Return on Investment Model Development

Martec has developed ROI calculators for clients providing a wide variety of different products and services to retailers including:

• A vendor of an electronic gift card solution marketed as an ASP service.
• A manufacturer of premium fibers and chemicals widely used in the manufacture of own brand or private label garments.
• A computer manufacturer working with software partners to provide a wide range of merchandising, supply chain, HR and other solutions to mid-market and tier 1 retailers.
• A vendor of supply chain software solutions.
• A partnership of a store systems software vendor and a wireless terminal manufacturer.

Martec has a distinctive approach. We start with a basic profit and loss account (P&L) and a partial balance sheet that includes inventory and cash. We create a "before" scenario using published data for public companies and industry "norms" for companies that don't publish their figures. The industry norms vary by retail segment.

We then model the relevant business processes and calibrate them with "before" data. For example, in a supply chain application, we will create the steps in a replenishment process and model the inventory requirement as a function of lead-time or cycle time and safety stock.

Once the model is built, either we or the client can enter the "after" data and see the impact on the retailer's P&L and balance sheet. Continuing our example, we would enter the factors that change in the lead-time and the model would calculate the resulting inventory impact. The effect would typically be to reduce the inventory in the balance sheet, increase the cash and reduce the inventory carrying costs in the P&L.

Our models include the costs of implementing the solution, depreciated over the relevant time period and show the net benefit to the organization. Our format for presenting the results has been designed to assist the prospective customer's management in making their case to their Chief Financial Officer or CAPEX committee to support the required investment. 

We often develop and present web-based or face-to-face training to teach the client's sales force how to use the model effectively.

The strength of our approach is the ability to justify the benefits to the client and to be able to evaluate alternative scenarios in seconds, so that the prospective customer can have confidence in the robustness of the decision to invest in the solution. 

For a fact sheet that describes our ROI service in more detail, please click here.