I'm a Swedish-based Lean consultant, and the owner of the free World-Class-Manufacturing.com web site.
In short, I teach key descision makers how to get a cost-effective and robust production.
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Return on Investment calculator for Lean Manufacturing
Form for estimating ROI
To estimate the return on investment of your TPM or Lean Manufacturing project, first calculate the current OEE (i.e., today). Next estimate how OEE will increase over the years, and then exchange the default values in this form. All figures in millions of dollars.
A change project such as TPM or Lean Manufacturing must be looked upon as an investment that will come with initial costs and hopefully bring something back in return.
This is no different from any other investments.
Use this unique form to estimate the value of the concept you are looking at.Costs
The main cost will consist of:
- Training and Consultancy
- Increased initial maintenance costs
- Project team members
Benefits
Increased OEE ratio is the main factor that that may be used to approximate the return on the efforts. And since the OEE ratio is a direct reflection of your plant’s capacity, it may be used to calculate future productivity after completing improvements.
An example: A plant produces 10,000 units per year with an OEE ratio of 50 percent. After the improvements, the project team estimates that it will be possible to reach an OEE ratio of 80 percent. This means that they will be capable to produce.
10,000*80/50 = 16000
units in the same facility and with the same manning as before.
Is there a market for expansion?
One important question is if there is a market for expansion. If so, then the increased capacity may be used for increased sales. It is common that the company’s market share might grow after implementing TPM or Lean Manufacturing. This is possible as improved delivery accuracy and shorter lead times make more sales possible even if the market is stagnant.
If expansion is not considered possible, the increased capacity may instead be used to lower the production costs. This is possible through:
- less overtime
- fewer shifts
- fewer parallel production lines maintained and operated
The direct labor costs for production will therefore decrease as the OEE ratio increases.
Oskar Olofsson, 2009