BENEFITS OF ERP IMPLEMENTATION

Tanmay
Sah

Qualitative Benefits

Qualitative Benefits

Better Material Requirement Planning Improved Information Accuracy Better Vendor Evaluation and Selection Synchronicity and Integration across departments Helps to quote competitively Eliminates redundancy and reduces paperwork

Quantitative Benefits
Methodology Assumptions Calculations Expenses and Benefits NPV and IRR

Methodology

Studied the Business Blueprints and mapped the Qualitative Benefits onto corresponding entries on the income statement Identified Sales, COGS, Inventory Costs and Working Capital as data that would be affected Calculated the expenses and the benefits of the implementation over a four year period and stated the Net Present Value(NPV) and the Internal Rate of Return (IRR) of the implementation over this period

Assumptions

Only three of the SAP modules being implementedProduction Planning, Sales and Distribution and Materials Management have been considered in the analysis. The Sales, Cost of Goods Sold, Inventory Costs and Working Capital of LSL have been projected for the coming four years using Compound Annual Growth Rate (CAGR). Fixed percentages by which these parameters on the income statement will be affected in the coming four years have been assumed. The benefits will be accrued only after the initial two years. A discounting rate of 10% has been assumed in the Net Present Value calculations and cash flows have been studied over a four year period.

Calculations