Developing a ROI Analysis for Supply Chain Projects

Introduction

This paper explores the typical storage technologies and configurations as well as provide general application advice for each. In addition, we provides the fundamental process to mathematically determine your optimal storage density based on the characteristics of your inventory and order mix.  

Best practices in the Supply Chain can be elusive, dynamic and expensive. Those that involve the procurement of tangibles such as equipment, automation and software need to earn their keep and pay back to the owner by delivering shareholder value and/or improved customer service. 

Accounting 101

There are those projects that are justified based on non-financial forces such as image, regulations or sheer desire. For all others, there must be a financial payback. 

In terms of basic accounting, the name of the game is to maximize profit. This requires that you increase revenue and/or reduce ongoing periodic on sporadic expenses. Thus there are two ways we measure the ROI of an investment; does it reduce costs or increase revenue over a given period of cash flow?


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