Principios nutritivos

The business case is made for the development and the operation of the intelligent web application. It includes the costs and benefits for Remeha. Corporate social responsibility is also taken into account for the proposed situation. Data and assumptions are needed for the business case. These are discussed first.

Data

Data about the returns is required to calculate the reduction of returns with the gatekeeping model (see Table 8.3). An assumption is that the top 10 customers (both National and Export) with the most returns in 2013 get the gatekeeping model.

Table is not available in the public version of this report.

It is hard to determine the reduction of returns with the gatekeeping model. XX% of the returns was out of warranty in 2013. This percentage can be avoided anyway. Looking at the percentage of parts that have obtained warranty and is scrapped after the judgment is XX% (based on the returns in 2013). Different scenarios are calculated in the business case. A range from 25% to 45% less returns is taken.

The starting point is a reduction of 35%. Research conducted by a specialized company in return handling results that more than 35% of the returns are unnecessary (S&H Productfulfilment BV , 2014). We analyzed other scenarios for the sensitivity analysis. More required data is described in Appendix E.

Costs and benefits

The business case is constructed with the costs and benefits for Remeha. The payback period is determined in the end.

Costs

The total costs are the development costs for the intelligent web application, the company visits and the annual maintenance for the gatekeeping model in the web application (see Table 8.4).

Customer Web application Gatekeeping model Retrieval model Link standard fees with part

Simple process

Wholesaler ✓ ✓ ✓

Large service provider ✓ ✓ ✓ ✓

Small service provider ✓ ✓

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Cost elements Cost

Development

Development costs intelligent web application € 75,000.00

Company visits

Travel time to customer (per year) € 18,000.00

Fuel (per year) € 3,000.00

Maintenance

Maintenance application (per year) € 9,000.00

Initial cost € 75,000.00

Annual cost € 30,000.00

Table 8.4: Cost for proposed system (fictitious numbers)

Benefits

The benefits for Remeha are a reduction in administration activities because of the data matrix technology, less handling cost because of less returns and less transport cost for the returns from export partners. The detailed costs reductions of these activities are described in Appendix E.

The total reduction for Remeha expressed in Euros is (Table 8.5):

Scenario 25% 30% 35% 40% 45%

Reduction administration

cost (per year) € 12,600.00 € 12,100.00 € 11,700.00 € 11,200.00 € 10,800.00 Reduction handling cost (per

year) € 23,800.00 € 28,600.00 € 33,300.00 € 38,000.00 € 42,800.00 Reduction transport cost

export returns (per year) € 16,400.00 € 19,700.00 € 22,900.00 € 26,300.00 € 29,500.00 Annual reduction total € 52,800.00 € 60,400.00 € 67,900.00 € 75,500.00 € 83,100.00 Table 8.5: Total reduction Remeha (fictitious numbers)

The net present value (NPV) is needed to determine the payback period. The formula is: NPV

(1 )t

Future value i



 , with i is the discount rate and t is the period.

An opportunity cost of capital of 6% is taken for the discount rate. The cash flows for the coming five years are calculated for the scenario of 35% less returns (see Table 8.6).

Year 0 1 2 3 4 5 Costs Remeha € 75.000,00 € 30.000,00 € 30.000,00 € 30.000,00 € 30.000,00 € 30.000,00 Benefits Remeha € - € 67.900,00 € 67.900,00 € 67.900,00 € 67.900,00 € 67.900,00 NPV Remeha € - 75.000,00 € 35.754,72 € 33.730,87 € 31.821,57 € 30.020,35 € 28.321,08 Benefit Remeha-costs € - 75.000,00 € - 39.245,28 € - 5.514,42 € 26.307,15 € 56.327,50 € 84.648,59 Table 8.6: Cash flows in the coming five years (fictitious numbers)

The payback period for this scenario is two years and two months. The net present value over five years is € 84.648,59. The payback period is three years and ten months for the scenario of 25% less returns and the payback period is one year and six months for the scenario of 45% less returns. More details are given in Appendix E.

Other advantages

Other advantages that cannot be expressed in Euros are:

 Shorter cycle, because of the data matrix scanning and less returns.

 More detailed information, because of the web application. The customers that have returns exactly know the required information.

Corporate Social Responsibility (CSR)

The gatekeeping model has from the CSR perspective the advantages that there is less transport and therefore less CO2 emission. The estimated reduction is 157 pallets per year with the assumption of 35% less returns (see Appendix E for details).

Conclusion

The intelligent web application with gatekeeping model and the data matrix technology has the following consequences for Remeha, the customer and in the CSR perspective.

Remeha:

 Initial investment of 75,000 Euros (fictitious number).

 Annual cost of 30,000 Euros (fictitious number).

 Annual reduction of 67,900 Euros (based on 35% less returns) (fictitious number).

 Payback period of 2 year and 2 months (based on 35% less returns).

Customer:

 On average 0.98 Euro per part transport cost reduction for customers using the gatekeeping model (fictitious number).

 Shorter cycle time, because returns are handled faster (for all the customers).

 46% cycle time reduction for returns from export partners.

 Fast credit for returns that do not come back to Remeha (applies for wholesalers, large service providers and export partners).

 Simple process to start the warranty procedure (for all customers).

 The link between standard fees and the corresponding part is possible.

 The wholesalers keep the possibility for customer loyalty.

CSR perspective:

 Less CO2 emission, because of less transport (and therefore less weight) of pallets.

The proposed process has advantages for the customers. The policy plan contributes to excel in the base Customer Value Proposition. This results in a broader base to improve the customer relationships and to grow as organization. Customer segmentation also fits well with the ambitions to start with partner programs. The proposed situation is also good in the CSR perspective.

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Looking at the business case, the policy is interesting for Remeha. The payback period for the investment is slightly more than two years and the policy has benefits after that period.