American Labs provides lab testing services for a variety of clients, mostly doctors’ offices and other small medical businesses throughout the Midwest. Clients send test vials containing blood samples or other test requests to American Labs’ testing center, where the requested tests are performed, after which the results are sent back to the client via fax. Jim Larsen, the head technician in the testing facility at American Labs, has approached you for help with the company’s outdated inventory tracking system. Business has picked up recently, and the turnaround for clients’ requested tests has been lengthening. To make matters worse, the lab technicians are seldom able to give customers an answer regarding where their requests fall in the testing queue or how long they can expect the turnaround to be. Much of this stems from an old, mostly paper-based inventory tracking system, which includes handwritten labels put on each of the incoming test vials and a logbook with entries made for each vial at each stage of the testing process. Jim would like to streamline the inventory tracking process with an updated information system that uses barcodes and a modern database to keep track of customer test requests and the accompanying vials. He would like to enable technicians to provide accurate status updates and turnaround estimates, and generally shorten the turnaround time for test requests. After an initial analysis, you make the following estimations. You will use these data as part of your initial feasibility assessment.a. Identify several benefits and costs associated with implementing this new system. b. Using Figure 4-10 as a guide, prepare an economic feasibility analysis worksheet for American Labs. Using a discount rate of 10 percent, what are the overall NPV and ROI? When will break-even occur? c. Modify the spreadsheet developed for part b to reflect discount rates of 11 and 14 percent. What impact will these new rates have on the economic analysis?
American Labs
American Labs provides lab testing services
for a variety of clients, mostly doctors’ offices
and other small medical businesses throughout the Midwest. Clients send test vials containing blood samples or other test requests
to American Labs’ testing center, where the
requested tests are performed, after which
the results are sent back to the client via fax.
Jim Larsen, the head technician in the testing
facility at American Labs, has approached you
for help with the company’s outdated inventory
tracking system. Business has picked up recently, and the turnaround for clients’ requested
tests has been lengthening. To make matters
worse, the lab technicians are seldom able to
give customers an answer regarding where their
requests fall in the testing queue or how long
they can expect the turnaround to be. Much of
this stems from an old, mostly paper-based inventory tracking system, which includes handwritten labels put on each of the incoming test
vials and a logbook with entries made for each
vial at each stage of the testing process.
Jim would like to streamline the inventory
tracking process with an updated information system that uses barcodes and a modern
database to keep track of customer test requests and the accompanying vials. He would
like to enable technicians to provide accurate
status updates and turnaround estimates,
and generally shorten the turnaround time
for test requests. After an initial analysis, you make the following estimations. You will use these data
as part of your initial feasibility assessment.a. Identify several benefits and costs associated with implementing this new system.
b. Using Figure 4-10 as a guide, prepare an
economic feasibility analysis worksheet
for American Labs. Using a discount rate
of 10 percent, what are the overall NPV
and
c. Modify the spreadsheet developed for
part b to reflect discount rates of 11 and
14 percent. What impact will these new
rates have on the economic analysis?
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