ROI – Answering the return on investment question for order fulfillment projects
How do you determine ROI for various order fulfillment solutions?
Almost
every endeavor depends on ROI. This section is designed to help you calculate
return on investment for automation, material handling, information systems,
and other order fulfillment technologies. Methods
Return on investment analysis for Order fulfillment investments, especially in large capital projects, is managed differently in different organizations.Common ROI methods include:
- IRR – internal rate of return
- NPV – net present value
- ROA – return on assets and other financial measures as each organization dictates.
Focus
This site section focuses on the kinds of functions and processes that need to be examined in developing order fulfillment strategies and attaining results from investments.Order Fulfillment strategies are driven by client requirements for shipping, handling practices, freight costs, point of receipt management, material ID and tracking and point of use quality upon receipt. The complexity of building clear requirements and converting those into the right mix of equipment & personnel is critical. Ultimately, final solutions will provide operating models for comparison by having the right mix of technology and process.
Operating Models in ROI
Models that account for building and construction costs, equipment costs, and operating costs—including staffing—are the key to determining ROI. Well-constructed models with valid cost information allow order fulfillment strategies to be examined for cost variance and benefit between competing solutions.The ways automated order fulfillment strategies can affect processes and equipment/facility design isn’t fully understood.
Understand all the implications
The key to remember is that each solution provides the required performance over time at a cost. In some instances, the ability to postpone processes (activities) or speed them up can eliminate tasks, people, and resources.For example, going to an appointment scheduling process because an order fulfillment strategy can deliver rapid dock service may reduce the or eliminate the number of docks, the drop lot size, the number of yard trucks, the associated cost of yard construction and so on. In other cases, denser storage can reduce cube and thereby costs of running a cooler or freezer operation. It is critically important to be sure and value in all the factors that can support investment arguments for desirable order fulfillment approaches.