In today’s highly competitive market, it’s essential for manufacturers to implement new technology that improves production and increases efficiency. Many manufacturers will research low-cost solutions as well as high-performance machinery. While a standard return on investment (ROI) analysis only focuses on equipment price, to accurately measure the cost/benefit factor for each, it’s vital to calculate true ROI.

1) What should I incorporate when calculating true ROI?

In addition to including acquisition costs in the ROI calculation, you’ll also want to examine how the equipment will impact operating costs, maintenance costs, and decommissioning costs.

2) What are other costs of ownership I should consider?

While low-cost solutions might first appear economical, they may be more expensive than high-performance options after you factor in often-overlooked hidden costs. Additional expenses include:

  • Decreased product performance
  • Maintenance/repair
  • Labor
  • Unplanned downtime
  • Waste/scrap
  • Utilities
  • Administration

Maintenance and repair costs typically skyrocket during years 4 through 12 in a lower-cost machine – causing part quality to suffer and scrap to increase while perishable tool costs soar. A high-performance machine can retain 50% of its value at the end of three years and can extend component life and reliability.

3) Are there machine features that can improve ROI?

Automation can improve ROI in a number of ways, increasing machine use as much as 95%. Marked production improvement can reduce the machine count needed which, in turn, reduces utilities, floor space, coolant, tooling, etc. needed to achieve desired production volumes.

Automation also reduces cycle times which can result in lower labor costs and tool life expenses.

4) Are there ways to protect your machine investment?

Unexpected expenses from unplanned downtime can greatly add to the cost of ownership and negatively impact ROI. Unforeseen machine maintenance can be costly when it affects the ability to produce quality parts on time. It’s certainly expensive to expedite replacement parts or call for emergency service. Makino’s MHmax software/sensor package proactively reduces unplanned downtime by monitoring and assessing four machine health subsystems. Its predictive and proactive capabilities can prevent unforeseen issues and allow users to plan maintenance when it won’t interrupt production.

5) Can financing affect ROI?

On a large capital purchase, it’s essential to consider how financing cost can impact ROI. Paying for equipment in cash allows the company to amortize the cost throughout the lifetime of the equipment. However, purchasing it outright can also increase a company’s liquidity risk as assets are tied up in the machine.

Leasing can provide flexibility in capacity and financing. If the equipment is only needed for a 3-year production run, the company can return the machine at the end of the contract and only pay for the machine’s depreciation while receiving full benefits of a high-performance machine.

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