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Section 1. Estimate of Potential Benefits of Scanning and Store Automation

Industry
Potential

Estimate for Your Store
Increase per Day

Sample Values for
"Quickmart Store"

1. Estimate your Daily Gross Sales

1333.00

2. Eliminate most pricing errors

0.96% of line 1

12.80 daily

3. Reduce errors and theft by vendors and employees

0.84% of line 1

11.20 daily

4. Reduce unnecessary inventory and increase Turns

0.68% of line 1

9.06 daily

5. Reduce labor costs for training, labeling, inventory and receiving

0.37% of line 1

4.93 daily

6. Decrease order time

0.43% of line 1

5.73 daily

7. Decrease accounting costs, external and internal

0.28% of line 1

3.73 daily

8. Reduce store manager's paperwork, goes home one hour early

$12.00

8.50 daily

Note: The amounts of the savings in Items 2 through 8 are relatively easy to measure. There are many additional automation benefits that can't be easily be measured. Items 9 through 16 list some real (but hard-to-measure) automation benefits. Since we are not aware of typical industry data for these categories, we can't provide average amounts for our typical store. Make your best estimate of how Items 9 through 16 may effect your store.

9. You can monitor special pricing and promotions and compare results to determine optimum strategies

10. By offering quicker checkout times and more accurate pricing, you will keep customers that would otherwise not come back

11. You may be able to sell your scanning data to suppliers, manufacturers, or market research firms

12. You will accurately identify peak/slow periods helping you to improve labor scheduling -- and perhaps change store hours

13. You can investigate store "traffic flow" --and measure the effects on sales of moving products from one location to another

14. You can compare the differences in sales/profits for different days, different shifts, different clerks

15. You can monitor sales and results -- and even change prices via modem while you're 1000 miles away from your store

16. You can easily identify your best sellers and slow movers and adjust your product mix to maximize profits

17. Total: Potential Increase in Profits due to automation (add lines 2 through 16)

55.95

18. How many days per year is your store open? (required)

360

19. Total: Annual Potential Increase in Profits due to automation for one store (line 17 times line 18)

20142.00

20. How many stores do you have? (required)

1

21. Total Annual Potential Increase in Profits due to automation for all stores: (Line 19 times Line 20)

20142.00

22. Total Five-Year Potential Increase in Profits (multiply line 21 times 5)

100710.00

Section 2. Estimate of Potential Costs of Scanning and Store Automation

23. Hardware and software costs for typical installation: 1 store with 1 point of sale register and 1 backoffice computer

10000.00

24. Number of point of sale register stations needed in your store in addition to the 1 point of sale register included in Line 23 (required)

0

25. Additional cost for point of sale stations if more than one is needed. Includes register, scanner, receipt printer, etc. (multiply line 24 times $6,000)

0.00

26. Typical training and installation costs (5 days @ $700)

3500.00

3500.00

27. Total one-time cost for implementing a store automation system - 1 store (add Lines 23, 25, 26)

13500.00

28. How many stores do you have? (required)

1

29. Total one-time cost for implementing an automation system in all stores (multiply line 27 times line 28)

13500.00

30. Cost of annual service/maintenance agreement and software upgrades for 1 store (typically 1500.00)

1500.00

31. Total cost of service/maintenance agreement and software upgrades for five years for 1 store (multiply line 30 times 5)

7500.00

32. Total cost of service agreement/maintenance for 5 years for all stores (multiply line 28 times line 31)

7500.00

33. Total expected cost of implementing an automation system for five-year period for all stores (add Line 29 and Line 32)

21000.00

Section 3. Estimate of Return on Investment and Payback Period

There are many ways to measure the value of an investment project. We will use two common measures here: Return on Investment (ROI) and Payback Period. For the sake of simplicity, in all calculations we will ignore variables such as cash inflow irregularities, seasonal factors, the time value of money, inflation, interest rates, and any unusual or rare occurrences.

Return on Investment = Total Increase in Profits divided by Total Investment
Payback Period = Total Investment divided by Total Increase in Profits

34. Total Increase in Profits (5 years) (Line 22)

100710.00

35. Total Investment (5 years) (Line 33)

21000.00

36. Total Increase in Profits (1st Year) (Line 21)

20142.00

37. Total Investment (First Year) (Line 27 + Line 30)

15000.00

38. Potential Return on Investment
(Line 34 divided by Line 35 x 100%)

4.80 (480%)

39. Potential Payback Period (1st year)
(Line 37 divided by Line 36) = years

0.744 years

272 days

NOTE: Calculations in this guide have been based on industry potentials. All stores differ, and it is unlikely that your store would have the identical performance characteristics to our theoretical Quikmart Store.