The ROI, or return on investment, shows whether an investment is profitable. In practice, it can work like this: Before a manufacturing company buys a new piece of equipment, it determines what optimizations can be made with it. The purchase can improve the quality of the products and thus minimize complaints. It is also conceivable that the new system can produce more parts in a shorter time. Improvements in production usually lead to an increase in profits for the company.
There are different methods for calculating ROI. However, the company’s profit is often set in relation to the total capital invested. That is
ROI = Profit / Total Capital x 100
If the result is 100 percent, the investment is covered. In this context, total capital refers to the sum of equity and borrowed capital. Profit is calculated as sales minus costs and taxes. It is also possible to multiply the return on sales by the capital turnover according to the DuPont system:
ROI = Return on Sales x Capital Turnover
In practice, the ROI calculation can be quite extensive, as a large number of costs associated with the investment are taken into account. This means that in addition to the price of a new system, fees are also incurred for administration, taxes, transport, setup or maintenance.
After a certain period of time, the investment pays for itself and is therefore profitable: the costs for purchasing the new plant are ultimately covered by the additional profit generated by the optimizations in production. This state can occur at different rates.
The Use of OEE Quickly Becomes an Indispensable Value and Control Tool
When calculating the ROI, various factors can also be taken into account. One of these is Overall Equipment Effectiveness (OEE). This is a key figure used to evaluate the productivity of a machine, plant or line. In this way, all plant losses, i.e. potential, can be systematically identified, analyzed and then eliminated. However, many manufacturing companies do not yet measure productivity systematically. Often, the number of units produced in relation to the time required serves as an indirect productivity indicator.
Producing based on gut feeling is not an exact method, because at best it is suitable for comparison: if it works as you know it, it works well, if not, it doesn’t work so well. However, in fact, only what can be measured can be improved in the long term.
Marc Ehls, Team Leader Consulting at FASTEC
The OEE value is calculated by multiplying the availability, performance and quality levels. When calculating the OEE value, the losses due to unplanned downtime, deviations from the planned number of units, and defective parts or parts that have to be reworked are thus included:
OEE = availability level x performance level x quality level
OEE is thus a kind of speedometer for production management. These figures are based on facts – information collected about all processes and malfunctions, which are stored in a database. It becomes clear where optimization is necessary and useful. And the success – or failure – of implemented measures can be seen immediately. OEE enables an analysis of the potential of production. As a control instrument, it is used to monitor individual machines, complex systems or the entire factory in real time.
The OEE indicator offers great benefits for manufacturing companies in a range of sectors. By revealing sources of error, faults can be avoided, leading to higher productivity while keeping operating costs the same. It’s easy to do the math.
Edwin Schott, Project manager for the potential analysis with easyOEE at FASTEC
Including OEE in the ROI calculation offers a decisive advantage: OEE reflects the productivity of a machine holistically and thus also shows the losses, i.e. the potential, in full. If, on the other hand, companies were to take only the availability of a machine as a basis, for example, other important factors would be neglected.
Entry-Level Solution Enables a Cost-Effective and Fast Start to Digital Manufacturing
FASTEC has developed smartOEE to enable potential analysis and optimization of production with little effort. It has a hybrid architecture of cloud and edge and facilitates entry into the digitalization of production with an MES. smartOEE is a “turnkey” system that companies can use directly after simple installation and activation (plug & play). The flexible monthly rental option enables quick and cost-effective entry into the digital factory. Production data is collected and can be analyzed directly in the cloud. By automatically calculating the OEE, companies can derive optimization measures and increase the productivity of their production. By using the cloud, the data is always available and can be used.
The edge components for smartOEE are provided by the FASTedge product family. The FASTedge Box connects to the cloud, terminals and machines. It not only performs system control, but also guarantees reliability (always on). Production employees can use the FASTedge SFT15 touch terminal to make entries at the machine. Machine signals are recorded automatically and manually.
Utilization of the Results of the Potential Analysis is Crucial
However, recognizing the potential of a production system alone is not enough. How it is handled in the future is crucial. The keyword here is CIP: continuous improvement process. The biggest challenge is maintaining continuity. Once a company has decided to implement an MES, another requirement is to educate production personnel about the purpose and benefits. Training ensures that the required data is recorded correctly.
Trained lean managers who use the MES daily as part of the CIP make a significant contribution to the success of the project. Their responsibilities include analyzing the key figures, deriving measures from them and ensuring successful implementation in order to achieve lasting improvements. OEE recording thus provides a suitable basis for a lean team or an operational excellence (OPEX) department.
Experience shows that the introduction of lean production in conjunction with an MES quickly yields a high ROI, because analyzing the data from the MES effectively uncovers weak points and targeted measures for process improvement can be initiated. The more and the better the data from the MES, the more effectively weak points can be analyzed.
Daniel Kierstein, FASTEC partner for OPEX consulting
OPEX consulting helps companies to achieve efficiency gains in production based on data. Training and project support enable companies to recognize and exploit potential. The range of services includes identifying and implementing optimizations, embedding performance metrics in meeting routines (shop floor management), setting up meeting routines, increasing acceptance among internal stakeholders and building interactive analysis dashboards using Power BI.
Expertise and Tools for the Data Basis are Necessary
Examples from practice show: If companies succeed in determining the potential of their production and implementing optimizations, they can increase their productivity and minimize costs. For example, the pharmaceutical company Sartorius saved 300,000 euros in one year by reducing its scrap. Medice, a manufacturer of pharmaceuticals and medical products, was able to achieve an OEE increase of 20 percent within 12 months.
The results of the potential analysis and the ROI calculation based on them thus justify the investment in an MES. The better the results of the potential analysis are implemented, the faster the ROI is achieved. This requires know-how and a tool for the data basis.
