The New HR Analytics by Jac Fitz-enz

Author:Jac Fitz-enz
Language: eng
Format: epub
ISBN: 9780814416440
Publisher: AMACOM

The Inventory Control System

As an integral part of the plan to increase efficiency and throughput in the distribution center, the site plan includes a state-of-the-art inventory control system. It features handheld scanners and a central software package that ties directly into Sundance’s enterprise resource planning system. Based on anticipated needs, the system design specifications and performance standards are set. Requests for proposals go out to a variety of vendors and a competitive bidding process ensues. Eventually, a vendor and system are selected, and the final bid amount is included in the budget.

In planning the anticipated return on investment in the scanning system, the financial analysts considered the cost of purchase, the cost of physical implementation, and the cost of training associated with getting the system up and running. As the system is implemented, it will take time before the return on investment is realized. It is not until the system is fully functional and accurately tracking inventory and orders that the full financial return on the system will be realized.

The relative return on investment in the scanning system can be tracked as illustrated in Figure 5.5. In the initial installation of the system, there is a net financial deficit created based on the investment to procure the system shown at Point A. As the distribution center begins operations, time and resources are invested in implementing the system, articulating outputs with order entry and inventory control processes. As the various bugs are worked out of the system, and the system begins functioning as it was intended, the efficiencies are realized and the target level of production is gradually achieved (Point B). Eventually the system is operating at design parameters defined in the operations plan; we may refer to this as “full productivity” (Point C). Additional steps to optimize the system may gradually increase the return on investment over time.

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