MRP II Cost / Benefit Analysis

       Prepared in conjunction with:

       Horst J. Paul & Assoc.

       Houston, Tx.




       Company profile


       Annual sales                    $ ________________

       Annual purchase cost            $ ________________

       Annual direct labor cost        $ ________________

       Average inventory value         $ ________________

       Inventory carrying cost         % ________________



       Benefits


       Inventory Reduction

       Typically there is a 25% to 35% reduction in inventory.  This is
       accomplished through better scheduling of inventory; getting the
       right material at the right time.  Elimination of safety stock on
       dependent demand items is also a key factor.


       Inventory value         $ ________________

       x Inventory reduction   % ________________

       x Carrying cost         % ________________

       = Annual inventory cost reduction       $ ________________






       Note: There is also a one-time cash flow improvement from the
       decrease in inventory.


       Inventory value         $ ________________

       x Inventory reduction   % ________________

       = Cash flow improvement                 $ ________________


       Purchasing cost reduction

       Typically there is a 2% to 5% improvement in purchase costs.
       Valid schedules allow purchasing people to spend most of their
       time doing effective purchasing instead of expediting or trying
       to get material in less than normal lead times.  This also
       provides purchasing people with accurate up-to-date projections
       of usage by item for sourcing decisions, volume discounts, and
       value analysis.  Less paperwork is also a by-product.


       Annual purchase cost    $ ________________

       x Percent improvement   % ________________

       = Annual purchase cost reduction        $ ________________


       Productivity improvements

       Improvement in direct labor is typically 5% to 10% in fabrication
       areas and 25% to 40% in assembly areas.  This is a result of
       fewer shortages, less frequent interruptions and short runs
       because of expediting.  "All" parts are available when scheduled
       for assembly.  In fabrication areas, there are minimal hot orders
       and rush jobs that cause short lots, extra set ups, disruption
       and inefficiency.


       Annual direct labor     $ ________________

       x Percent  improvement  % ________________

       = Annual direct labor savings           $ ________________


       Customer service

       A 3% to 5% increase in sales is typical due to more on-time
       shipments, improved quality, and reduced lead times.  This is
       usually accomplished with existing facilities.  With better
       scheduling, more of the right material is made available at the
       right time and shortages are known further in advance so that
       they can be prevented before they impact customer service.


       Annual sales            $ ________________

       x Increase in sales     % ________________

       x Net profit            % ________________

       = Improved sales                        $ _________________


       Miscellaneous benefits

       Elimination of annual   $ ________________
       physical inventory

       Reduced scrap           $ ________________

       Reduced clerical effort $ ________________

       A/R cycle reduction     $ ________________

       Reduced overtime        $ ________________

       Capital expenditure     $ ________________
       avoidance

       Improved supervisory    $ ________________
       effectiveness

       Total misc. benefits                    $ ________________


       Total annual benefits                   $ ________________



       Costs


                       One-time                Ongoing annual

       Software        $ ________________      $ ________________

       + Hardware      $ ________________      $ ________________

       + Consulting    $ ________________      $ ________________

       + Other         $ ________________      $ ________________

       = Total costs   $ ________________      $ ________________




        Cost/benefit analysis


       Return on investment

       Annual benefits         $ ________________

       - Annual expenses       $ ________________

       = Net annual benefit                    $ ________________


       Net annual benefit      $ ________________

       / One time costs        $ ________________

       = Return on investment                  % ________________


       Note that the one-time benefit of reduced inventory value is not
       used in the above calculation.


       Cost of delay

       Net annual benefits     $ ________________

       / 12 = cost of delay    $ ________________
               (monthly)