Made2Manage ERP ROI: Lower Material Costs

Fact: Lower material costs lead to higher profitability.

• Purchasing managers spend less time performing administrative tasks and more time sourcing material, volume ordering, and negotiating lower prices.
• Inventory is accurate, perpetual, and real-time — leading to fewer “impulse” buys based on incorrect assumptions. Net results include higher turns and lower costs.
• Reduced inventory translates into more available space for value-added manufacturing work centers.
• Physical inventory and cycle counting are much easier to conduct, resulting in more frequent execution and, consequently, increased inventory accuracy.

Net Benefit: Annual savings on material costs = $60,000 - $100,000

Logic: A $5 million company will reduce its material costs (as a percentage of revenue) by 3-5 percent. Based on average material costs equal to 40 percent of revenue, the net return to the company is $60,000 - $100,000 annually.