SAP Cost/Benefit Analysis

Actully we are planning to implement sap in our fertilizer company. The thing which I need to know from you people is why we should implement sap in our company and what kind of steps should we take to implement sap in fertilizer company. Before we are running manualy so what kind of benefits sap will bring us for prolong period of time.

Yasir Bhatti

SAP COST/BENEFIT ANALYSIS

Reduce Receivables (0%- 75%)
1. Identify current working capital investment in receivables
2. Determine average days outstanding
3. Estimate reduction in days outstanding
4. Determine associated reduction in working capital
5. Benefit in the cost of capital for the reduction in working capital

SAP Enablers

1. On-line and integrated system provides faster invoicing cycling time
2. Better analysis tools for receivables analysis

Increase Sales (0% - 10%)

Calculation
1. Identify sales volume by product line
2. Estimate total sales capacity/production capacity (This should include allowances for preventive and unplanned
downtime for maintenance reasons)
3. Estimate sales value of lost available production
4. Estimate portion of capacity that an be converted to sales

SAP Enablers
1. On line real-time capabilities increase responsiveness and customer service
2. Improved customer forecasting

Increase Production/Sales (0%-5%)

Calculation
1. Determine total sales
2. Determine margin on sales
3. Determine capacity utilization
4. Estimate increase in capacity utilization
5. Benefit in the margin on additional products

SAP Enablers
1. Integration with MM provides earlier visibility of material/asset availability issues
2. Production planning helps identify unused capacity
3. Better forecasting and planning tools helps identify correct product mix to produce
4. Better planning tools help manage product conversion (tear down, setup, off-spec) costs

Reduce Inventory (0%-50%)

Calculation
1. Identify inventory value by category (if LIFO valuation, value is actually higher than reported)
2. Multiply inventory reductions by incremental carrying costs (carrying costs includes cost of capital, taxes,
insurance, and damage allowance)

SAP Enablers
1. Improved visibility of inventory
2. Improved forecasting
3. Improved data accuracy
4. Reduced process cycle times

Hope this will give you a small picture.

Faraz