Return on Investment (ROI) is a measure of the gain (preferably) or loss generated relative to the amount of money that was invested. ROI is typically expressed as a percentage and is generally used for personal financial decisions, examining the profitability of a company, or comparing different investments. It can also be used to evaluate a project or process improvement to decide whether spending money on a project makes sense. The formula is shown below-

A negative ROI says the project would result in an overall loss of money

An ROI at zero is neither a loss or gain scenario

A positive ROI is a beneficial result, and the larger the value the greater the gain

Gain from investment could include many factors, such as energy savings, reduced scrap savings, cost per part due to increased throughput savings, and many more. It is important to analyze the full impact and to truly understand all of the savings that can be realized.

Cost of investment also could have many factors, including the capital cost, installation costs, downtime cost for installation, and others. The same care should be taken to fully capture the cost of the investment.

Example – installing a Super Air Nozzles (14 SCFM compressed air consumption) in place of 1/4″ open pipe (33 SCFM of air consumption consumption) . Using the Cost Savings Calculator on the EXAIR website, model 1100 nozzle will save $1,710 in energy costs. The model 1100 nozzle costs $37, assuming a $5 compression fitting and $50 in labor to install, the result is a Cost of Investment of $92.00. The ROI calculation for Year 1 is-

ROI = 1,759% – a very large and positive value. Payback time is only 13 working days.

Armed with the knowledge of a high ROI, it should be easier to get projects approved and funded. Not proceeding with the project costs more than implementing it.

If you have questions regarding ROI and need help in determining the gain and cost from invest values for a project that includes an EXAIR Intelligent Compressed Air® Product, feel free to contact EXAIR and myself or one of our Application Engineers can help you determine the best solution.

If you have ever looked through our catalog, website, blog, twitter feeds, or even our Facebook page, you will see that we can almost always put a dollar amount behind the amount of compressed air you saved by installing EXAIR’s Intelligent Compressed Air Products. No matter which platform we use to deliver the message, we use the same value for the cost of compressed air which is $.25 per 1,000 Standard Cubic Feet of compressed air. This value is derived from average commercial and industrial energy costs nationwide, if you are on either coast this value may increase slightly. On the positive side, if your cost for compressed air is a bit more, installing an EXAIR product will increase your savings.

So where does this number come from? I can tell you this much, we didn’t let the marketing department or anyone in Accounting make it up. This is a number that the Engineering department has deemed feasible and is accurate.

To calculate the amount we first look to what the cost per kilowatt hour is you pay for energy. Then we will need to know what the compressor shaft horsepower of the compressor is, plus the run time percentage, the percentage at full-load, and the motor efficiency.

If you don’t have all of these values, no worries. We can get fairly close by using the industry accepted standard mentioned above, or use some other general standards if all you know is the cost of your electricity.

The way to calculate the cost of compressed air is not an intense mathematical equation like you might think. The best part is, you don’t even have to worry about doing any of the math shown below because you can contact us and we can work through it for you.

If you prefer to have us compare your current compressed air blow off or application method to one of our engineered products, we can do that AND provide you a report which includes side by side performance comparisons (volume of flow, noise, force) and dollar savings. This refers to our free Efficiency Lab service.

If you already know how much air you are using, you can use the Air Savings Calculators (USD or Euro) within our website’s knowledge base. Just plug in the numbers (EXAIR product data is found on our website or just contact us) and receive air savings per minute, hour, day and year. We also present a simple ROI payback time in days.

Now, back to the math behind our calculation. Cost ($) =
(bhp) x (0.746) x (#of operating hours) x ($/kWh) x (% time) x ( % full load bhp)
——————————————————————————————————————————
Motor Efficiency

Where:
bhp — Compressor shaft horsepower (generally higher than motor nameplate Hp) 0.746 – conversion between hp and KW Percent Time — percentage of time running at this operating level Percent full-load bhp — bhp as percentage of full load bhp at this operating level Motor Efficiency — motor efficiency at this operating level

For an average facility here in the Midwest $0.25/1,000 SCF of compressed air is accurate. If you would like to attempt the calculation and or share with us your findings, please reach out to us. If you need help, we are happy to assist.

Recently, I wrote a blog about the use (or lack thereof) of algebra. I know you’re curious, so I’ll tell you: we STILL use it every day in the Application Engineering department at EXAIR. One thing we DON’T use every day, but got a chance to use this morning, was trigonometry. See, for our Atomizing Spray Nozzles, we publish the dimensions of the achievable spray patterns at certain distances, while using specific air & liquid pressures. Today, one of us got asked how far a particular nozzle would have to be to attain a smaller pattern than the minimum published. A few of us broke out our calculators, eager to test our math retention skills. I’ll spare you the math lesson, but, we were all able to visualize it as a right-triangle problem, solve for the angle (using the TAN^{-1} function of trig), apply it to the shorter opposite side, and, using the TAN function, solve for the new adjacent side. Only one of us forgot to check and see if his calculator was in “radians” mode. For all you non-math geeks, all the math geeks are enjoying a good laugh at Ryan’s expense right now.

Speaking of things you don’t use every day, I had the pleasure of discussing a material conveying application with a customer this morning. He needed to move a few hundred pounds of sand, but only once a month or so, and couldn’t justify the price of a standard auger-type mechanical conveyor system, and thought he was stuck with using a shovel and bucket. We discussed the application, and, based on some testing we’d performed in the Efficiency Lab, we figured he should be able to use a 2″ Heavy Duty Line Vac to convey 200-300 lbs in about a half hour, which sounded GREAT…and at a tiny fraction of the cost of the auger conveyor.

Whether it’s something you’ll use all the time, or once in a while…if it concerns compressed air, we’d love the opportunity to help.