Get the Maximum Return on Investment with IFS Ultimo

Return on Investment (ROI) is a metric used to understand the performance of an investment. This information is useful for justifying an investment made, being able to evaluate the savings that have been or will be obtained over time.

How to Calculate the ROI of an EAM System like IFS Ultimo?

Calculating the ROI of an EAM is complex, because there are multiple benefits that are difficult to quantify economically that enable significant improvements in the company. Some are knowledge retention and exchange, easy access to operational data for decision making, access to information from anywhere and any device, or increased customer satisfaction with the quality of products or services offered.

There is a generic formula for calculating ROI, which is apparently simple:

ROI = (Net Profit of the EAM – Cost of the EAM / Cost of the EAM) x 100

However, things get complicated when defining net profit in economic terms. Therefore, let’s look at 5 illustrative examples of factors that add value when using the EAM IFS Ultimo:

• Goodbye to reporting data on paper (example: work orders)
  IFS Ultimo eliminates this need with digital document management. Consequently, it saves a significant amount of time searching for information. A medium-sized company could save up to seven hours each day, which employees could instead use for tasks that add more value.
• Optimization of planning and intelligent maintenance
  IFS Ultimo enables better planning and the performance of intelligent data-driven maintenance. If we achieve one hour of planned shutdowns when performing maintenance (preventive or corrective), production lines could operate for an additional four hours. This would give a significant boost to profitability.
• Mobile phone, new operator in plants
  IFS Ultimo enables mobile work so that staff do not have to return to the office between jobs, so a technician could perform several more jobs per day.
• Optimization of inventory management
  IFS Ultimo helps to avoid errors and unnecessary downtime related to stock. In addition to ensuring that you always have the right amount of spare parts in stock, the software also makes it easier to avoid overstocking, which reduces unnecessary costs.
• Module for health, safety and environment
  IFS Ultimo has an HSE module with which to digitize work permits, LOTO procedures, incident management… By creating a safe working environment and reducing workplace accidents, tangible economic benefits are generated for the organization.

To delve a little deeper into how to calculate the “Net Profit” of an EAM system like IFS Ultimo, we are going to provide some real and tangible examples:

1. Reduction of operating costs

   Savings = Costs before EAM – Costs with EAM

   This formula takes into account the operating costs of the organization before and after implementing an EAM system. It applies to various areas such as maintenance, energy, inventory, and other operating costs that may be directly related to the implementation.

2. Reduction of downtime

   Savings = (Downtime hours before EAM – Downtime hours with EAM) × Cost per hour of operation

   For its part, this formula helps to estimate what impact an EAM system can have on the economic results of the organization. In order to make the prior calculation of the downtime hours saved, a reduction of downtime hours between 10% and 40% is usually recorded, depending on the % of unscheduled maintenance of the organization.

3. Reduction of inventory costs

   Savings = (Inventory cost before EAM – Inventory cost with EAM)

   Thirdly, this saving refers to the reduction of costs associated with inventory management, including lower storage needs, reduction of obsolescence and improvements in inventory turnover. IFS Ultimo helps to reduce immobilized costs while ensuring that there are no stockouts with advanced warehouse management.

4. Increase in productivity

   Profit = (Units produced with EAM – Units produced before EAM) × Margin per Unit

   The increase in productivity, whether due to greater efficiency of assets, the reduction of downtime or the increase in units produced within acceptable quality margins, generates direct benefits.

5. Reduction of costs due to workplace accidents

   Savings = (∑ Costs before EAM – ∑ Costs with EAM)

   Finally, by promoting a safe working environment with the HSE module of IFS Ultimo, there are many items that see their costs reduced. In this case, costs such as medical expenses, worker compensation, production losses, property damage, fines for non-compliance with safety, etc. must be taken into account.

Slowly and Carefully

It must be taken into account that generating value takes time, so the improvement must be measured appropriately by intervals to have an accurate idea of the performance of the solution. A few months after implementation, for example, staff training may still be in progress or staff may not have had time to act on the information collected by the EAM system. Six months later, the improvements should be more visible and even more prominent a year from now.

In addition, the return on investment figure is usually negative during the first months after implementation. This does not mean that the EAM system is not having a positive impact on the organization; it simply means that the values have not yet exceeded the cost of the software: the expected recovery time depends on the size of the establishment and the types of processes that the EAM uses to optimize.

Thus, the implementation of an EAM represents a strategic investment capable of offering a significant ROI through the optimization of maintenance and operations, reduction of risks and operating costs, improvement of compliance, increase of customer satisfaction and provision of valuable data for decision making. To maximize this return, however, it is crucial to choose a system aligned with the specific needs of the organization and to carry out an effective implementation and management of it.

IFS Ultimo has all the functionalities to optimally manage the life cycle of assets and promote a safe working environment. With the right approach, it can become a powerful tool to drive efficiency, sustainability and long-term success.