eCommerce and eBusiness
benefits are difficult to quantify for YOUR particular situation - we are dealing with relatively new
technology with a limited history, and every situation is different.
closely related to EDI - a technology that has
been in place for around 30 years. The major difference is that modern
Internet-based technology provides the same
benefits as EDI - but at a much lower cost.
This page uses industry
average figures for companies operating traditional EDI systems. The
figures are likely to be close to those for companies merging their
operations with the Internet for the first time.
(For an in-depth
analysis of EDI see: http://www.tradanet.intnet.mu/roi.htm).
There are 3 sections on this page:
Like EDI, implementing
eCommerce-eBusiness can provide strategic and operational benefits.
- Strategic benefits include strengthening relationships with customers and vendors, resulting in a
greater advantage against the competition.
- Operational benefits
include reducing both the time and personnel required to complete
business processes, and reducing strain on other resources.
page and complete it offline or contact us
via e-mail for a free "what-if" Excel spreadsheet
can provide your business with strategic benefits is probably best answered by
asking yourself the following questions:
Is the ability to meet customer and vendor
demands and requirements a driving factor in your business, perhaps
even more a factor than pricing?
Is the timing and accuracy of the
delivery of goods and services critical to your customers and vendors?
Could a significantly faster delivery time to your customers and
turned into a competitive advantage?
Will being "eCommerce
enabled" allow your firm to penetrate new markets or find new
Are customer loyalty and long term alliances a high
priority for your firm?
enabled systems systems favourably affect your payment terms and agreements with customers and
If you answered
"Yes" to any one of the above questions, then your company
could probably benefit from eCommerce-eBusiness systems. (For an
summary of industry averages see
Real eBusiness benefits)
|Strategic Benefits - Assume your firm
increased its sales and number of customers and vendors by generating a 2.5% increase to the firm's annual bottom line. Calculate and enter the value of the increase here:
With an eCommerce-eBusiness system in place, you
should save time and money processing
and executing customer orders. Studies of EDI systems show that it takes up to five
times as long to process a purchase order manually as it does
electronically. With eCommerce-eBusiness in place, documents such as
processed electronically and error-free, minimising processing time and
the number of staff required. The following
is a list of key operational areas that can benefit from
eBusiness-eCommerce. (The estimates are based on EDI experience).
Administration Costs - EDI studies suggest that an automated system
saves 2/3 of the costs involved in
manually processing a customer order.
Reductions - Calculate the cost of processing customer purchase
orders each year
then multiply that figure by 50%. Enter the amount here:
Personnel Reduction -
A properly enabled eCommerce-eBusiness system will reduce labour time and cost in the following
- document preparation
- error detection and correction
- mail preparation
- telephone calling
- data entry
- supervision expenses
EDI studies show as much as a 50% reduction in
|Personnel Cost Reductions -
Estimate the cost savings if you reduced sales order processing
personnel costs by 25%. Enter the amount here:
Cycle Time Reduction -
Cycle Time is the amount of time between a customer placing and order and
receiving the goods. Reducing cycle times can:
- increase competitive
- decrease shrinkage
- improve cash flow.
Studies show EDI is able to
reduce order cycle times by 50%.
|Cycle Reduction Time -
Assume you can reduce order cycle time by an average of 25%, which in turn
helps to increase
sales orders by 10%. Assuming a 5% profit
margin, enter the profit increase resulting from the 10%
increase in sales here:
Inventory Reduction - eCommerce-eBusiness
systems can reduce inventory costs because of:
- more accurate demand
- more dependable supplier schedules.
To estimate the possible
inventory, multiply the number of days by which
order cycle-time can be reduced by the value of inventory on hand.
For example, if you carried an eight-week supply of finished goods
and were able to reduce cycle time by 25% from 30 days to 22.5 days,
only be necessary to hold a six-week supply of finished goods.
This would result in reduced costs including cost of goods,
storage space, service, and insurance.
|Inventory Reduction -
If you reduced your inventory by 10% due to better demand forecasting,
how much money could your company save in inventory carrying costs?
Enter the amount here:
Cash Flow Improvements - Reduced
operating expenses and improved accuracy when purchasing provide direct cash
flow benefits. With eCommerce-eBusiness systems you should be able to:
- negotiate better payment
- take advantage of discounts
- enter more long term
Although this area is difficult to quantify, most accounting
departments can attest to the numerous benefits of improved
corporate cash flow.
|Improved Cash Flow -
How much cash could you bank if you were able to make cash savings.
Enter the amount here:
Improved Order Fulfillment - EDI-based reporting provides managers with access to
data and process-status information, which enables them to make
more accurate and informed business decisions. EDI-based reporting
can also improve the analysis of pricing changes and promotional
ties. Most importantly, it can maximize product availability,
despite shifting demand, by enabling faster analysis and
recognition of demand trends. EDI-enabled manufacturing firms reported an
average inventory reduction of 10%.
|Improved Order Fulfillment
- If you
reduced stock outs and backorders by 10% due to better reporting and demand forecasting,
what would the increased margin on an annual increase in sales volume be
worth. Enter the amount here:
Summary of Benefits
Reduced Administration Costs
Cycle Time Improvement
Cash Flow Improvements
Improved Order Fulfillment
Identifying the types of costs
associated with eCommerce-eBusiness are relatively straightforward.
Quantifying the costs is not feasible until you have a clear understanding
of the system objectives and have identified the best technology for the
job. The types of costs you need to consider are:
- Software Purchase price -
Totally dependent on the selected solution - hence the range of menu
options in our eBusiness sections of the site.
- Ongoing Maintenance cost
- allow for 15-18% of the initial cost annually.
- Communication expenses -
Dependent on the bandwidth your system will require, the number and
nature of the connections.
- eCommerce-eBusiness Personnel
- Very dependent on whether you are running your computer systems
in-house, and how far you integrate your systems using
eCommerce-eBusiness techniques. A key to success is to have at least one
person within your organisation taking charge of your
If you would like to discuss
how our products and services can make a difference to your business, send us
your telephone contact details
and we'll get back to you within 72 hours - wherever you are in the world -
PO Box 633, Tokoroa 3444, Waikato, New Zealand
Mobile: +64-27-306-8999 After Hours: +64-7-886-0445
Main Contact: Noel Ferguson
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