Simple Cost Benefit Analysis
I. Introduction
A. Purpose
The purpose of this Cost-Benefit Analysis (CBA) is to evaluate the financial and non-financial impacts of implementing an Automated Inventory Management System for [YOUR NAME] at [YOUR COMPANY NAME]. This analysis supports decision-making by comparing costs and benefits over a five-year period (2061–2066).
B. Scope
This analysis considers direct and indirect costs, projected benefits, and potential risks. It also factors in qualitative benefits such as improved efficiency and employee satisfaction.
II. Assumptions and Methodology
Discount Rate: 5%
Time Horizon: 5 years (2061–2066)
Currency: USD
Valuation of Intangible Benefits: Based on industry benchmarks and internal surveys.
Data Sources: Company financial records, vendor proposals, and market research reports.
III. Costs
A. Initial Costs
Category | Description | Cost (USD) |
|---|
Software Purchase | Custom inventory system | 50,000 |
Hardware Installation | Servers and scanners | 20,000 |
Training | Staff training sessions | 5,000 |
Total Initial Costs: $75,000
B. Recurring Costs
Category | Description | Annual Cost (USD) |
|---|
Maintenance | Software updates | 10,000 |
Staffing | System support staff | 25,000 |
Total Recurring Costs (5 years): $175,000
C. Opportunity Costs
Potential lost revenue from delaying alternative projects valued at $30,000.
Grand Total Costs: $280,000
IV. Benefits
A. Tangible Benefits
Category | Description | Annual Value (USD) |
|---|
Increased Revenue | Faster order processing | 50,000 |
Cost Savings | Reduced errors and waste | 20,000 |
Total Tangible Benefits (5 years): $350,000
B. Intangible Benefits
Improved Customer Satisfaction: Faster order fulfillment.
Enhanced Brand Reputation: Demonstrates commitment to innovation.
Employee Satisfaction: Simplified workflows reduce stress.
V. Cost-Benefit Summary
A. Total Costs
Type | Amount (USD) |
|---|
Initial Costs | 75,000 |
Recurring Costs | 175,000 |
Opportunity Costs | 30,000 |
Grand Total Costs: $280,000
B. Total Benefits
Type | Amount (USD) |
|---|
Tangible Benefits | 350,000 |
Intangible Benefits | Qualitative |
Grand Total Benefits: $350,000 + intangible benefits.
C. Net Benefit
Category | Value (USD) |
|---|
Total Benefits | 350,000 |
Total Costs | 280,000 |
Net Benefit | 70,000 |
VI. Risks and Mitigation
Risk | Description | Mitigation Plan |
|---|
Implementation Delays | Vendor delays in deployment | Regular progress check-ins |
Cost Overruns | Unforeseen expenses | Budget contingency of 10% |
Staff Resistance to Change | Hesitation to adopt new system | Comprehensive training sessions |
VII. Conclusion and Recommendation
Based on this analysis, the Automated Inventory Management System is projected to deliver a positive net benefit of $70,000 over five years, excluding intangible benefits. It is recommended to proceed with the implementation, addressing the identified risks proactively.
Prepared by:
[YOUR NAME]
[YOUR COMPANY NAME]
Date: January 1, 2061
Analysis Templates @ Template.net
