From the course: Supply Chain and Operations Management Tips

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Calculate return on investment

Calculate return on investment

From the course: Supply Chain and Operations Management Tips

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Calculate return on investment

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- Every project that supply chain and operations professionals work on is an investment. You're spending time and money to make a change, and expecting the results will be worth more to your business in the long run. But we sometimes struggle to communicate the financial impact of our projects. In this video I'll walk through the process of calculating the return on investment for a project. Calculating the ROI will help you translate the operational benefits of a project into financial terms. Let's use an example and say that you want to buy a piece of equipment that will cost $100,000 and take one year to set up. When it's up and running at the end of the year, the new device will reduce your future costs by $45,000 a year. It has an expected life of four years. So when you factor in the setup time and the expected life of the equipment, this is really a five-year project. What do you think? Is it a good investment or not? Let's find out by calculating the ROI. Your investing…

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