Return on investment (ROI) calculations are notoriously difficult. But as budget constraints grow ever tighter in every industry, these calculations are increasingly essential. How can we try and calculate the ROI of virtual commissioning?
Virtual commissioning can deliver a strong ROI by removing many of the costly and time-consuming physical tasks associated with a product’s development. This expedites the design process and provides value-added benefits.
But you can’t just assume virtual commissioning will deliver a guaranteed ROI. Every project is different, operating under its own requirements. What works for one may not work for another.
ROI: You Have to Do the Math, But We Can Help
So when it comes to calculating an ROI, there are many factors to take into account. For example, how do you know what numbers to use? How can you have confidence that those numbers will be accurate? What other references could act as a basis for your company’s calculations?
Don’t worry, help is at hand. Maplesoft recently developed an interactive calculator to help you evaluate the ROI of virtual commissioning. All you have to do is enter:
- the number of staff working on your project,
- their daily rate,
- the average total value of products or services produced by the production system, and
- the average number of days to commission your product or service.
The calculator will automatically tabulate the amount of money that your company could save by pursuing a virtual commissioning effort. It also breaks this down into total savings per employee and the total value of the resultant products or services.
In this post, we wanted to explain the formulas behind this intuitive calculator, to help you understand how and when to use this convenient tool.
The ROI Calculations for Virtual Commissioning
Let’s start by reviewing the calculator’s formulas.
There are two main outputs: the total savings on the employee cost to commission the system and the total value of additional products or services produced by the system.
- The total savings on employee cost to commission the system is calculated by multiplying (1) the number of employees by (2) the daily rate of commissioning employees by (3) 75% of the average number of days to commission a production system.
- The total value of additional products or services produced is calculated by multiplying (1) the average total value of products or services produced by the production system by (2) 75% of the average number of days to commission a production system.
You’ve probably noticed that each of these calculations assume that the amount of time it takes to commission a production system will be reduced by 25%. Why 25%? Let’s talk about that in the next section.
The Basis for the Calculations
The cost and time savings of virtual commissioning are widely documented. We also found multiple sources, both in research and in use cases, which quantified the impact of adopting a virtual commissioning effort. Here, we’ll discuss three.
- In 2017, Gartner conducted research into the benefits of adopting a virtual commissioning initiative. According to Gartner’s research, the use of virtual commissioning when performing machine-level integration testing with a model-driven digital twin reduces integration time by 75%.
- Further research reveals that virtual commissioning can lower your project cost overruns by 50-100% (Fosberg, Kevin, Hal Mooz, and Howard Cotterman, published by John Wiley & Sons, Hoboken, NJ, 2005).
- One of our own customers, Niigon, realized significant advantages by employing a virtual commissioning approach. Niigon’s engineers developed new control strategies that they hoped would greatly improve their machine performance. When they traveled to their customer’s production site, they implemented the new control code in only two days—considerably less than the several weeks that are usually necessary for similar hardware upgrades.
So, a savings of only 25% is a fairly conservative estimate for the calculations. While companies and manufacturers are realizing significantly larger benefits, this seems like a sensible figure to use.
- Return on investment (ROI) calculations are notoriously difficult. When evaluating virtual commissioning, a new calculator from Maplesoft can check the total savings on the employee cost to commission the system and the total value of additional products or services produced by the system.
- The calculations use the number of staff working on your project, their daily rate, the average total value of products or services produced by the system, and 75% of the average number of days to commission your product or service.
- This 25% reduction is representative of the cost and time reductions offered by other virtual commissioning efforts. In fact, this is a highly conservative estimate. Other sources have reported up to 100% reductions in project overrun costs. For one customer, the timescales for its commissioning process were reduced from the company’s average of a few weeks to just two days.