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CALCULATING MONETARY
BENEFITS FROM IT INITIATIVES
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| Outputs
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Examples |
Monetary Benefits
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| Increased productivity
| An IT infrastructure
upgrade improves productivity of
a manufacturing operator whose
labor costs are tied to
operating hours. |
Calculate the unit labor cost of
the operation. The increase in
output multiplied by the unit
labor cost is the added value of
the IT upgrade. |
| Time savings |
An IT project reduces labor
involvement in IT programs.
An IT project eliminates
bottlenecks in production and
delivery, resulting in
increased on-time deliveries.
| Multiply the
hours saved by the labor cost
per hour plus benefits. If
the result is a reduction in
grievances, use the average
cost per grievance to estimate
the benefits. |
| Increased
capacity utilization |
Infrastructure enhancement
(for example, use of satellite
communications) optimizes the
use of existing resources, such
as transportation vehicles.
| Benefits arising from
increased turns (that is,
journeys from the production
facility to the customer and
back) are equal to additional
sales minus direct variable
costs. |
| Improved quality |
An IT project enhances
manufacturing quality, resulting
in: Lower preventive and
appraisal cost of quality.
Less scrap and waste.
| Multiply the
number of hours saved by the
standard wage, adjusted by a
benefits factor. Calculate
the savings in costs of
defective products by
subtracting their salvage
value from the total cost
incurred at the point the
defect is identified.
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| Direct
cost savings |
Integration of the
organizations IT systems with
those of its global customers
and dealers. An IT
initiative to increase
information systems security.
A program of
consolidation and
standardization across a range
of hardware, database,
communications and
applications systems reduces
IT expenses. |
Calculate the reduction in
administrative costs.
Reduced hours of system
downtime (multiply the hours
saved by the average hourly
productivity) and reduced
fraud incidence (estimate the
financial damage caused by
fraud). Benefits
equal to reduced IT expenses
(cost of operating and
maintaining the IT system).
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Preparing the statement of cash flows
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