ROI formula= (return, saving – investment)/Investment
Terry- Inventory Maintenance- rank #3, cost $90,000 in person months (10*$9,000)
ROI: 18.95% (339,000 – 285,000) / 285,000
339,000 = 113,000 * 3 years = annual savings in productivity
285,000 = 90,000 + (65,000 * 3 years) = cost in person months + annualized depreciation
Inventory Maintenance System’s main functionalities allow for adding, modifying, or omitting inventory data. Data consists of: description, cost, case pack, vendor information, weight, shipping unit, and other information. System has been feeding data to other systems for 30 years. The system requires manual effort due to an old architecture. The system is not flexibility to add new data fields, which might be a problem for adding RFID data to the system in the future.
Replace the system takes time and may cause unpredictable errors during the replacement. When errors occur, they can negatively impact to other systems like invoicing. This project is the most difficult compare to the other projects. The cost for this project is significant, and the ROI is not very good. If this system is still working, we should focus on the other critical project. The replacement is unnecessary until the needs of implement new datas.
Reason for ranking- System is way overdue for replacement, current system restricts further automation and innovation, current system requires time consuming manual efforts and is prone to error, errors affect other systems (invoicing), system will restrict adding future technologies(RFID)
Background: System stores new items in inventory, main functionalities allow for adding, modifying, or omitting inventory data. Data consists of : description, cost, case pack, vendor information, weight, shipping unit, and more. System has stayed 30 years, feeding data to other systems.