ezMiner, Inc. - Store Automation Profit Calculator

Store Automation Profit Calculator

Store automation requires an investment. What will be the Return On Investment?
Will the automation system pay for itself! How soon?

There are hundreds of factors involved in the benefits and costs associated with store automation. Rather than discussing each of those factors here ( and losing sight of the "big picture"), we will combine many of the individual factors into a few meaningful groups. The creation of this small number of groups will greatly simplify your task of assessing the impact of automation on your store.

First, let's examine store automation benefits that have the potential to add dollars to your store's profits and calculate a "Potential Increase In Profits" amount for your store. We will then develop an estimate for your "Expected Cost of Automation". And finally, we will perform calculations to determine the Return on Investment and Payback Period that you might expect.

Assumptions: To simplify our calculations we will consider equipment, installation, and training for the "typical" store. We will not consider any "special cases" of "exceptions." All data will relate to a hypothetical store -- The Quikmart Store. The Quikmart Store is a one store, one register application. The store is open for business 360 days a year, and has annual sales of $480,000 ($40,000 per month; $1,333 per day). The store automation system has an expected life of 5 years and consists of a: UPC barcode scanner, a point of sale computer with a touchscreen monitor, cash drawer, receipt printer, credit card reader, two uninterruptible power supplies, and a backoffice computer, system printer and software for store reporting, inventory control, electronic reorder, house accounts and price book / category management functions. If you have more than one store, perform these calculations for one of your "average" stores. Because of the many factors mentioned earlier, the actual result for your store may differ significantly (plus or minus) from the hypothetical Quikmart Store. The percentages shown in Section I relate to gross sales and are based on national association statistics and other data.

Section I. Estimate of potential benefits of scanning and store automation

	Industry Potential	Quikmart Store	Estimate for Your Store Increase per Day
1. Estimate your Daily Gross Sales	N/A	$1,333	1.______________
2. Eliminate most pricing errors	0.96% of line 1	$12.80 daily	2.______________
3. Reduce errors and theft by vendors and employees	0.84% of line 1	$11.20 daily	3.______________
4. Reduce unnecessary inventory and increase Turns	0.68% of line 1	$9.06 daily	4.______________
5. Reduce labor costs for training, labeling, inventory and receiving	0.37% of line 1	$4.93 daily	5.______________
6. Decrease order time	0.43% of line 1	$5.73 daily	6.______________
7. Decrease accounting costs, external and internal	0.28% of line 1	$3.73 daily	7.______________
8. Reduce store manager's paperwork, goes home one hour early	$12	$8.50 daily	8.______________
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			9.______________
10. By offering quicker checkout times and more accurate pricing, you will keep customers that would otherwise not come back			10.______________
11. You may be able to sell your scanning data to suppliers, manufacturers, or market research firms			11.______________
12. You will accurately identify peak/slow periods helping you to improve labor scheduling -- and perhaps change store hours			12.______________
13. You can investigate store "traffic flow" --and measure the effects on sales of moving products from one location to another			13.______________
14. You can compare the differences in sales/profits for different days, different shifts, different clerks			14.______________
15. You can monitor sales and results -- and even change prices via modem while you're 1000 miles away from your store			15.______________
16. You can easily identify your best sellers and slow movers and adjust your product mix to maximize profits			16.______________
17. Total: Potential Increase in Profits due to automation (add lines 2 through 16)		$55.95	17.______________
18. How many days per year is your store open?		360	18.______________
19. Total: Annual Potential Increase in Profits due to automation for one store (line 17 times line 18)		$20,142	19.______________
20. How many stores do you have?		1	20.______________
21. Total Annual Potential Increase in Profits due to automation for all stores: (Line 19 times Line 20)		$20,142	21.______________
22. Total Five-Year Potential Increase in Profits (multiply line 21 times 5)		$100,710	22.______________

Section II: Estimate of potential costs of scanning and store automation

	Quikmart Store	Estimate for Your Store
1. Hardware and software costs for typical installation: 1 store with 1 point of sale register and 1 backoffice computer	$10,000	1.______________
*2. Number of point of sale register stations needed in your store in addition* to the 1 point of sale register included in Line 1**	0	2.______________
3. Additional cost for point of sale stations if more than one is needed. Includes register, scanner, receipt printer, etc. (multiply line 2 times $6,000)	$0	3.______________
4. Typical training and installation costs (5 days @ $700)		$3,500
5. Total one-time cost for implementing a store automation system - 1 store (add Lines 1, 3, 4)	$13,500	5.______________
6. How many stores do you have?	1	6.______________
7. Total one-time cost for implementing an automation system in all stores (multiply line 5 times line 6)	$13,500	7.______________
8. Cost of annual service/maintenance agreement and software upgrades for 1 store	$1,500	8.______________
9. Total cost of service/maintenance agreement and software upgrades for five years for 1 store (multiply line 8 times 5)	$7,500	9.______________
10. Total cost of service agreement/maintenance for 5 years for all stores (multiply line 6 times line 9)	$7,500	10.______________
11. Total expected cost of implementing an automation system for five-year period for all stores (add Line 7 and Line 10)	$21,000	11.______________

Section III: 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

	Quikmart Store	Estimate for Your Store
1. Total Increase in Profits (5 years) (from section I, line 22)	$100,710	1.______________
2. Total Investment (5 years) (from section II, line 11)	$21,000	2.______________
3. Total Increase in Profits (1st Year) (from section I, line 21)	$20,142	3.______________
4. Total Investment (First Year) (from section II, line 5 plus line 8)	$15,000	4.______________
5. Potential Return on Investment (line 1 above divided by line 2 above) (times 100%)	4.80 480%	5._____________%
6. Potential Payback Period (for 1st year) (line 4 above divided by line 3 above = yrs) (times 365 = days)	0.744 yr. 272 days	6a._________Years 6b.__________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.