The basic premise of any ROI tool is to show how quickly there will be payback on the investment made.
But, what does this really mean? How can one define Enterprise mobile app ROI?
The answer can seem complex, depending on what is most important to a company. But, the truth still comes back to achieving quantifiable financial improvements for the bottom line.
The easiest way to calculate an Enterprise mobile app ROI is to perform and evaluate time and effort comparisons.
Here’s a simple example. If the time and effort to perform a certain task manually (write results on paper and later key the information into the ERP software) is X; and, if the time and effort to perform the same task with Enterprise mobile apps (real-time) is Y, then it should be straight forward to calculate the time savings difference between the two methods and to calculate the resulting cost savings for a single task.
Then, all one has to do is determine the typical number of task to be performed in a period of time – an hour, a shift, a week, a month, or a year. Multiply the single task savings by the estimated number of tasks to be performed and the ROI picture begins to emerge.
Are these the only ROI factors to consider? Not really.
Perhaps the area where there is the most over-looked ROI savings can be found is in “error corrections,” which is directly tied to efficiency and productivity.
The rule of thumb for error corrections is done by estimating the number of errors that need addressing per 1,000 entries. An entry can be defined as a single transaction or as a single line within a transaction. Companies define this term differently all the time. For this discussion, let’s assume an error is a single line-item within a transaction with some type of problem.
Correcting errors is a nebulous term that can mean anything unexpected that causes a focused level of staff interaction. Essentially, the ERP software may be expecting something completely different than what reality says is right, which triggers the error. Numbers transposed – keyed wrong; wrong quantity entered; wrong location entered; damaged goods that can’t be used; lost products that can’t be found; expedited orders that take priorities over others; QC holds; etc. These are everyday problems for nearly all companies.
Most supervisors I’ve talked to say they spend, on-average, 2-hours to research, to validate, to document, and to correct a single error. Your results may vary.
If a company believes they are 95% efficient daily, that also implies they are 5% inefficient. Those inefficiencies are the errors that must be corrected and fixed. Using the entries rule of thumb above, this means 50 entries out of 1,000 are in error. Fifty entries times two hours each equals 100 hours of staff time required to fix and correct errors. Wow! That’s a lot of time and staff resources!
Error correcting can also become an easy target to realize immediate savings by employing mobile app technology that improves efficiency.
For example, raising and improving efficiency from 95% to 98% would imply that only 20 entries out of 1,000 are in error. Twenty entries times two hours equals 40 hours of staff time to fix and correct errors. That means there is a potential of 60 hours savings difference!
When one does this math, it is easy to discover the financial impact of improving efficiency and reducing error correction time.
And, of course, there are a number of important intangible savings that can be realized from mobile Enterprise business apps including better inventory accuracy, better order fulfillment, better customer satisfaction, and, best of all, repeat business. These are harder issues to quantify true value; but, they are vitally important never the less.