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The Fast-Payback SAP Projects for Saving Money in 2009: Detailed Data for Business Expense Projects
Fast-Payback SAP Projects is also known as :
Business Expense Projects,
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Business Ideas,
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Download Business Expense,
Small to Medium-sized Projects,
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Immediate Reimbursement Form,
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Download Business Expenses Shareware,
Expenses as Business Expenses,
Expenses Track,
Collection of Business Expenses.
Companies can squeeze further business benefits from their existing SAP ERP and supply
chain systems in order to save money at a time when it's desperately needed. This Report,
which summarizes detailed data from a field study conducted exclusively for AMR Research
SAP Peer Forum clients, was written to help business audiences looking for every opportunity
to reduce the total business expenses of their huge, existing investments in SAP.
The Bottom Line: Enterprises that revisit the business process areas in this Report will have
improvement opportunities to reduce overall expenses by instigating a fast-payback project to
exploit their huge investments in SAP.
Enterprises are under huge pressure to cut all SAPrelated
costs. This Report was written to help business
audiences looking for every opportunity to exploit their
huge, existing investments in SAP to help reduce their
total business expenses. It summarizes the detailed data
generated from an online survey of 18 respondents in
a field study conducted exclusively for AMR Research
SAP Peer Forum clients.
This confidential cost-savings survey was split into two
halves:
- Fast-payback projects for business expense reduction for a business audience
- Fast-payback projects for SAP operations cost reduction for a technical audience
We'll present data for the former half, where there
appears to be considerable potential to squeeze further
cost savings by exploiting SAP investments, especially
in classic ERP and supply chain business process areas.
Findings and best practices rising from this data were
identified in the SAP Forum Summit Sessions held on
April 14, 2009, in Palo Alto, CA and April 28, 2009,
in Walldorf, Germany.
The fast-payback lowdown: Results from our field study
The highest-potential areas for business expense reduction opportunities
Respondents were asked to rate the potential of a predefined
list of business process areas to generate a fast
payback for a moderate, overall project expenditure.
This potential was expressed through a score of 1 to 5,
where 1 is the lowest potential and 5 the highest. Table
1 shows the results.
The business process areas in Table 1 have been ranked
by highest average score (first column) for potential fast
payback. For some respondents, particular business process
areas have a higher impact, so those with the highest
score (4 or 5) are shown for additional information
(second column). This shows that business intelligence
(BI) and manufacturing have a higher impact, with
some companies currently engaged in related projects.
Overall, these are relatively high scores, indicating the
respondents believe there's high potential still to reduce
business expenses, especially in the upper half of the table.
Table 1: The highest potential SAP business process savings
| Average Score/Rank |
Percentage of Score of 4 or 5 |
SAP Business Process Cost Savings Category |
| 1 |
58.8 |
Purchasing |
| 1 |
47.1 |
Supply chain |
| 3 |
47.1 |
Inventory management |
| 4 |
35.3 |
Financials-working capital |
| 5 |
35.3 |
Order fulfillment |
| 6 |
41.2 |
Business intelligence |
| 7 |
29.4 |
Warehouse management |
| 8 |
29.4 |
Master data management |
| 9 |
29.4 |
Financials-operating expense |
| 10 |
35.3 |
Manufacturing |
| 11 |
29.4 |
Quality control |
| 12 |
11.8 |
Human resources |
| 13 |
23.5 |
Scoreboards and dashboards |
Detailed data for sample fast-payback projects to reduce business expense
Respondents were asked to select their most successful
fast-payback project to reduce business expenses to date
for any business process area. They were then asked to
supply some detailed data about its financial characteristics
(see Table 2). Note: Not all survey respondents
were able to supply such detail.
Of note, four of these projects were justified on the
basis of strategic need, with another four justified by
cost savings. There's also a fairly broad range of business
process categories, although purchasing and order fulfillment
were the most popular choices. Detailed data
for the costs and benefits are provided for each project,
as well as project team size and duration.
Summary of financial performance metrics
for sample fast-payback projects to reduce
business expense
Two basic financial performance metrics-what we
call time to payback and bang for the buck-were
calculated to identify the most successful fast-payback
projects to reduce business expenses (see Appendix
A for definitions of these metrics). The results of this
calculation are presented in Table 3.
For time to payback, an order fulfillment project that
featured drop-ship with third-party providers had the
best overall financial performance. For bang for the
buck, a purchasing project, featuring a supplier relationship
manager (SRM) procurement implementation,
generated the best performance.
Table 2:Source: AMR Research, 2009 Detailed data for some fast-payback projects to reduce business expense
| Cost Savings Category |
Business Justification Type |
Description |
Actual Annual Cost Saving |
Approx.External Project Cost |
Approx.Internal Project Cost |
Total Cost |
| Financials- operating expense |
Strategic need |
ERP/SCM single back-office systems |
$120,000 |
$200,000 |
$400,000 |
$600,000 |
| Supply chain |
Cost savings |
Reduce inventory, increase ROA |
$2,200,000 |
$6,100,000 |
$1,800,000 |
$7,900,000 |
| Financials- operating expense |
Cost savings |
Consolidate systems,low-cost countries |
$20,000,000 |
$7,000,000 |
$29,000,000 |
| Business
intelligence |
Revenue improvement |
BI for customer and
product profitability |
$1,000,000 |
$500,000 |
$500,000 |
$1,000,000 |
| Manufacturing |
Cost savings |
Plant reliability improvements |
$12,000,000 |
$7,000,000 |
$3,000,000 |
$10,000,000 |
| Order
fulfilment |
Compliance
requirement |
Drop-ship with thirdparty
providers |
$250,000 |
|
$80,000 |
$80,000 |
| Purchasing |
Cost savings |
SRM implementation
for procurement |
$1,041,000 |
$435,200 |
$489,000 |
$924,200 |
| Purchasing |
Strategic
need |
Establish global
sourcing agreements |
|
|
|
|
| Order
fulfilment |
Revenue improvement |
Reduced staffing to
manage complexity |
700,000 |
$1,500,000 |
$500,000 |
$2,000,000 |
| Manufacturing |
Strategic
need |
Replace legacy with
SAP |
$5,000,000 |
$10,000,000 |
$20,000,000 |
$30,000,000 |
| Business
intelligence |
Strategic
need |
EDW plus common
metrics and scorecards |
|
$20,000,000 |
$5,000,000 |
$25,000,000 |
Table 3:Source: AMR Research, 2009 Financial performance metrics for fast-payback projects to reduce business expense
| Cost Savings Category |
Business Justification Type |
Description |
Time to Payback (Months) |
Time to Payback (Rank) |
Bang for the Buck (Money Back) |
Bang for the Buck (Rank) |
| Financials- operating expense |
Strategic need |
ERP/SCM single back-office systems |
$120 |
|
-$840,000 |
|
| Supply chain |
Cost savings |
Reduce inventory, increase ROA |
58 |
|
-$4,050,000 |
|
| Financials- operating expense |
Cost savings |
Consolidate systems,low-cost countries |
53 |
5 |
-$29,000,000 |
|
| Business
intelligence |
Revenue improvement |
BI for customer and
product profitability |
24 |
3 |
$1,000,000 |
2 |
| Manufacturing |
Cost savings |
Plant reliability improvements |
|
|
|
|
| Order
fulfilment |
Compliance
requirement |
Drop-ship with thirdparty
providers |
8 |
1 |
$565,833 |
3 |
| Purchasing |
Cost savings |
SRM implementation
for procurement |
19 |
2 |
$1,418,050 |
1 |
| Purchasing |
Strategic
need |
Establish global
sourcing agreements |
|
|
|
|
| Order
fulfilment |
Revenue improvement |
Reduced staffing to
manage complexity |
52 |
4 |
-$950,000 |
|
| Manufacturing |
Strategic
need |
Replace legacy with
SAP |
78 |
|
-$17,500,000 |
|
| Business
intelligence |
Strategic
need |
EDW plus common
metrics and scorecards |
|
|
-$20,000,000 |
|
Approach to measuring SAP business
benefits
Respondents were asked to choose from one of four
ways to characterize how they currently measure the
business benefits derived from their SAP business projects
(see Figure 1):
- Analyze benefits once at some point after the project
is completed.
- Identify benefits and metrics as part of project planning
and measure continuously within the project
team.
- Assign specific goals to business units and departments
and hold individuals in those groups
accountable for achieving them.
- Do not measure benefits.
Despite the difficulties with measuring benefits, only
one respondent didn't try to measure. Companies that
do measure benefits do so in one of the three methods
in Figure 1, but the respondents in this survey were
evenly split across all three.
Figure 1: Managing and measuring benefits
Q: What best describes the process you use to measure and
manage benefits from this and other SAP-related projects?
Most respondents feel confident when it comes to
handling large IT projects, rating their companies'
abilities to manage them with a high average score of
4.25. However, the same companies were less confident
in their abilities to manage large business transformation
or reengineering projects, where the average score
dropped to 3.50. For the ability to get consensus across
business units on common processes and systems, the
average score was lower still, at 3.07.
Popular methods used to share SAP skills
To complete the survey, respondents were asked
whether they have the following organizational elements
in place. The percentages reported below represent
the organizations that do:
- SAP center of excellence (COE)-67%
- Dedicated group measuring SAP benefits-28%
- Dedicated group conducting business process
improvements-44%
- Senior executive responsible for business process
improvements-11%
The SAP center of excellence clearly remains a popular
way of sharing and exploiting SAP skills. But most
companies prefer to devolve the measurement of business
benefits and business process improvements down
to the local level to ensure ownership.
Conclusions
Consider the following:
- There appears to be considerable potential to
reduce business expense using existing SAP investments,
especially in the classic ERP business process
areas of purchasing, inventory management, working
capital management, and order fulfillment.
- Fast-payback projects for reducing business expense
to offer an attractive payback and bang for the
buck can easily be executed without high levels of
expenditure.
- Most companies prefer to use local business expertise
to ensure ownership to measure the actual business
benefits accruing from business improvement
projects.
Appendix A: Methodology
A set of research questions was built into an online
survey tool to gather important data about the following
type of fast-payback project information:
- Company profile
- SAP ERP profile
- SAP operations costs fast-payback projects, potential
by project type
- SAP operations costs fast-payback projects, profile
of best project
- SAP business expense fast-payback projects, potential
by project type
- SAP business expense fast-payback projects, profile
of best project
- Usefulness of SAP enablers for business expense
fast-payback projects
- Company approach to SAP business benefits
measurement
Appendix B: Financial metrics
Time to payback
- Financial payback time, months = (total project
cost) / (annual project cost savings)
- Time to payback, months = (project elapsed time) +
(financial payback time)
The time-to-payback metric realistically takes account
of how quickly the project pays back as well as the
actual project lead time.
Bang for the buck
Consider a three-year period:
- Available benefit time, months = 36 - (project
elapsed time)
- Financial savings, $ = (available benefit time) x
(annual project cost savings)
- Bang for the buck, $ = (financial savings) - (total
project cost)
The bang-for-the-buck metric takes account of how
much net money is returned by the project over a threeyear
period.