ROI and Payback in the Supply Chain Operating Network #2

June 13, 2017 Jerry Turner

Where’s the Beef?

In my previous blog posting, which you can read here, I described the new ROI models developed by Elemica based on our 15+ years of experience delivering B2B automation solutions and their associated benefits to our clients.  Using just a single data point, the client’s annual revenue, the models can produce very accurate estimates of the expected benefit of implementing Supplier Management, Customer Management, and Logistics Management solutions as part of your Supply Chain Operating Network. 

So the obvious follow-up question was, what does the expected benefit normally look like?  What kind of improvements and payback could you expect in your company from implementing these kinds of solutions?

Actually, we have found that the ROI and payback is quite dramatic.  Supply Chain Operating Network (SCON) solutions can drive tremendous benefit, not only in the area of labor savings and reduction of errors, but also in improved Days of Sales Outstanding (DSO) and Days of Inventory Outstanding (DIO). So they can have a positive impact on your Working Capital investment.Not only that, but in Logistics Management, SCON solutions can drive improvements in transport-specific expenses, such as detention, demurrage, and accessorial overages.

How about a specific example?  It turns out that, for a chemical company with annual revenue of $3.5B, the benefits for Procure-to-Pay, Logistics, and Order-to-Cash can be as follows:

 

 

 

 

 

Much of this is hard-dollar benefit, such as the $900K in Operating Expense improvement shown above in the Order to Cash (O2C) area.  You might argue that some of the benefits are “softer”, such as the Revenue Uplift, and most clients would not be willing to sign up with their management for the uplift.  But most clients will agree that the revenue uplift really does occur as an effect of implementing these O2C solutions, since it frees up their Customer Service Reps for more value-added activities such as up-selling and cross-selling.

The “monthly cost of inaction” calculation in the table above shows the money being left on the table while you delay implementing these solutions.  Comparing that cost of delay to the cost of the implementation project gives you the payback in months.  Amazingly, for most of the clients we work with, the payback occurs extremely rapidly, within 2 to 3 months.  It’s rare that it takes even 6 months to recoup your investment in these solutions, making them very attractive projects relative to other proposed programs in your business.

Contact your Elemica representative to gain access to these ROI models yourself, for your company.  I guarantee that it will be worth your time, and the results will be eye-opening!  

 

 

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Elemica Executive Quoted in May 2017 Supply & Demand Chain Executive Magazine
Elemica Executive Quoted in May 2017 Supply & Demand Chain Executive Magazine

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ROI and Payback in the Supply Chain Operating Network #1
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Having delivered these kinds of automation solutions and their associated benefits to our clients over more...