Increff WMS ROI Calculator

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ROI Calculator Documentation

This documentation explains the input parameters, business metrics, and calculation logic behind the Increff WMS ROI Calculator. Understanding these components will help you make informed decisions about WMS implementation.

📋 Table of Contents

Input Parameters

  • • Basic Business Metrics
  • • Order Processing Settings
  • • Marketplace & Returns Settings
  • • Implementation Cost Settings

Calculation Logic

  • • Inventory Accuracy Savings
  • • Labor Cost Savings
  • • Marketplace Performance Gains
  • • Return Management Savings
  • • Implementation Costs

📊 Input Parameters

📈 Basic Business Metrics

Daily Order Volume

The number of orders processed per day. This is the primary driver for all calculations.

Impact: Directly affects annual orders, revenue, and all savings calculations

Inventory Count

Total number of SKUs in your warehouse inventory.

Impact: Used for inventory accuracy savings and cost calculations

Average Selling Price (₹)

The average price at which you sell your products.

Impact: Determines order value, revenue, and gross margin calculations

Gross Margin (%)

The percentage of revenue that remains after accounting for the cost of goods sold.

Impact: Used to calculate cost price and return cost savings

Return Rate (%)

Percentage of orders that are returned by customers.

Impact: Drives all return management savings calculations

⚙️ Order Processing Settings

Per Item Cost (₹)

Cost to process each individual item in an order.

Default: ₹5

Average Basket Size

Average number of items per customer order.

Default: 1.1 items

Time Saving per Order (min)

Minutes saved per order with WMS implementation.

Default: 6 minutes

Labor Cost per Hour (₹)

Average hourly wage for warehouse workers.

Default: ₹85/hour

Implementation Cost Factor

Multiplier for additional implementation costs.

Default: 0.25 (25% additional)

🛒 Marketplace & Returns Settings

SLA Penalties per Order (₹)

Average penalty cost for missing service level agreements.

Default: ₹15

Tier Improvement Gain (%)

Revenue increase from marketplace tier improvements.

Default: 7%

Include Tier Gains

Toggle to include/exclude tier improvement benefits.

Default: Enabled

Re-return Rate (%)

Percentage of returns that get returned again.

Default: 7%

Fraud Return Rate (%)

Percentage of returns that are fraudulent.

Default: 20%

💰 Implementation Cost Settings

Implementation Cost Base (₹)

Base cost for WMS implementation.

Default: ₹5,00,000

Implementation Cost per Order (₹)

Additional cost per annual order processed.

Default: ₹2

WMS Cost per Order (₹)

Annual WMS licensing cost per order.

Default: ₹5.5

🧮 Calculation Logic

📦 Inventory Accuracy Savings

Reduces inventory shrinkage through better tracking and serialization.

Formula:

Inventory Accuracy Savings = Inventory Value at Cost × Shrinkage Reduction %
Components:
  • • Inventory Value at Cost = Inventory Count × Cost Price
  • • Cost Price = Average Selling Price × (1 - Gross Margin %)
  • • Shrinkage Reduction = 1.5% (configurable)
Business Impact:
  • • Reduces inventory losses
  • • Improves stock accuracy
  • • Better demand forecasting

👷 Labor Cost Savings

Reduces manual processing time through automation and optimized workflows.

Formula:

Labor Savings = Annual Orders × Time Saved per Order × Labor Cost per Minute
Components:
  • • Annual Orders = Daily Orders × 365
  • • Time Saved = 6 minutes per order (configurable)
  • • Labor Cost = ₹85/hour ÷ 60 = ₹1.42/minute
Business Impact:
  • • Faster order processing
  • • Reduced labor costs
  • • Higher throughput capacity

🏪 Marketplace Performance Gains

Improves marketplace performance through better SLA compliance and tier benefits.

SLA Penalty Savings:

SLA Savings = Annual Orders × (Improved Rate - Current Rate) × Penalty per Order

Tier Improvement Gains:

Tier Gains = Annual Revenue × Tier Improvement % (if enabled)
Components:
  • • Current Fulfillment Rate: 96%
  • • Improved Rate: 99.5%
  • • SLA Penalty: ₹15 per missed order
  • • Tier Gain: 7% of revenue (toggleable)
Business Impact:
  • • Avoid SLA penalties
  • • Higher marketplace tier
  • • Better visibility and ranking

🔄 Return Management Savings

Reduces return processing costs and fraud through better tracking and serialization.

Formulas:

Re-return Savings = Return Count × Re-return Rate × Order Value × Reduction % × (1 - Margin)
Fraud Savings = Return Cost × Fraud Rate × Recovery Improvement %
Components:
  • • Re-return Rate: 7% (configurable)
  • • Re-return Reduction: 80%
  • • Fraud Rate: 20% (configurable)
  • • Recovery Improvement: 15%
Business Impact:
  • • Reduced return processing
  • • Better fraud detection
  • • Lower return costs

💸 Implementation Costs

Total cost of implementing and operating the WMS solution.

Formulas:

Implementation Cost = (Base Cost + Per-Order Cost × Annual Orders) × (1 + Factor)
Annual WMS Cost = Annual Orders × WMS Cost per Order
Components:
  • • Base Implementation: ₹5,00,000
  • • Per-Order Cost: ₹2
  • • Implementation Factor: 25%
  • • WMS Cost per Order: ₹5.5
Cost Breakdown:
  • • One-time implementation
  • • Annual licensing fees
  • • Additional setup costs

📊 ROI Calculation

Final ROI Formula:

ROI % = ((Total Savings - Annual WMS Cost) / Implementation Cost) × 100

Total Savings Components:

  • Inventory Accuracy Savings
  • Labor Cost Savings
  • Marketplace Performance Gains
  • Return Management Savings

Cost Components:

  • Implementation Cost (one-time)
  • Annual WMS Cost (recurring)

💡 Key Insights:

  • • ROI increases with higher order volumes
  • • Labor savings typically provide the highest returns
  • • Marketplace gains depend on current performance
  • • Return savings scale with return rates

🎯 Best Practices

Input Accuracy

  • • Use actual daily order volumes, not peak periods
  • • Verify gross margin percentages with finance team
  • • Get accurate return rate data from customer service
  • • Consult with operations for labor cost estimates

Scenario Planning

  • • Test conservative vs. optimistic scenarios
  • • Consider seasonal variations in order volume
  • • Factor in business growth projections
  • • Account for implementation timeline

Implementation Considerations

  • • Plan for training and change management
  • • Consider integration with existing systems
  • • Factor in data migration costs
  • • Account for potential downtime during transition

ROI Validation

  • • Track actual vs. projected savings
  • • Monitor key performance indicators
  • • Regular reviews with stakeholders
  • • Adjust calculations based on real data