Each of the process goals in the proceeding section can be related to quantitative benefits. Examples are presented below.
Process Goal Improve the process and content of decision making
Examples of
quantification
Example: Reducing losses due to bad loans.
Calculation: reduced percentage of bad loans * number of loans made * loss per loan
Process Goal Improve Intra-organization communications
Examples of
quantification
Example: Assume that one department sent information via Email to another department who in turn used it to update a status of a particular transaction and that this process is being replaced by one that allows the first department to make updates directly.
Calculation: Number of status send per day * (minutes spent per transaction in old process – minutes spent per transaction in new process) * (1 work day / number of minutes per day) * adjusted average labor cost per workday * scaling factor
Assumption: Some fraction of saved employee time is directed toward other productive work, as represented by “scaling factor”
Process Goal Improve system uptime
Examples of
quantification
Example: New diagnostic software is being deployed to identify problems with machinery within a factory. This is expected to reduce downtime,
Calculation: Number of machines * reduction in length of outage (hours)* number of units produced per hour * revenue per unit
Assumptions: Equipment is currently 100% utilized, so increased production due to decreased downtime is desirable.
Process Goal Provide better coordination among functional areas in your corporation
Examples of
quantification
Example: Set up of dedicated test servers / regions requires coordination of multiple groups such as DBA, system administrators, hardware support groups, messaging groups. A simple wiki based approach is proposed to reduce the need for multiple request forms, Emails and phone calls.
Calculation: Number of tests conducted per year * time saved by consolidated information on a wiki page * adjusted hourly rate of staff * scaling factor.
Assumption: Some fraction of saved employee time is directed toward other productive work, as represented by “scaling factor”
Process Goal Reduce transaction costs by making it easier for suppliers to handle orders
Examples of quantification
Example: Electronic integration of internal ordering system with suppliers order fulfillment systems to reduce manual processing.
Calculation: Number of orders placed * time saved by not manually processing * adjusted labor rate * scaling factor + Number of incorrect orders * (time per reorder + time in return processing) * adjusted labor rate.*scaling factor
Assumptions: Some fraction of saved employee time is directed toward other productive work, as represented by “scaling factor”.
Note: There may be additional benefits if reduction in incorrect orders results in more output due to having fewer delays due to needing to wait for materials to arrive.
Process Goal Reduce variance in supplier lead times
Examples of
quantification
Example: Electronic integration of internal ordering system with suppliers order fulfillment systems to reduce manual processing.
Calculation: Increased number of units produced * revenue per unit
Assumption: Erratic delivery of supplied was leading to lost production. Construction of products were delayed waiting for supplies.
Process Goal Enhance the ability to monitor the quality of products and services from suppliers
Examples of
quantification
Example: Deployment of automated testing software to test circuit boards prior to use in assembly of products.
Calculation: Percentage of defective circuit boards * cost of rework per unit produced.
Process Goal Help to gain leverage over suppliers
Examples of
quantification
Example: A system supporting comparison of products and prices across suppliers could allow discounts to be negotiated. Calculations: Cost savings per input * number of inputs used per period.
Process Goal Help to coordinate closely with suppliers
quantification transaction cost on orders and reduced time to supply resulting in lower inventory requirements
Calculation: Savings per order * number of orders made Calculation: Dollar amount of reduction in inventory * cost of capital per period.
Process Goal Increase the level of production / Improve Employee Productivity
Examples of
quantification
Example: Automation of business process
Calculation: Time saved per transaction (hours) * number of transactions * adjusted hourly rate of employees * scaling factor
Assumptions: Some fraction of saved employee time is directed toward other productive work, as represented by “scaling factor”.
Example: Automation of factory equipment
Calculation: Increased number of units produced * revenue per unit
Process Goal Reduce the cost of materials
Examples of
quantification
Example: Ordering system integrated with suppliers
Calculation: Percentage discount * total cost of orders per period.
Assumption: Suppliers will offer a discount because of lower costs on their end.
Process Goal Retire system(s)
Examples of
quantification
Example: Implementation of new system allows retirement of old system(s)
Calculation: Hardware Costs (Old System) – Hardware Costs (New System) + (Full Time Equivalents (Old System) – Full time Equivalents (New System) * Adjusted labor rate per year * years of service of new system.
Assumptions: New system is less costly.
Process Goal Reduce waste / scrap
Examples of
quantification
Example: Factory automation reduces scrap / waste production
Calculation: Reduced disposal costs
Process Goal Reduced Headcount
Examples of
quantification
Example: Automation of business process
Calculation: Number of headcount reduced * adjusted cost per period
Calculation 2: Number of hours saved per day per employee / number of hours per work day * adjusted daily rate of pay * days in period * scaling factor
Assumptions: Some fraction of saved employee time is directed toward other productive work, as represented by “scaling factor”.
Process Goal Reduce employee turnover
Examples of
quantification
Example: Improved access to information about employee benefits via new intranet site increases employee satisfaction and decreases employee turnover.
Calculation: Total number of employees * reduction in turnover rate * training costs for new employee
Assumption: Current employee headcount is required to support business and new employees face a significant learning curve.
Process Goal Improve system uptime
Examples of
quantification
Example: Better production monitoring software to minimize production outages.
Calculation: reduction in down time (hrs) * units produced per hour.
Assumption: Lost production time cannot be compensated for by unpaid overtime for employees or increased rate of production.
Process Goal Reduce days of inventory
Examples of
quantification
Example: Inventory control system supporting monitoring of actual inventory levels and allowing lower levels of inventory to be stored.
Calculation: Reduced level of inventory (dollars) * cost of capital.
input and in inventory of finished product.
Process Goal Reduce rework
Examples of
quantification
Example: Automation of manual processes leads to lower error rates.
Calculation: Number of defective units * cost of repair per unit
Calculation 2: Number of defective units * (cost of manufacturing + cost of disposal) for unsalvageable units Calculation 3: Number of times process is run per day * reduction in error rate * process time (hrs) / number of hours per workday * adjusted daily labor rate * scaling factor.
Assumptions: Some fraction of saved employee time is directed toward other productive work, as represented by “scaling factor”.
Process Goal Improve product / process quality
Examples of
quantification
Example: Automation of manual processes improving quality. Calculation: Increased customer reorder rate * revenue per unit
Note: See reduce rework for additional examples
Assumption: Higher quality products increase customer satisfaction leading to higher reorder rate.
Process Goal Reduce time to market
Examples of
quantification
Example: Deployment of better or integrated software development tools reduces time to market.
Calculation:
Assumptions: New tools do not become shelfware. Early entry into market leads to at least a temporary increase in market share.
Process Goal Reduce variance on products/service quality
Examples of
quantification
Note: See Improve product / process quality
Assumption: Customers care about variance in quality as well as mean. Note 2: In some cases quality variance may be more significant than the mean quality. A small percentage of highly defective units (good mean quality with high variance) can change customer perceptions more than a large percentage
of slightly defective units (average mean quality with low variance) in some cases.
Process Goal Facilitate the tailoring of products/services to markets
Examples of
quantification
Example: System improvements allow production of customized output or customization of processes to better satisfy customers.
Sample Calculation: Increased number of units sold * cost per unit.
Process Goal Reduce the cost of designing/developing new products or services
Examples of
quantification
Example: Integrated development tools
Sample Calculation: Decrease in hours for design/development * adjusted hourly rate * scaling factor. Assumptions: Some fraction of saved employee time is directed toward other productive work, as represented by “scaling factor”.
Process Goal Provide support for identifying market trends via analytical tools
Examples of
quantification
Example: Statistical analysis system allows detection of market trends and allows greater investments in growing market segments.
Sample calculation: Projected increase in sales * revenue per unit.
Process Goal Assist the firm in locating or serving new market
Examples of
quantification
Example: See Provide support for identifying trends via analytical tools
Process Goal Enhance the accuracy of sales forecasts
Examples of
quantification
Example: See Provide support for identifying market trends via analytical tools
Process Goal Increase firm’s ability to anticipate customer needs
Examples of
quantification
Example: See Provide support for identifying market trends via analytical tools
Process Goal Track market responses to pricing strategies, discount strategies, promotions
Examples of
quantification
Example: See Provide support for identifying market trends via analytical tools
Process Goal Optimize existing markets
Examples of
quantification
Example 1: See Increase cross-selling
Example 2: See Provide support for indentifying market tends via analytical tools
Process Goal Increase cross-selling
Examples of
quantification
Example: CRM (Customer Relationship Management) system allowing better cross selling, that is, the selling of other products to current customers of one of the firms products. Sample Calculation: Increased sales of product X to current customers of product Y * revenue per sale of X.
Note: This increase can be determined in a pilot study comparing the results of sales staff with access to the CRM system to those without.
Process Goal Reduce days of receivables
Examples of
quantification
Example: New accounts receivable or billing system that allows increased collection rates, tracks missing or late payments to allow better collections and reduces errors in billing.
Calculations: Number of days receipt of payment is earlier * amount received * interest rate for risk free investment
Note: risk free interest rate is used to produce a conservative estimate of “revenue”.