Facilitated Integration Technology The FIT-Herlyn Cost and Benefit Analysis Tool© and Practice

The current market pace is rapid and the margin for error is very small. Manufacturing organizations are working to decrease costs and improve profits. The way in which each company's management group execute this very critical analysis and change activity will determine the company's future.

FIT has been assisting manufacturing clients to successfully complete analysis activities for many years. We have developed a set of tools and methodologies that are time proven, quickly pinpointing areas for increased productivity and profitability change and the cost and benefit of those changes. These tools, along with a group of highly skilled, thirty-five year veterans, can very rapidly examine a company's business and business processes, economics and infrastructure and suggest a slate of changes with associated hard dollar benefits of change.

FIT has been recruiting operations management, plant management and regional management professionals from the manufacturing and process industries over the past ten years, as they retired from major manufacturing companies. This group is key to our success, as their experience in the manufacturing environment allows us to rapidly narrow areas for profitability change consideration in engagements where all initiatives are being considered. Simultaneously, FIT recruited some of the top economic analysis and information systems talent in the industry. These professionals, in situations where we are examining the economic benefit of change in a specific area or to information system infrastructure, are invaluable. These professionals, along with the FIT-Herlyn Cost and Benefit Analysis Tool©, form the basis of the FIT Cost and Benefit Analysis Practice.

Based on a set of economic parameters from the client, the FIT-Herlyn Cost and Benefit Analysis Tool© is able to examine a full business environment and sort out opportunities for change, the hard dollar benefit of each change, and a discussion of initiatives to effect the change. The tool can also be used in specific cases, looking at, for instance, the benefit of change to an information system. In either case, both hard and soft factors are considered:

 

The FIT-Herlyn Cost and Benefit Analysis practice is offered to clients in many different forms, according to client objectives:

Þ Analysis of client business and business processes for profitability improvement opportunities using industry business process models, industry best practice benchmarks, KPIs, and economic tools. Evaluation examines the impact of change to business processes and systems on plant value chain, against plant and organizational capabilities and measures, and on overall business performance. A discussion of opportunities and associated economics is provided to the client.

Þ Compute hard dollar benefits of change to existing information systems, the infrastructure that supports the business. New information system benefits are examined against the client's economic parameters to determine the actual benefits that can be realized for each information system change initiative.

What is the Process?

Prior to arrival on-site, FIT will ask for multiple documents that give the Consultants a basic economic 'picture' of the operating facility economics. Preliminary benefit calculations, based on experience, will be validated by interviews with key plant professionals to ascertain that the economic factors have been properly applied.

Figure 1: Experience Factors and Client Analysis 1

Analysis of a Part of the Business, Rather than the Whole

The FIT-Herlyn Cost and Benefit Analysis Tool© is capable of taking a value slices from all relevant business processes into account. In this way, a single area of the company's business processes can be studied or a specific system in the IT infrastructure can be analyzed. Each process and each system contributes to the overall productivity and profitability, as it does to the overall operating cost. We are able to extract the contribution of each, as a segment.

An Example of the Process

Typical input to The FIT-Herlyn Cost and Benefit Analysis Tool© for justification of a refinery IT project can be seen in Figure 1, below. Please note these same techniques are also applicable to non-IT opportunities, such as improvements of business processes through business process modeling, another major strength of FIT.

Table1: Client data input

Table 2, Benefit Model Output

A proprietary and unique technique permits the allocation of benefits to individual applications such as LIMS, production, maintenance management systems and others.

If, for instance, a client wished to understand the benefit or contribution of the Laboratory business processes or the Laboratory Information Management System, LIMS, to his profitability, we could use the FIT-Herlyn Cost and Benefit Analysis Tool© and Practice to decompose either the business processes or the LIMS to major functions and them perform an analysis. In the case of the LIMS, we would analyze:

After analysis, it usually becomes apparent that the LIMS 'quality management application' has an impact to the entire manufacturing operation effectiveness. For this reason, the benefits are not dedicated to the cost reduction of the laboratory only but to the profitability as contributed by all functions. The same is true for maintenance and operations applications and for business processes in various areas of the organization.

What Are Potential Uses for the Analysis?

It is often useful to have an economic analysis performed prior to making change whether to the business, the business processes or to information systems infrastructure, to determine the impact of the proposed change. The FIT-Herlyn Cost and Benefit Analysis Tool( determines the benefits of change; cost calculation can then be added to determine return on investment.

The FIT-Herlyn Cost and Benefit analysis results are formatted appropriate to the engagement and client usage. In some cases, the economic data is added to the Client Business Process Model, showing the financial benefit of change on a 'To Be' model. In other cases, the economic benefit is, itself, the reason FIT was engaged, as is often the case when a client is evaluating the value of change to existing infrastructure or information systems. In these cases, FIT can assist the client with a set of documents that vary from a pure financial analysis to a full set of information systems plans, detailing requirements to bring in a system that will fall within 10% of costs calculated and that will be capable of achieving calculated benefits. In either case, the results are generally presented in a formal presentation to management, with a supporting documentation.

The FIT-Herlyn Cost and Benefit Analysis practice: we look forward to the opportunity to assist your organization toward increased profitability.

Facilitated Integration Technology, Inc.
1100 NW Loop 410, Suite 700
San Antonio, TX. 78213
Tel (210) 366-8801     Fax (317) 577-0433    mailto:s.starr@fit-consulting.com