Introduction
Understanding the return on investment for inventory management systems is useful for making informed decisions. This worksheet provides a framework for estimating the financial impact of automating point-of-use inventory. The figures below are example assumptions for illustration — substitute your own numbers before drawing conclusions.
Key Cost Areas to Evaluate
Labor Costs
Calculate current time spent on inventory-related activities including counting, ordering, receiving, and tracking. Automation can reduce some of this labor, but the amount depends on how much manual work exists today — there is no universal percentage that applies to every operation.
Carrying Costs
Inventory carrying costs commonly range from roughly 20-30% of inventory value annually, including storage space, insurance, obsolescence, and capital costs. This is an industry rule of thumb, not a measured Vysix result — use your own accounting figures where available.
Emergency Purchases
Rush orders and expedited shipping typically cost more than normal procurement. Track the frequency and cost of your own emergency purchases to estimate potential savings from better inventory planning.
Calculating Your ROI
Use this formula, with your own assumptions plugged in, to estimate potential return on investment:
ROI = (Annual Savings - Annual System Cost) / Annual System Cost × 100%
Annual Savings May Include:
- Reduced labor time spent on manual counting and reconciliation
- Lower inventory carrying costs from tighter stocking levels
- Decreased emergency purchase expenses
- Fewer stockout-related production delays
- Improved inventory accuracy reducing waste
Worked Example (Illustrative)
Here's a sample calculation using assumed figures, not a measured customer result. Suppose a plant assumes 10 labor-hours per week on manual inventory tasks at a fully loaded cost of $35/hour, plus an estimated $15,000 per year in emergency purchases it hopes to reduce by half:
Labor: 10 hrs/week × 52 weeks × $35/hr = $18,200/year (assumed)
Emergency purchase reduction: $15,000 × 50% = $7,500/year (assumed)
Total estimated annual savings: $25,700 (assumption-based, not guaranteed)
Replace every number above with your own figures. The payback period and total savings for any real operation depend on its starting baseline, and we don't promise a specific timeline or dollar figure.
Beyond Financial ROI
While financial returns are one input, also consider intangible factors such as improved decision-making through better data, easier compliance documentation, and less time spent on low-value administrative work.
