As a solutions provider, we’ve seen more and more companies relying on gauging technology to automate the quality control of their products. With the promise of cutting costs, streamlining production and improving product quality, many companies are looking for a measurement system solution that can deliver a substantial return on investment (ROI).
How do you know if an in-process measurement technology will be worth the investment for your company?
Understanding the cost savings and cost structure of why you should invest in an in-process measurement system is critical if you are to accurately make process improvements, realize a lower total cost of ownership (TCO) and achieve investment returns. As you evaluate in-process gauging systems, make sure you look at the best measurement and control strategy for your company and how you’ll plan on evaluating the system’s performance. Remember, the adoption of an in-process measurement system is not merely a technology investment; it’s a business investment.
Preparing the Business Case
Before you implement an in-process measurement system at your plant, it’s prudent that you first prepare a strong business case. The framework below was developed to help you evaluate the ROI of the measurement system:
1. Begin with the end in mind.
What is it that you’re trying to achieve? Process-related savings, as outlined below, are just part of your evaluation. Ultimately, you’ll want to differentiate your products from the competition to retain or grow your customer base. The financial impact to your company is potentially far greater than all the process-related savings.
2. Evaluate how the measurement technology will fit into your process.
Before you do anything else, examine your company’s manufacturing philosophy and strategies to see how in-process measurement will fit in with what your production plant is doing today. Good in-process measurement technology is designed to add value to your production operation.
3. Consider the direct/indirect benefits and costs of implementing the in-process measurement system.
In order to measure the potential benefits and costs of the measurement system investment, you’ll need to collect some data. Your investment strategy must be based on the actual implementation costs. To examine the direct benefits that the measurement system will bring to your process, consider the following:
- Decrease product waste – measurement inaccuracies can cause a number of in-process issues with certain production and finishing operations. High-accuracy measurements coupled with process insight enable you tightly control production processes. This translates into fewer manufacturing issues that require costly rework or produce waste.
- Increase product quality – poor measurement accuracy and consistency can have a direct impact on product quality by affecting the product’s appearance or performance. As mentioned above, precision gauging allows you to better control product quality by ensuring it does not deviate from the production requirements designed to meet customer expectations.
- Minimize maintenance and downtime – measurement systems that require regular servicing and recalibration can cause downtime and tie up costly resources. Depending on your operation, shutting down your production line for servicing a piece of gauging equipment will cost you significantly. System reliability and dependable performance reduce maintenance costs and ensure that you maximize production uptime and productivity.
- Improve customer satisfaction – always deliver a quality product. Your customers will be happier and you will reduce or eliminate customer returns.
Looking at the indirect benefits, you can leverage your measurement system as a competitive differentiator. You can also feel assured that you are meeting the customer procurement requirements for delivering a quality product on-time, to specification and to the agreed-upon purchase price.
4. Conduct a strategic assessment.
Prior to deciding whether a certain measurement system is right for your process, you’ll need to assess the potential impact it could have on the various drivers related to the value it brings to your company. Grade each initiative on the following key enablers (to characterize the ease or difficulty of implementation):
- Type of measurement system
- Integration level
- Process transformation
Plot the data on a flowchart to show the value of implementing the technology. Remember, don’t just look at the price of implementing the measurement technology; look at the value it can add to your business and process.
5. Perform a financial analysis.
Measure the profitability at your plant across your production lines. Using current data, calculate the investment return ratio, the net present value and the ROI of the investment. Be sure to include the cost savings you’ll realize from the increased measurement accuracy, such as reduced scrap and downtime per year. This will help you place a value to the cumulative costs and benefits, as well as to the timing of the project costs.
6. Present the final results to key decision makers.
Incorporate all the data you’ve gathered into a document that summarizes the qualitative and quantitative aspects of the measurement system. Be sure to include:
- A business case that identifies both the benefits and costs of implementing the measurement technology
- A set of cumulative solutions through various measurement system-related options
- A framework for identifying sensitivities to determine the timing of costs
- The timeline of the implementation plan
In the current fiscal economy, organizations find themselves evaluating all conceivable means to increase productivity, improve quality and gain a competitive advantage. Implementing a highly accurate and reliable measurement system that gives you process insight is one of the key ways to accomplish these goals. It’s the best long-term investment you can make. The NDC team is here to help.