One of the most important tools for any business is an ROI analysis. If a tool, or a product line, or a new procedure does not yield a positive return, it sends a clear signal that something has to change. Having a real-time ROI analysis at your fingertips makes this happen.
While such an analysis should be straightforward when it comes to the items you sell (or resell), the reality is that it can be quite difficult to assess the total cost of items in your inventory, let alone generate the actionable insights you need. This is where having the right technology, including the right integrations, comes in.
For example, consider what a manager would need to know when assessing a new line of products. Of course, the cost of those products—the “cost of goods sold”—must be factored in during the ROI analysis. But beyond that, the true cost of an item to a company far exceeds what the company pays for it. Items in that product line also incur costs when:
- They (or their parts) are shipped from the manufacturer.
- The manager pays her workforce to receive, catalog, and store those items.
- The manager pays for the rental or lease of additional warehouse space.
- The company insures that warehouse and/or the products.
- Orders are shipped to customers or retailers.
Accurate ROI for that product line must take these costs into account as well. Indeed, finding these costs allows for more accurate calculations, and isolating them allows you to take positive steps toward cost control.
So how does one get this more robust kind of ROI analysis? There are several things you will want in terms of technology:
Seamless Accounting Software Integrations
Most modern accounting software has some ability to integrate with other systems, including warehouse management and inventory control systems.
When integrating these systems, make sure that the general accounting ledger codes are entered accurately into the inventory management system. Costs for each item must be correct as well. This step could also require integration with shopping cart software or other channel management software; in all of these cases, the integration should proceed as any other systems integration would.
The closer your data come to a true snapshot of your organization as it stands right now, the more accurate your calculations will be.
Having true real-time data can, for example, capture spikes in demand due to season or fashion, price fluctuations, labor costs, and more. This is important, because ROI can depend on other events that are occurring in very specific time windows. For example, a promotion that offers a steep discount might move product quickly—but the discount might eat through already-razor-thin profits. The effectiveness of the promotion, or lack thereof, could potentially be “drowned out” when data are averaged over time.
Automated Custom Reports
We’ve written quite a bit about how the right reports can give you business inteligence worth its weight in gold. Your inventory management software should allow for the creation of customized reports that give you just the analytics you need. It should also give you the option of receiving such reports at regular intervals (daily, weekly, etc.), or of bringing up the reports manually when requested.
These three capabilities (integration, real-time data, and automated custom reports) are good for more than just ROI analysis, too. They can provide other useful metrics as well, such as labor management, customer service metrics, fulfillment measures, and more.
When the engineers at Infoplus built our management software, they purposely made integration easy, especially for accounting software and shopping cart/channel software. When those integrations are in place, the system works with data in real time, flowing that data automatically into easy-to-use custom reports. The system was designed this way so that organizations of any size can assess what their inventory is doing at any moment—and whether the operations that support that inventory are really worthwhile.
If you would like to learn more about any one of these topics, follow any of the links above, or contact us to see how these reports work via a trial demonstration.