Part 3: The Best Way to Maximize ROI for Continuous Improvement

By: Simon Spencer

August 6, 2020

ROI for Continuous Improvement

Digital work instructions are critical for maximizing your return on investment and creating a culture of continuous improvement. Implementing this kind of software on the shop floor is the stepping stone towards standardizing work, improving processes, and cutting costs.

Be sure to read the previous articles in our ROI series:

Calculating ROI for Continuous Improvement

Take a moment to imagine bringing in the following numbers for your company just by implementing digital work instructions:

  • $14,099.80 saved per month by reducing paper ($169,000/year)
  • 150,000 hours saved per year in labor
  • 10% increase in shop floor efficiency
  • 30% decrease in rejects (and increase in quality!)

And how much does it cost to implement? If you were to use Pro with SaaS, then it could come out to $700/month or $8400 per year.

That means that the implementation of work instruction software would pay for itself in just one month given all the money you'll be saving on paper, supplies, and labor.

It is very important to make sure you capture all the details and spendings you are likely to come across in your project.

Saving Even More Money

Let's go a step further by imagining that your company already has a good IT infrastructure in place with computers, screens and wireless networks already installed.

Equally, your summary should total your savings into the same ‘Currency’. As a rule, your company will have calculations that bring this data to a standard format. Simply replace the data with your own numbers to get an accurate calculation of the kind of ROI you can get by switching to our work instruction software.

Total Amount You Can Expect to Save

  • Paper Savings: $169,000 (per year)
  • Digital work instructions Savings: $3,000,000 per year (150,000 hrs x $20 per hour)
  • Shop floor efficiencies Savings: $750,000 per year (25,000 hrs x $30 per hour)
  • Quality improvement Savings: $485,000 per year (Raw material $155K, 11,0000 hrs x $30 per hour)

In total, you can expect to save at least $4,404,000 per year!

Total Amount You Can Expect to Spend

In this calculation, we're also going to include the cost of adding internet infrastructures:

  • Implementation of digital work instruction software: ~ $9,000/year
  • Internet training: $120,000 for the first year (4,000 hrs x $30 per hour)
  • On-going training: ~$24,000/year (800 hrs x $30 per hour)
  • Purchase of devices (computers & screens): ~$200,000 for the first year (200 stations x $1000)
  • Replacement of devices: ~$5,000/year (5 stations x $1000)
  • Intranet infrastructure: ~ $200,000 for the first year (Wireless network ~ $200,000)
  • Intranet maintenance: ~ $5,000 per year (Wireless network ~ $5,000)
  • API project: ~ $30,000 for the first year (Outsourced contractor)

In total, this comes up to $593,000 for the first year and $43,000 for the following years.

Calculating the ROI: Savings vs Spendings

Based on the previous numbers, we can deduce a return on investment (ROI) of:

  • $3,811,000 for the first year
  • $4,361,000 for the following years

This means that even if your company needs to implement an updated IT infrastructure, the savings are still huge!

Risks of Implementing Work Instructions

The HR side of these systems can also present challenges. Your ROI summary needs to also contain the risks which may be involved with your projects. Whenever you implement a new idea, process, or project, you always need to listen to all the stakeholders.

Check out this series on how best to minimize your Project Fear and move purposefully implementing the next evolution in your company:

Process Improvement from Maximizing ROI

Remember our two employees in the second article, A New Approach to Manufacturing ROI?

The senior employee was using the digital work instruction software on that same product. The manager then studied the results. How is this employee achieving a piece rate of 8 minutes per part when everyone else is achieving 10 minutes? So, the manager went down to the shop floor.

As he approached the senior employee, he saw a work instruction author standing next to him. The senior employee was explaining a really nice trick to make the assembly easier to do. It was this trick which gives the employee the ability to build the parts faster. And now, with the work instruction updated, ALL the employees are hitting 8 minutes per part.

Using digital work instructions provides a sound and stable foundation for continuously improving your products and your bottom line.

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