Turn the kaizen’s before and after into annual savings, payback and ROI, and take to the A3 a table that management and cost accounting understand.
Pre-sizing and estimating tool: results do not replace design, calculations or reports signed by a licensed professional, nor verification against the applicable codes and standards.
Before, after and gain for each indicator, ready to copy into the A3 or print to PDF.
Annual gain of each item, largest first, and the recurring cost.
Take this page’s results to another calculator with the fields already filled in.
Cash flow of the improvement: investment in year 0 and annual savings escalated at the rate entered, discounted at the MARR.
The calculation report gathers this page's inputs, results, equations, assumptions and references, with fields for project, engineer and revision. The full report also includes the charts and interpretations, in color. In the print dialog, choose Save as PDF.
Measure each affected indicator before and after (time per part, scrap, inventory, machine hours, energy), turn the difference into money per year and add it up. Then subtract any recurring cost and compare with the investment. In the example, gross savings are about US$ 101k a year for an investment of about US$ 30k.
Equipment and fixtures, materials and services, and the hours of the team that worked on the improvement (participants × hours × hourly cost). In the example, 320 team hours at US$ 50 an hour come to US$ 16,000, more than half of the total investment.
Hard savings are cash that stops going out: scrap, energy, inventory holding cost. Freed people and machine hours only become cash if they are used to produce more, cut overtime or postpone a hire. Many controllers accept only hard savings in an A3; the page shows both.
Lower average inventory frees cash once and cuts holding cost every year. In the example, going from US$ 60k to US$ 36k frees US$ 24k and, at a 20% holding cost, saves US$ 4,800 a year. Only the second figure goes into annual savings.
It depends on where the machine sits. At the bottleneck, every extra hour becomes sales, so the value is the contribution margin per hour. Elsewhere, only the variable hourly cost (energy, maintenance) is saved, a much lower value.
Payback is the time for the net gain to repay the investment: in the example, about 3.5 months. Annual ROI is one year’s gain divided by the investment, about 340%. NPV is the value of all gains over the horizon, discounted at the company’s rate, minus the investment.
Measure the after state in stable operation, over a few weeks, and in the same season as the before. Do not count the same gain twice, such as operator and machine hours that are really one resource. Name who tracks each indicator so the new standard holds.
Important notice: Indus Metrics tools produce estimates and pre-sizing results from the data you enter and from published engineering methods. They do not replace design, calculations or reports signed by a licensed professional engineer (PE), nor verification against the applicable codes, standards and regulations, such as OSHA rules and the ASME codes. Material and fuel properties vary: check manufacturer data or your own process analyses before deciding. By using this site you agree to the Terms of Use.
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