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SPOTLIGHT

February 2016

Continuous Improvement Tool - Develop a business case for your reliability initiatives! 

One of the most common issues we hear from our clients is there desire to address issues with equipment reliability and high costs. However, they struggle to justify the improvement initiatives because of a lack of a sound business case or financial justification.

 

Predictive Service has developed a two-part process to aid in both the business case development. The first part is achieved by utilizing our Continuous Improvement tool (CI Tool). The second part is working with our team of professional consultants and enhanced with proven tools to further define and develop an improvement strategy.

 

Predictive Service’s CI Tool was developed to help our clients quantify financially the impact of poor reliability and to project the return on investment once those issues are addressed. The tool outputs a calculated return on investment include a five-year cash flow projection with an internal rate of return. Designed for high-level business case development, to help manager and stakeholder make decisions whether to approve a project or specific initiative. Once an initiative is approved, the Predictive Service’s Return on Investment tool can be used for a deeper dive into the reliability issue with respect to impact on cost and a more detailed evaluation of savings. The theory behind this two-step process is to minimize the effort in developing a business case until the project approved for validation. At that time, a more detailed analysis of the project can commence.

 

The user begins the process by choosing the reliability issue(s) that is creating a negative impact on production, cost or productivity. The tool’s wizard will present issue specific questions that will define the overall situation in term of cost. The user will enter data (actual or estimated) and the tool will calculate the annualized financial impact of the issue. Once the costs side is known, the system will guide you in the calculation of estimating realistic savings. The tool can be used to run “what if” scenarios to compare the impact of different estimated saving, from a conservative approach to a more aggressive point of view. As the projected annualized savings are calculated, the user will be prompt to allocate a portion of the projected savings that will be used to address the root cause of the problem.

 

Finally, the user will be asked to allocate a percentage of those funds set aside to address the problem, to validate the entire project. In other words, if the projected savings will generate a $1,000,000 a year and the user wishes to allocate 10% of the first year’s saving ($100,000) to address the problem, it is a sound strategy to take a portion of those funds say 15% or $15,000 to validate the overall business case is achievable. This process will minimize the project risk to only the validation funds. This also be the point in the process where a much deeper technical and financial analysis will take place.

 

At the end, the user can elect to save the data and the calculated results to a PDF file which will include, the overall ROI (return on investment), a five-year cash flow analysis and the calculated IRR (internal rate of return). Predictive Service’s Development Managers and EAM Reliability Consultants can then assist in refining the business case for the approval process and deployment strategy. Please visit www.predictiveservicec.om to access the tool and begin the process of financially justified reliability improvements.

 

 

 

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