Manufacturing, by its very nature, is a very practical industry. Organizations have to manage inventory, warehousing, distribution, workflows and a whole host of daily tasks that are heavily reliant on accurate, up-to-date information to ensure processes are running smoothly. There are too many moving parts to invest half-heartedly in software and infrastructure and expect to keep a firm handle on all of the various components in today's manufacturing environment.
However, before a manufacturer invests in new technologies and equipment, they need to ensure they've thought through the process. The biggest step in infrastructure updates is taking a close look at the return on investment. This is the time frame that a purchaser can expect to recoup the costs of a particular capital asset, whether it's a software system, hardware or equipment. In addition, ROI takes into account the potential profits they can expect to earn.
Why Pay Attention to ROI?
A report for Tooling University, an online education and training service provider, highlighted the complexity involved in trying to calculate ROI in modern manufacturing organizations. In reality, it's very difficult to isolate every component or system because they're often part of an interconnected web of processes. For instance, a mobile data collection solution involves everything from an ERP to the handheld devices used to collect and transmit information.
At the same time, manufacturers often deal with heavy upfront expenses, explained the Houston Chronicle. For those first getting started or expanding, they need to purchase factories, equipment, machinery, raw materials and components, to name just a few. Then there are labor costs and spending on research and development that can also influence the way a manufacturer measures its ROI. Accordingly, the majority of organizations won't likely recuperate the costs of these investments in the short term and should look at it with a broader perspective.
But having a concrete idea of how long it will take to earn back the money needed to integrate or update new systems is imperative.
Labor Costs: An Uphill Battle
According to Cleaning & Maintenance Management Online, labor often accounts for the majority of expenses. In manufacturing, the amount an organization spends on its personnel can be a significant influence on the bottom line.
The most recent data from the Bureau of Labor Statistics showed employers in goods-producing industries spend more than $36 in compensation for every hour an employee works. Wages and salaries compose the majority of spending, at nearly $24 for every hour. The figures for manufacturing fall closely in line with these numbers.
While every company will likely have a slightly different pay scale, the idea remains the same. Manufacturers need to be as efficient as possible with their existing skilled labor and invest in solutions that will allow them to perform their jobs with maximum accuracy and speed. The less time a worker spends performing a task, the fewer hours are required. As a result, the company can save more in compensation costs.
As a result, it makes sense for manufacturing organizations to seriously consider an automated data collection solution, especially if they're still using paper-based, manual processes to keep track of production, inventory and other activities.
Data Collection Software ROI
Manufacturers need a clear-cut process to uncover the needs, pain points and options available to them by way of software solution. RFgen has created an ROI calculator specifically for this reason. Broken down into a six-step process, the resource guides manufacturers through a series of evaluative and diagnostic processes that help them gain visibility into their current circumstances and where they want to be.
- Step One: The ROI calculator allows you to personalize the report, complete with the names of key stakeholders and corporate information involved in the purchase decision.
- Step Two: Further develop a profile and enter in all data necessary to create a preliminary budget, identify the problem areas that automated data collection software can address, establish clear goals and estimate the project's timeline.
- Step Three: Go into further detail, outlining multiple tasks, including cycle counts, work orders and sales orders.
- Step Four: For each task, clarify corrections time to detail efficiency rates. Describe task times, meaning the estimated duration needed to complete a transaction using current manual data collection processes.
- Step Five: Get a clear snapshot view of the estimated ROI and savings and review each part of the report.
- Step Six: Meet with a consultant to discuss the automated data collection solution in detail.
With any new manufacturing investment, the foundation must be a clear plan.