Manufacturers now have new opportunities to comprehend and use ROI analysis because of advancements in the IIoT and its wide adoption. In this article, we examine this subject and clarify the significance of OEE growth in determining the ROI of your investment choices. We’ll also assist you in comprehending the anticipated return on investment (ROI) of OEE software, which, in our experience, many manufacturers found to be puzzling.
What role does OEE play in ROI analysis?
Most manufacturers must create a business case and determine the return on investment before making any significant capital expenditures, including buying new machinery or production equipment (ROI). In fact, many organizations use this as a best practice standard before releasing funds, and few finance managers won’t demand it.
ROI analysis will give financial justification
We can examine prospects and provide the financial rationale for spending with the aid of ROI analysis. It aids financial managers in being able to respond to crucial queries to make sure businesses are making superior investment judgments.
Questions such as :
- Where should we invest? – Businesses have limited funds but multiple opportunities to invest. How can we compare and decide which is the best option?
- How should we evaluate the performance of an investment after implementation? – Companies should assess financial performance after investment to validate the ROI. Doing so can potentially provide insights for improved decisions in the future.
- How do we know if the performance of the investment is optimized? – Once we have a new machine up and running on the line, it will be helpful to see if we are obtaining the maximum benefit from our investment.
The results of new investments must be measured
There are other signs to look for that go beyond ROI that demonstrate the investment is profitable for manufacturers. OEE is one of these, and we’ll examine it in the following chapter. Ultimately, an investment should enhance the production process and enable us to accomplish more with less. In actuality, this translates into less waste each production run or fewer production hours per item produced. In any case, the investment must yield a return while either increasing production, reducing waste, or raising quality.
There are many ways for us to improve our manufacturing processes.
- We could invest in new machinery.
- We might reduce stops, with the help of OEE software.
- Or we could automate routine tasks with robots.
Other advantages that show investment is adding value and having a favorable effect on the bottom line are:
- Reduce the number of shifts or overtime hours needed to carry out the production strategy
- Delay making expenditures in new machinery and facilities
- reduce the need to hire more people
- Respond more rapidly to changes in demand
- Alternately, speed up delivery
OEE improvement as a sign of a profitable ROI
A lean manufacturing tool and universal best practice known as overall equipment effectiveness (OEE) is used to track, assess, and boost a production process’s efficacy. An assembly line, machine cell, packaging line, filling machine, etc. might all fit this description. Furthermore, most of the other important manufacturing KPIs are improved by increasing OEE. OEE is essential for determining the ROI of decisions because of this.
When trying to defend new capital expenditures, manufacturers can greatly benefit from OEE. Utilizing real-time OEE data provides you with hard data that you may use to show the limitations of your manufacturing process. Additionally, these constraints are inevitably being lowered when you observe gains in OEE. You can simply model the value of additional hardware or software that is acquired to enhance the process once you have this data at your disposal.
Additionally, by enabling manufacturers to calculate the value of the change, tracking OEE also enables them to identify and rank opportunities. When attempting to justify new spending, this is also beneficial.
Indeed, it is hard to imagine a more credible metric than OEE to validate your investments.
Utilizing OEE improvement to keep track of investment decisions
It should come as no surprise that expenditures in production equipment should, once operational, boost OEE given the significance of ROI and OEE in the manufacturing industry. While we are still assessing fresh opportunities, this is a great time to start estimating the value of enhancing OEE.
Even better, you can track the performance of your investment in real-time if you’re utilizing Tipteh IoT platform. The software can then assist you in understanding why an investment may not be increasing OEE. As a result, you can make sure that your investment is performing to its full potential by utilizing OEE as a metric and monitoring whether it is improving or not. Additionally, it is a way to monitor whether you are getting the highest ROI.
Naturally, the next concern is how to determine the ROI of the OEE Software itself after you have implemented OEE in your manufacturing?
ROI Calculator for OEE Software
Calculating your return on investment is quite simple when making more conventional investment decisions, such as buying new equipment. However, many manufacturers find it difficult to comprehend the value they are receiving from their investments in IIoT solutions, such as OEE software.
By estimating the ROI of OEE improvement and tracking the real performance of OEE after purchase, the solutions can be discovered. It all comes down to determining whether implementing OEE software has a favorable influence on your bottom line.
You may, of course, determine the ROI of purchasing Tipteh IoT platform using the OEE ROI calculator since that is its main function. Additionally, you may compute the ROI of various IIoT products and software by using the formulas in the calculator logic.
IIoT and the Future of Investment Justification
From our discussion, we can draw the conclusion that manufacturers are looking at and weighing more investment options than ever before. They are doing business in an atmosphere where competition is rising at the same time. Therefore, having a gut feeling that an investment will be worthwhile is no longer sufficient.
ROI has long served as the main justification for investment decisions. We can now monitor and record production data at the machine level in real-time thanks to the development and adoption of IIoT. Manufacturers can expand and enhance the way of evaluating investments with the help of this new capacity. They should also look at increases in OEE to determine how a planned investment will affect the bottom line.
