How to Evaluate an Investment for In Premise Enterprise Mobility
We talk to many potential clients who are considering in premise enterprise mobility to improve the performance of their business.
It is still a surprise that even in these tough time economic times orgainsations decide to invest in a solution without measuring and evaluating its financial impact.
Figuring out a cost justification is really a two part exercise. Not surprisingly it balances the immediate cost of the investment against the savings you expect in the long run. This post is all about the first stage the next one introduces the maths involved.
What Are The Up Front Costs ?
You will need to determine what sort of in premise enterprise mobility system you will need and what it is likely to cost. For example, if you are going to use it for some sort of inventory control in a yard or warehouse you will no doubt need some sort of rugged Wi-FI enabled device with built in barcode scanning capability. If you are delivering product to a customer by van you may need to specify something with a larger screen WWAN capability mobile printing and a suitable in vehicle docking system.
At this point many projects spend a lot of time compiling scorecards to evaluate one potential offering with another. Whilst this total cost of ownership TCO phase is a key step the sooner you can get on to measuring potential savings the better. Much has been written about this in the context of Supply Chain Excellence.
Can you Estimate the Savings ?
Total costs can be spread out over time and can include soft costs which can themselves be tough to quantify. However you should reasonably expect to see some improvements in income and savings in labour operational costs and inventory. For example:
Income
- Better cost data means better quality bids.
- Improved customer satisfaction by having better access to data.
Labour
- Process Improvements and better rostering of tasks.
- More efficient use of time.
- Reduce administration time and fewer meetings
- Reduce the need for data entry.
- Less overtime.
Inventory and Operations
- Lower carrying costs.
- Less scrap or re-work.
- Fuel.
- Better Factory and warehouse and vehicle utilization.
The challenge is coming up with a realistic estimate of the values associated with these areas.
So we have some potential savings where you could reasonably see a positive benefit from doing a project. The next step is to determine if the project is viable and to do this you will need to compare it to the cost of the investment necessary to carry it out.
There are a number of ways to evaluate this but two that are worth beginning with are:
- Payback Period
- Net Present Value
Next time we will go over the calculations necessary to evaluate an in premise enterprise mobility investment using both of these methods.
This involves some scary maths so make sure you have a pencil and a pad of paper handy !
