Financial Justification

ProENTRY IV offers you many benefits; however, in the final analysis, it is the bottom line that counts. The following illustration depicts what is possible with ProENTRY IV.

This exercise has been kept simple because it deals in generalities. Every business is different, and so it is unlikely that you will find your business modeled precisely here. Nevertheless, you can use these figures to get a quick grasp of what you might expect to achieve with ProENTRY IV or as a starting point to construct your own analysis.

Primary Benefits to be Realized with ProENTRY IV:

• Reduced order entry errors
• Reduced production errors
• Reduced number of replacement orders and errors in replacement orders
• Reduced production disruption dealing with rush and replacement orders
• Reduced rush and replacement order shipping costs
• Reduced administrative time in processing and managing orders
• Enhanced customer satisfaction and improved retention rate
• Improved communications and record accessibility

Examples by Estimated Sales

Explanations:

• Annual Sales - Select the annual sales volume column that most closely matches your company's figures or projections then read down that column to find the related statistics and projections.

• Employees - These figures, derived from the US Census, are essential in establishing productivity and total costs of goods sold.

• Hours / Yr - The number of production man-hours per year (based on Census data).

• Materials - Total cost of materials used in production.

• Direct Cost of Goods Sold - Total of material costs and production payroll.

• Cost of Goods Sold as % of Sales - Direct costs of goods sold divided by annual sales.

• Production $ / Hour - Annual sales divided by the number of production hours per year. This provides a simple but effective measure of productivity.

• Error Reduction - An estimated percentage of production, currently invested in errors and rework, which may be eliminated through the implementation of ProENTRY IV. Note that this figure is highest for small firms that typically are less specialized and more likely to do highly custom projects, thus more inclined to errors, than larger manufacturers that are more systematic. A careful review of most cabinet business will reveal that the figures used here are quite conservative.

• Savings - Total savings in material and production payroll as a consequence of error reduction.

• Recovered Production Hours - The number of production hours freed by reduction of errors, rework, elimination of disruptive rework, etc.

• Revised Production $ / Hour - Productivity has increased as a consequence of the elimination of material and labor waste; therefore, it is possible to compute a revised value for production.

• Additional Sales / Year - Without the necessity of adding workers or facilities, the recovered production labor can be converted into additional billable production at the revised production rate.

• Additional Costs - Producing additional product incurs additional material and labor costs.

• Net Additional Revenue - Additional sales less additional labor and materials yields the value of additional production.

• Savings + Additional Revenue - Total of savings due to error reduction plus net additional revenue.

Two Important Considerations

1. The cabinet industry is complex and difficult, so errors are commonplace and even accepted. Given this, it is essential to understand the concept of opportunity cost as used by economists to characterize the cost of something given up at the expense of an alternative. In bearing the cost of errors, your company pays for materials and labor which could otherwise be used to produce billable products. Therefore, the real cost of errors is not just the additional material and labor, but the lost opportunity to produce and sell more products.

2. ProENTRY IV holds not only the promise of reducing errors and waste, but of assisting in developing and maintaining the additional sales to take advantage of the recovered production capacity. Improved service, faster turn around, improved communications, and private label marketing are all tools ProENTRY IV puts in your arsenal to help you take full advantage of the opportunity that improved productivity offers.

Comments or Questions

Please feel free to contact us with comments or questions concerning this page. If you would like an analysis prepared specifically for your company, please contact sales at 717-412-1972 or info@ProENTRY4.com.

*Based Upon 2002 US Census Bureau Data, 337110, Wood kitchen cabinet and countertop manufacturing. Some payroll and sales data for small single establishment companies with up to 20 employees (cutoff varied by industry) were obtained from administrative records of other government agencies rather than from census report forms. These data were then used in conjunction with industry averages to estimate statistics for these small establishments. This technique was also used for a small number of other establishments whose reports were not received at the time data were tabulated.