From total interest payments for a loan to how much longer you can expect to live, you can find an online calculator for almost anything that can be quantified, and many things that can’t. There’s even a calculator on a Swedish manufacturing website for estimating ROI from total productive maintenance (TPM) and lean manufacturing.
To estimate the return on investment of your TPM or Lean Manufacturing project, first calculate the current OEE (i.e., today). Next estimate how OEE will increase over the years, and then exchange the default values in this form. All figures in millions of dollars.
Applying 5S in year 1, TPM in year 2, kaizen in year 3, and so on, the sample posits an Overall Equipment Effectiveness (OEE) increase of 5% per year (from 50% to 85%). Any productivity gains are applied to boost output and sales. With a cost payback of less than one year, the net result for a company starting with annual sales of $100 million is a cumulative cash flow gain of $156 million over a five year period. Not too shabby.
Of course every lean advocate or advisor will recognize—starting with equating lean manufacturing with one tool: TPM, and one metric: OEE—that the assumptions are more than a bit simplistic. But as flawed as this calculator is, the underlying idea that you could project such returns is intriguing and seductive for anyone who is leading a lean initiative.
Don’t you wish you could have a similar real-time tracking device like the daily output to demand display at the end of an assembly line to encapsulate the returns from all of your lean projects and initiatives? Something that executives and board members could glance at any time and see the returns the company is reaping from all of this effort your people are investing to become a lean enterprise?
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