Simple Solutions That Work! Issue 16

18 reduced to $175, providing the opportunity to double production because the cleaning room time is reduced by 50% as well. Let’s say you currently produce 40,000 pieces/year of this casting and the automatic grinding machine costs $400,000. The simple ROI calculation on this project could look like this: (Additional Earnings) [40,000 pcs. x $25] – (Initial Investment) $400,000/(Initial Investment) $400,000 = 1.5 In addition, if you factor in the intangible costs, employee productive opportunity cost and energy expended associated with a new hire that you are saving, this ROI analysis becomes increasingly more attractive. While it's difficult to pinpoint an exact number, a Society for Human Resource Management study in August of 2021 stated that the average cost to hire an employee is $4,129, or 6 weeks of pay for a $15 per hour job. This ratio acts as a financial measurement tool that quantifies how long it will take the equipment to pay for itself. In this case the equipment will be paid for and generate additional revenue in less than one year. This would be an excellent investment considering the short pay-off time and we have not factored in the additional revenue received from being able to increase production, savings from reductions in manpower and scrap or lower insurance costs. Some organizations are beginning to quantify the intangible costs with a numeric value and adding it into the additional earnings portion of the equation as a method to reflect the total savings more fairly in the ROI analysis for investment evaluation. For example, the elimination of the need and costs to hire additional employees might be valued at $100,000 for the year, so when added into the equation the ROI becomes 1.75 which decreases the term on the investment payback. The addition of an automatic grinding machine can be a very cost-effective solution for the elimination of manpower shortage, increasing productivity and higher quality castings. Since the automatic grinding machine will more consistently and efficiently finish in one day Contact: Palmer Manufacturing sales@palmermfg.com the same total volume of castings that 3-4 employees can finish manually, a foundry can install one automatic grinder to produce the same work volume of those 3-4 productive employees. This provides the opportunity to repurpose 2-3 employees from the cleaning room into another area of the foundry. Under this scenario, with the increased productivity and decreased training time, the foundry can afford to increase employee wages and benefits to improve employee retention, while eliminating the manpower shortage. In addition, using an automatic grinding machine to dramatically reduce the physical nature of the job, the foundry can extend the productive life of their very best employees by reducing the stress on their bodies. The addition of automatic grinding can change the entire dynamic of your foundry operation by removing manpower issues, increasing quality, improving productivity, and raising profitability.