If you installed the solution listed in Step 1 above and it prevented an outage within its area of
control, what would that save in terms of downtime? This downtime should be divided into
two categories:
Lost Revenue
Remediation costs
Note that some of these costs may be based on the duration of the outage, while other costs
are incurred on a per occurance basis. Once you have identified these costs, place them
in the appropriate field below.
$
(downtime in dollars per hour; e.g. lost revnue from continuous process)
$
(additional costs of each event, clean-up, restoration, liabilities,
legal costs, environmental penalties, lost revenue from batch process where batch
must be discarded)
$
(estimated additional costs associated with worker injury due to equipment catastrophic failure.)
hours (if you experienced an outage, enter the actual downtime)
Press the Find ROI button to review the data entered above. The program
will compute a rate-of-return for the investment by comparing the cost of the solution with
the cost of doing nothing. The assumption will be that the solution will reduce the likelihood
of the problem to essentially zero probability. With the problem eliminated, the resultant downtime
caused by the problem will not occur and the costs associated with that downtime will be saved.
This savings is compared to the cost of the solution and an IRR (internal rate of return) is
computed.
1FICA (Social Security), Medicare and Unemployment are typically employer matched funds.
As a result, the cost to the employer must include these values. These values are in addition to
the withholdings paid by the employee. 2Discount Rate: Internal cost of money or minimum required return before a
solution is considered worth of investment. The benefit of this solution must exceed
this value. 3Salvage Value (existing): If the existing product has a residual value that can
be captured, then these funds can be applied to the "solution cost", effectively lowering the
cost of the new solution by an amount equal to this salvage value. The most conservative
estimate is to assume zero salvage value. 4Salvage Value (new solution): When estimating the total cost of a solution, we
total the costs to provide the solution and subtract any benefits, refunds, savings or other
payments that reduce the total cost of the solution. One of those refunds is the
end-of-life salvage value.
If a value is entered here, the calculator adds this benefit to the final year savings and
computes a net present value equivalent benefit today based on the discount rate you selected
above. This benefit reduces the cost of the solution and works to improve the solution's
internal rate of return (IRR). As discussed above, the most conservative calculation is to
assume zero salvage value.
5If the solution does not appear in the list, chose "Other" from pull down list and
enter the name or description of the solution. The MTBF and MTTR data must be entered
manually. One souce for this information will be Chapter 3 of the IEEE 493 (Gold Book), in
particular, table 3-2.
6Multiple to multiply times the straight-line percentage. This value is multiplied times the
remaining book value to determine the annual allowable depreciation allowance. For example, a 5-year
straight-line depreciation would depreciate an asset 20% per year. A 1.5 multiplier (150%) would increase
the depreciation to 30%, but would be applied not to the original asset value, but rather to the remaining
book value at the end of that year. Use this method to simulate 125% or 150% declining balance depreciation
methods.
Downtime Cost