If you’re reading this post, you’ve likely wondered at some point about how you can help rationalize what may be perceived by some as “intangible” – the return on your investment for implementing a data management solution. Many of our customers have justified the purchase of SolidWorks Enterprise PDM (EPDM) because they simply wanted to get better with the right systems in place, but with today’s tight margins and cash flows, CFO’s are more frequently relying on their team to prove that there is a valid return on investment that is competitive with other investment options. Calculating a return on investment for SolidWorks Enterprise PDM does not need to be complex. It can be as simple as estimating some potential time savings in comparison to current methods and multiplying it by the number of potential users and average cost per employee. If the senior executives feel confident in your ability to judge how your team may be struggling today without proper file management this may work well, but if you want to get more granular with time savings, I would recommend working with us on creating a proper calculation. We have a number of tools that we can use to create a return on investment statement. The one we use most often is an excel template but there are a number of tools we can use – some of which produce great graphics to highlight key concepts about how the financial benefits of this investment continue for many years. (See below for an example) Multi year cash flow and break even analysis for Enterprise PDM Here are the top 5 areas where a financial return may come from with the implementation of SolidWorks Enterprise PDM.
1) ProductivityTime savings for employees is typically one of the larger areas of return. Because EPDM is such an affordable solution a time saving of between 5-10% is typically enough to justify the investment and when combined with some other benefit areas can lead to a return on investment of under a year. The time savings may come from different areas depending on what the nature of the designer’s job is. When designers more project based and do very similar projects for various clients, the top time savings area commonly include:
- Reducing the time spent on finding and reusing files or entire projects
- Eliminating the need to recreate files which are available
- Working from clear lists of change requests
- Automating repetitive publishing tasks like publishing to PDFs or creating burn profiles of flame cut parts
- Coordinating multiple designers on a project
- Tracking revisions, approvals and file references
- Documenting change requests and prioritizing work
- Publishing BOM information to ERP systems
2) Error ReductionIn many cases error reduction can be the leading contributor to a compelling return on investment. To figure out what the cost of errors is to your company, I have included some good questions to ask yourself and your colleagues:
- How often do we accidentally manufacture to the incorrect revision?
- What is the potential cost if we do manufacture to the wrong revision?
- How many change orders are created a year and how many of them could have been avoided if proper collaboration processes were in place?
- What is the cost of processing a change order?
3) Team growth management and trainingIf you are at a company which is expanding its team to meet current work demand, you may be a prime candidate for the simplest type of ROI calculation. Many teams believe that that extra hire can be avoided; if you could just eliminate the need to … [Fill in the blank]. If designers are not concentrating on designing and adding value to your product development process and are bogged down by “Administrative overhead”, it is critical you get the right tools in place to get the most out of your existing team before the team continues to expand. If you are continuing to hire, ask yourself how long it takes to train a new employee on all of your internal standards and procedures. What about retraining employees if you decide to make a modification to your process? This is a largely overlooked area when calculating a return on investment because not many companies have documented time spent on training. Regardless of whether training time is tracked, rest assured that there are SIGNIFICANT savings both in time and error reduction by having a standardized way of creating, prioritizing and finishing work.
4) SalesIf you are at a company where engineering and sales commonly interact, there is a high likelihood that a compelling area of return is integrating sales into the implementation. With sales having easy to use search tools for finding and reusing older projects, there is a fair chance that quoting and proposals could be higher quality and faster to produce. If the sales team is using Microsoft Office to create their quotes, there may be some key benefits of standardizing this quoting process directly inside Enterprise PDM. Even without sales directly using the system, there is a VERY good chance that sales are indirectly affected by improved customer relationships when engineering is extremely organized and handle customer requests promptly with little error. The nice thing about working with sales as an aspect of an ROI calculation is that it is no longer about plugging financial leaks in the business with a certain amount of cash flow in. If efforts are put in place to make sales and customer relationships improved, the cash flow in to the business will continue to improve and the sky is truly the limit!
5) DistributionA trend that has been taking place over the last 10 years has been to move towards paperless processes. With the rise of the iPad and other affordable portable electrics with fairly good screens, this is quickly becoming a reality. Although few people think about it at the company, the printing and distribution of drawings can not only be bad for our rainforests, it can also be true financial burden. For many organizations, Enterprise PDM is a necessity to eliminate the use of paper because a large amount of electronic control, organization and distribution is required. Another aspect of distribution is working with your client base. If you are shipping paper drawings still, please stop! If you are distributing files via FTP or other older methods, there are better ways through self serve web portals which can streamline the distribution methods and lead to some real financial gains.
***Eric van Essen is a Product Group Manager at Javelin Technologies, a SolidWorks Value Added Reseller with locations in Ontario and Nova Scotia, Canada. He is a regular contributor to the Javelin blog.