Example being the elimination of the multiple entry of data into two or more systems that have been replaced with only one system such as a PLM system. (The term system could be an actual secondary system, or it could be a spreadsheet, or an email – which alters the below calculation – but not significantly.)
If it takes a person (on average) 3 minutes to enter the data into a secondary system and they are paid $70,000 (on average; fully burdened), then 3 minutes equals $3.58. Since most people have to get to the system, find the appropriate input form (screen / panel) we will (on average) consider 1 minute to get “setup to perform the activity”; which is another $1.58; and then they have to exit the system and “transition to the next activity”; which is 1.5 minutes (on average); which equals $2.08. This activity results in a TOTAL spend in labor cost equaling $7.25. For those that do better with tables: |
We then take that numeric calculation and amplify it by the number of times per day, week, month, or year (on average) that this occurs per person, and we then multiply it by the number of people (of that role) performing that task, and we get $73,080.
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This is then again amplified by all the various time wasted for similar activities per that role and other roles and it begins to crank up the cost of NOT having a system (i.e. PLM) that supports the various functions and maintains all the data in one place (one version of the truth).
Again – this is one of the basic profiles that incur Objective Costs of conducting business with multiple systems, or spreadsheets, emails, phone calls, meetings, … |
Erroneous data being entered into a spreadsheet that is used by another organization for ordering a specific product for testing. By entering the wrong product ID, it would then cause a delay that could be one week, or one month in getting the correct product tested.
How does one calculate that time lost:
The point is that Subjective Cost factors are wide ranging, very difficult to calculate the cost of, even “after the fact”, and are not costs that occur on a consistent basis. However, they erode the bottom line just as much (if not more) than Objective Cost factors. |
Regarding manual data entry into downstream systems – the simple answer is to take the hours spent by resources reentering data manually and multiply by their fully-loaded pay rate and this would be a perpetual savings. If enough of these types of investments [PLM based Systems Integrations] are made, they would improve operational efficiency and improve metrics such as:
Another cost metric is when IT resources spend too much time on manually moving data between systems – which is calculated by their value add per year (revenue, margin, quality) divided by the # of FTEs on the IT support team. For example, if on your support team you have 2 developers working on value-add projects and 2 developers/contractors working on maintenance [moving data] – ideally you would like to improve this ratio to 75% or higher working on value-add projects versus maintenance [moving data] work by digitally transferring that manually entered data directly from PLM to that support system. |
Operational delay in getting product and price information to e-commerce – the measurement would be an analysis of the sell-thru metric. Sell-thru – keeping all other factors the same – will improve. This means that without any delay in getting information to the e-commerce site that the products can be sold earlier in the season at the higher prices and will not have to incur the discounting process specifically attributed to the delay.
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making_cents_of_plm_based_systems_integrations.pdf | |
File Size: | 287 kb |
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