Small Manufacturers Look to Justify Automation Technology ROI by
Thomas R. Cutler
Tight budgets, limited resources, and too few hours in the day plague most small manufacturers. Growth is uncomfortable and these small businesses need extra rigor when buying any software solution for the business. Ultimately the challenge is to determine if the benefits of new technology are greater than the cost. Most commonly this is done by calculating an ROI (Return on Investment). There are several ways to calculate this, but the most common and practical is calculating the payback period on the purchase price, which often includes software and training, or the software alone.
Many millions of these small and midsized manufacturers have simply turned to QuickBooks by Intuit for most accounting functionality. These companies are able to run business more efficiently and also use proven solutions that integrate with QuickBooks. For some of these very small companies the QuickBooks solution alone has been sufficient.
QuickBooks owns an estimated seventy-eight (78%) percent of the accounting software market. Analysts estimate there are more than 7.1 million copies of QuickBooks in use. By conservative estimates, more than forty (40%) percent of these organizations directly need or could strongly benefit from inventory control.
Fishbowl Inventory has been the most frequently requested inventory solution for QuickBooks users for more than a decade. As small-to-medium companies grow and face increasing competition, the flexible cost-effective combination of QuickBooks and Fishbowl grows alongside SMBs at an affordable price.
There is little dispute that software is critical to remain competitive. Calculating the ROI includes the examination of several important concepts.
Automation and Acceleration
Automation simply allows a small business to process faster. Accelerating the rate in which customers are served, impacts revenue through repeat business. Many small manufacturing firms are able to quantify a process in production that takes five hours each week, but with the proper inventory management solution is reduced to just fifteen minutes. The cumulative result of this time savings week after week is significant and leads to more informed business decisions based on better and timelier information.
Data Entry & Data Entry Errors
There is no excuse to enter data into different systems two or three times. There is no excuse for data errors due to manually entering data into systems again and again. Data entry should be done once when possible, otherwise time is wasted and there is a great likelihood of introducing opportunities for human error.
Often those human errors cost small manufacturers (who can least afford it) lost profits and lost customers. Increasingly small businesses are combining Fishbowl Inventory, with QuickBooks and Intuit Merchant Services to virtually eliminate all multiple data entry tasks.
Receiving, Pick, Pack & Shipping
There are great savings realized in receiving and shipping products using barcode scanning. Savings are found in moving inventory between warehouses, or from warehouse to storage rooms or trucks. Monthly manual inventories, and searching for items are no longer necessary; these are areas where most companies experience ongoing savings.
ROI can be quantified by the ability to automate and accelerate a business resulting in new opportunities which increase existing revenue streams or create new ones that were not possible prior to the implementation of the technology. Often revenue is lost due to stock-outs, not being able to find the inventory at the moment it is needed; SMBs regularly have time-consuming manual processes in order fulfillment that simply take too long. The ability to bring inventory and supplies in on time, track every step, and then quickly ship, ensures maximization of revenue opportunities. Estimated monthly revenue increases due to automated reordering, automated work orders/purchase orders, never having a stock-out; knowing exactly where inventory is located and improved shipping & handling. Many manufacturers report the ability to expand product offerings due to better tracking and management of inventory.
With the right software one person can do the work of three. The cost savings can be dramatic. Factor in deploying those extra employees in other areas of a company to help generate additional revenue, and the ROI justification is reinforced once again.
This element is often missed in an ROI analysis. SMBs often lose money simply because there is no process to enforce compliance with pricing or other policies. Fidelity to compliance creates automaticity which ensures profits are maximized, procedures are consistent, and processes are enforced for greater efficiency and profitability.
Thomas R. Cutler is the President & CEO of Fort Lauderdale, Florida-based, TR Cutler, Inc., (www.trcutlerinc.com). Cutler is the founder of the Manufacturing Media Consortium including more than 4000 journalists, editors, and economists writing about trends in manufacturing, industry, material handling, and process improvement. Cutler is a member of the Society of Professional Journalists, Online News Association, American Society of Business Publication Editors, and Committee of Concerned Journalists, as well as author of more than 500 feature articles annually regarding the manufacturing sector. Cutler can be contacted at email@example.com.
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