ROI – Worth Looking at the Details

ROI or Return On Investment is a way to gauge the productivity or profit/loss from money spent on an investment. In business, companies will use this information to determine if a project or investment is worth the risk, ultimately leading to a net profit gain as the end result.

Don’t waste your money

In my own personal experience, my wife and I were considering buying into a timeshare vacation property a few years ago. To enter into the agreement, the company required a $ 22,000 “buy-in” (financed of course) and a recurring cost of approximately $60/month for the next 22 years. This would have afforded us 124 “points” for nightly stays on our planned vacation. Their timeshare rentals are tiered into different room types – Studio, 1 bedroom, 2 bedroom or a 3 bedroom villas – with each room type costing a certain amount of points. For us to maximize the length of our stay, we would have to select the studio room which would have given 6 nights at a total of the 124 points.

We have visited this popular vacation destination several times so we know what the average cost is to spend a week on property and purchase theme park tickets for our stay. When we booked on our own, we spent on average a little less than $ 3,000 for 7 days which included our room each night and 6 day park passes per person.

The timeshare rental cost was just for the nightly stay, it didn’t include any park tickets, food or other recreations. On average, the cost for 6 days worth of park passes per adult is close to $ 450.00 and per child it was around $ 400.00. Considering there are 2 adults and 1 child (at the time) we had to pay an additional cost of $ 1,300.00.

So if we joined the timeshare and stayed for 1 week once a year, it was going to cost us approximately $ 3,020.00 ($ 1,720.00 (timeshare cost) + $ 1,300.00 in tickets). In this case, it was actually going to cost us MORE in the long run than if we booked a yearly vacation on our own (< $3,000), leading to a negative ROI. (not to mention, I really didn’t want to commit to the same vacation for the next 22 years!).

When discussing replacement compressed air blowoff solutions with a customer, many times they look at the purchase price of the device and question if it’s worth it for them to make a change. If you follow along with our blog, you will notice that over the last few months we have submitted several different entries relating to this topic, like replacing drilled pipe with our 12″ Super Air Knife resulting in a 47 day ROI or where a customer replaced 4 open copper tubes with our 1110SS Nano Super Air Nozzle and recurring their expenses in just 38 days. In these instances, we show the calculations in regards to the true cost of ownership and how quickly you can recover capital funds when considering the whole scope of the project.

At EXAIR, we are committed to providing Intelligent Compressed Air® Products that reduce compressed air consumption leading to a more efficient process, as well as increasing operator safety. If you are considering an EXAIR solution for your current process but have questions about price or performance, contact one of our application engineers for assistance.

Justin Nicholl
Application Engineer
justinnicholl@exair.com
@EXAIR_JN

 

Little things add up image courtesy of Nic McPhee via creative commons license

ROI – Return on Investment

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-

ROI

  • 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-

ROI2

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.

Brian Bergmann
Application Engineer

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Life Hacking = Better Easier Life. So What Happens When You Hack Compressed Air?

The birth of the internet and personal computer brought to light a new form of hacking.  For many years now hacking has been considered a negative action, even criminal.  However, within the past several years the term lifehacking has come to mean a process of bettering your life through tips and tricks.  There are entire blogs and TED talks about life hacking, so that has gotten me thinking of how can EXAIR hack your compressed air system and turn it into a life hack?

All of our products are designed and engineered to make your life easier and better.  The best product I can think of to demonstrate this is our Super Air Knife With Plumbing Kit Installed.  This is an option for any of our Super Air Knives which are longer than 24″ that makes installation even easier on your end.  The plumbing kit has already connected air to each port on the Super Air Knife so all you have to do is plumb air to a single port at the end of the kit assembly.  See the picture below for a better idea.

Alumina dust 3 PKI

Another item that has helped many customers is our Chip Trapper System.   This is essentially a modified or hacked Reversible Drum Vac System which  adds the benefit of filtering the liquid you are sucking up to a 5 micron level.  (Other filter levels/sizes available.) This means you can make your cutting fluid last longer and cut that rancid coolant smell in your machine shop down because the bacteria in the coolant doesn’t have any solids to live upon.  This also means that you won’t be giving your coolant reclamation company any of your valuable solids so you keep more of your scrap profits.

So if you are looking for a way to make your life easier while you are working with compressed air, let us know, we’ll see how you can hack your compressed air applications.

Brian Farno
Application Engineer
BrianFarno@EXAIR.com
@EXAIR_BF