your use of or reliance on this calculator.
Kocer Consulting ROI Calculator
Client Input
Please respond to the following inputs in order to tailor the ROI analysis to your situation. Input Prompts Projected annual sales revenue Total inventory value (RAW, WIP, Finished) Material Cost of Goods Sold (COGS) as a percentage of sales Inventory carrying costs as a percentage of sales Annual dollar value of new purchases Margin as a percentage of revenue Average accounts receivable balance Average number of days to collect an invoice (DSO) Interest earned on cash Percentage of COGS reworked or scrapped Annual direct labor cost Annual indirect labor cost Number of office staff Desired inventory turns with new system Estimated cost of Server, Operating System, Database & client licenses Initial cost of software and services
alysis to your situation. Response $5,000,000 $700,000 36.00% 4.00% $1,500,000 4.00% $800,000 60 2.50% 3.00% $2,000,000 $600,000 5 10 15000 $100,000
Kocer Consulting ROI Calculator
ROI Detail
These are your analysis results. Please review the help text of each item for an explanation of the benefit and the calculation. You may override any of the results you don't agree with. Reduction of Inventory and Carrying Costs Improvement in the timing and quantity of inventory receipts based on actual production requirements can substantially reduce inventory values and their associated carrying costs. Value of current inventory Material Cost of Goods Sold (COGS) Value of inventory after ERP implementation Total inventory reduction Carrying costs on inventory Total annual savings from improving the timely receipt of materials Reduction in Acquisition Costs Providing the purchasing department with visibility into future material requirements will improve vendor negotiations by enabling them to secure large purchase quantity breaks associated with annual buys. Those purchases have scheduled receipts, fewer purchase orders and require less expediting. Annual dollar value of new purchases Expected percentage savings in acquisition costs with new system Annual savings in acquisition costs Increased Sales Due to Improved Customer Service You can dramatically improve customer service by having immediate access to accurate information regarding past due backlogs, customer request information, change orders or reschedules. As a result, components are received when needed, customer quotes and delivery dates are accurate, and customers stay appraised of status. Current projected sales revenue Projected profit based on historical profit levels Total percentage improvement in sales as a result of improved service levels Resulting projected sales revenue after Kocer Consulting implementation Profit on new sales revenue based on historical profit levels Annual profit improvement from improved customer service levels Earned Interest on Shorter Collection Cycle Reducing the number of days to collect can save the company money on interest cost. Average accounts receivable balance Percentage reduction in average number of days to collect invoice Resulting monthly return of cash to the business Resulting annual return of cash to the business Annual interest on additional cash Savings in Engineering Rework Reducing or eliminating rework can lead to significant cost savings. Cost of parts reworked or scrapped Percentage decrease in rework
Annual savings in reducing rework Increased Direct Labor Productivity MRP will provide visibility into all parts on hand, on order and required. By reducing expediting, parts shortages, schedule changes, materials handling, and picking time, most companies have achieved a productivity increase in their direct labor force, as well as a reduction in their indirect labor force. Current direct labor costs Direct labor productivity savings after implementation Annual savings in direct labor productivity Decreased Indirect Labor Costs MRP will provide visibility into all parts on hand, on order and required. By reducing expediting, parts shortages, schedule changes, materials handling, and picking time, most companies have achieved a productivity increase in their direct labor force, as well as a reduction in their indirect labor force. Current annual indirect labor costs Estimated reduction in indirect staff Annual savings in indirect labor costs Savings due to Management of Critical Business Processes Enterprise business systems administer your customer order management, production management and financials so you stay on track with your business objectives. Elimination of work redundancy Revenue increase due to more accurate job costing Cost savings due to more efficient scheduling Annual savings in management of business processes Solution Cost Software and services Hardware & Infrastructure Maintenance and support Administration Total solution cost
m for an explanation of the benefit you don't agree with.
ion requirements can substantially $700,000 $1,800,000 $180,000 $520,000 4.00% $20,800 will improve vendor negotiations by Those purchases have scheduled $1,500,000 2.00% $30,000
ate information regarding past due omponents are received when needed, tus. $5,000,000 $200,000 0.58% $5,029,000 $201,160 $1,160
$800,000 5.00% $40,000 $480,000 $12,000
$54,000 5.00%
$2,700
g expediting, parts shortages, schedule uctivity increase in their direct labor $2,000,000 4.00% $80,000
g expediting, parts shortages, schedule uctivity increase in their direct labor $800,000 4.00% $32,000
n management and financials so you stay $22,500 $12,500 $16,500 $51,500 $100,000 $15,000 $9,000 $48,000 $172,000
Kocer Consulting ROI Calculator
ROI Summary
This page summarizes the ROI Detail report. Please review the help text of each item for an explanation of the benefit and the calculation. Annual Savings Summary Reduction of Inventory and Carrying Costs Reduction in Acquisition Costs Increased Sales Due to Improved Customer Service Earned Interest on Shorter Collection Cycle Savings in Engineering Rework Increased Direct Labor Productivity Decreased Indirect Labor Costs Savings due to Management of Critical Business Processes Total Annual Savings of an ERP Solution Total Solution Cost Net Benefit Return on Investment
Cost Savings Breakdown
Reduction of Inventory and Carrying Costs Reduction in Acquisition Costs
$20,800 $51,500
$80,000
$30,000
$1,160 $12,000
Increased Sales Due to Improved Customer Service Earned Interest on Shorter Collection Cycle Savings in Engineering Rework Increased Direct Labor Productivity
Decreased Indirect Labor Costs Savings due to Management of Critical Business Processes
$32,000
$2,700
t of each item for an explanation of
$20,800 $30,000 $1,160 $12,000 $2,700 $80,000 $32,000 $51,500 $230,160 $172,000 $58,160 34%
eduction of Inventory and Carrying
eduction in Acquisition Costs
creased Sales Due to Improved ustomer Service rned Interest on Shorter ollection Cycle vings in Engineering Rework
creased Direct Labor Productivity
ecreased Indirect Labor Costs
vings due to Management of itical Business Processes
Kocer Consulting ROI Calculator
ROI Assumptions
Assumptions are data points that do not generally change from company to company, and do not need to be responded to when completing this analysis. They are listed here, however, so that you may review them and override them if necessary. Data Assumptions Expected percentage savings in acquisition costs with new system Improvement in sales due to error reduction, just-in-time receipt of components Improvement in sales due to fast, accurate, actionable information Reduction in the number of days to collect on invoices Percentage decrease in rework Direct labor productivity savings Estimated reduction in indirect staff Percentage of time spent on tasks that would be automated by ERP Average salary of office worker Percentage increase in revenue attributed to more accurate job costing Percentage increase in revenue attributed to more efficient scheduling Percentage of software charged for maintenance and support Annual cost of administration
ny to company, and do not need to however, so that you may review
$
2.00% 0.33% 0.25% 3 5.00% 4.00% 4.00% 15.00% 30,000 0.25% 0.33% 18.00% $64,000