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 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
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 $42, assuming a $5 compression fitting and $45 in labor to install, the result is a Cost of Investment of $92.00. The ROI calculation for Year one is-
ROI = 1,759% – a very large and positive value. Payback time is only 13 working days!
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.
I received an email from an engineer that was looking at our Super Air Nozzles. They currently were using four blow-off lines that were made from 6mm ID copper tubes. The system was designed to blow out holes after machining. The engineer was in charge of the task of optimizing 25 machining stations similar to this one. He was familiar with EXAIR products from his previous employment, and he recognized the waste of compressed air by using open pipe. He purchased four Nano Super Air Nozzle, model 1110SS, for a trial. He was impressed with the performance, the low sound level, and the engineered design in safety. But, for upper management in his company, he had to show a cost savings in order to change all the stations in the facility. He asked me to help him in calculating the compressed air savings.
He gave me some additional details about their application. He was using the compressed air about 30% of the time throughout an 8 hour day at a pressure of 80 PISG. He wanted to present the savings per day, week, and year as well as the payback period in his evaluation. I have performed many of these calculations for other customers and was happy to help. It is sometimes easier to speak in terms of savings, as everyone can relate to money, especially management.
Flow: 1110SS Nano Super Air Nozzle – 8.3 SCFM at 80 PSIG
The Calculator tells us you will see a ROI (Return on investment) is less than 5 days! And will save you $3,033.00 over a full year on compressed air generation cost alone!
Don’t be fooled by the initial cost of a tube, pipe, drilled holes, or a substandard nozzle. You can see by the facts above, if you use any additional compressed air in your blow-off application, it will cost you a lot of money in the long run. If you need any help in calculating how much money EXAIR products can save you, you can use our Air Savings Calculator from our website, or you contact an Application Engineer at EXAIR. We will be happy to help you.
Return on Investment, or ROI, is the ratio of profit over total investment. Many people use it to check stocks, financial markets, capital equipment, etc. It is a quantitative way in determining the validity for an investment or project. You can use the ROI value to give a measurable rate in looking at your investment. For a positive ROI value, the project will pay for itself in less than one year. Any negative values would represent a high-risk investment. In this blog, I will compare the ROI between an EXAIR Super Air Knife to a common drilled pipe. Let’s start by looking at Equation 1 to calculate the Return on Investment:
Equation 1: ROI = (Total annual savings – Total Project Cost) / Total Project Cost * 100
The Total Project Cost is the cost of the product with the labor to install. In our example, we will use a 24” (610mm) wide blow-off device. One device will be an inexpensive drilled pipe and the other will be a high-efficiency EXAIR Super Air Knife. The drilled pipe had (48) 1/16” (1.6mm) diameter holes spaced ½” (13mm) apart. EXAIR manufactures the model 110024 Super Air Knife with a .002” (.05mm) slot along the entire length. Both have a blowing width of 24” to cover the conveyor. The model 110024 has a retail price of $491.00 each. The cost of the drilled pipe was around $50.00. What a difference in price! But, how could EXAIR remain a leader in this industry for over 35 years?
Let’s continue on with the Return on Investment. The amount of time required to install the Super Air Knife across the conveyor only took a maintenance staff about one hour to mount. The labor rate that I will use in this example is $75.00 per hour (you can change this to your current labor rate). The labor cost to install the knife is $75.00. The Total Project Cost can be calculated as follows: ($491 – $50) + $75.00 = $516.00. The next part of the equation, Total annual savings, is a bit more in-depth, but the calculation is shown below.
EXAIR manufactures engineered products to be efficient and safe. The Super Air Knife has a 40:1 amplification ratio which means that 40 parts of “free” ambient air is entrained for every 1 part of compressed air. For comparison, the Super Air Knives are to compressed air systems as LED lightbulbs are to electricity. In that same way, the drilled pipe would represent an incandescent lightbulb. The reason for this analogy is because of the amount of energy that the EXAIR Super Air Knives can save. While LED lightbulbs are a bit more expensive than the incandescent lightbulbs, the value for the Return on Investment is at a higher percentage, or in other words, a short payback period. On the other hand, the drilled pipe is less expensive to make, but the overall cost for using it in your compressed air system is much higher. I will explain how below.
To calculate the Total Annual Savings, we will use the same blow-off scenario as above. The amount of compressed air used by the drilled pipe is around 174 SCFM (4,924 SLPM) at 60 PSIG (4.1 Bar). The model 110024 Super Air Knife has an air consumption of 55.2 SCFM (1,563 SLPM) at 60 PSIG (4.1 Bar). At an electrical rate of $0.08 per Kilowatt-hour, we can figure the cost to make compressed air. Based on 4 SCFM per horsepower of air compressor, the electrical cost is $0.25 per 1000 standard cubic feet, or $0.25/1000SCF. To calculate an annual savings, let’s use a blow-off operation of 8 hours/day for 250 days a year. Replacing the drilled pipe with the model 110024 Super Air Knife, it will save you (174 SCFM – 55.2 SCFM) = 121.8 SCFM of compressed air. To put this into a monetary value, the annual savings will be 121.8 SCFM *$0.25/1000SCF * 60 Min/hr * 8hr/day * 250 day/yr = $3,654 per year.
With the Total Annual Cost and the Project Cost known, we can insert these values into Equation 1 to calculate the ROI:
ROI = (Total annual savings – Total Project Cost) / Project Cost * 100
ROI = ($3,654 – $516.00) / $516.00 * 100
ROI = 608%
With a percentage value that high, we are looking at a payback period of only 52 days. You may look at the initial cost and be discouraged; but in a little over a month, the model 110024 will have paid for itself. And after using it for one year, it will save your company $3,654.00. Some things that may be overlooked are safety issues. With some inexpensive blow-off devices, the noise levels are over the OSHA limits. The drilled pipe had a noise level of 91 dBA while the Super Air Knife only had a noise level of 65 dBA.
In my experience, a loud blowing noise from your equipment is generally coming from an inefficient and safety-concerned product. With these “cheap” ways to blow compressed air, it will cost your company a lot of money to use as shown in the example above. If you would like to team up with EXAIR to set up ways to increase savings, improve productivity, and promote safety, an Application Engineer can help you to get started.
Sound levels and ROI don’t immediately link together in a quick thought. Unless you are me and things seem to link up that don’t always go together, like peanut butter and a cheese burger. (Trust me, just try it, or if you are near West Lafayette, Indiana just go try the Purvis Burger across the street from Purdue University.) The truth behind tying sound levels being reduced and ROI together is actually pretty simple.
For this example, I am going to stay fairly high level as we could get into some pretty deep measurements of what exactly could be a cost savings. If we reduce the sound level being generated by point of use compressed air products that is easiest to do by implementing engineered blow off products as well as reducing the operating pressure. Let’s use this example: A 1/4″ copper tube that is being used as a blow off will give off a noise level of over 100 dBA from 3′ away. The table below shows that at an 80 psig inlet pressure the same tube will also consume 33 SCFM of compressed air.
By installing a model 1100 1/4″ FNPT Super Air Nozzle on the end of this copper tube, we reduce the noise level generated by the blow off to 74 dBA. This measurement is at the same 80 psig inlet pressure and from 3′ away, which is well below the OSHA standard for allowable noise level exposure. This also gives a broader more defined pattern to the air stream which may permit a reduction in compressed air pressure.
The other factor this changes is that the air consumption is reduced by 19 SCFM of compressed air which then results in energy savings. This ultimately ends in a simple ROI equation where we are simply using the compressed air reduction as the only variable for the return.
By reducing the air consumption of a process that operates 24/7, 250 days a year that equates to a savings of 6,840,000 SCFM per year and that equates to $1,710.00 USD. This does not account for any reduction in paying for hearing protection that may no longer be needed, or increase in production because the application functions better.
So you see, reducing noise levels in a facility can easily amount to a sizable cost savings in energy going towards compressed air consumption. If you would like to walk through any potential applications, please contact us.
If you have a stock portfolio, or even a retirement account, you’ve likely heard the term “return on investment.” It basically tells you how hard your money is working for you, and, the higher, the better.
The term is also used to determine the financial benefits associated with the use of more efficient products than you’re using right now:
The cost of operating industrial pumps, air compressors, and a variety of industrial rotating equipment, can be greatly reduced by using variable frequency drive systems that sense the demand and change the motor’s speed (and hence power consumption) accordingly. These systems are not cheap, but the reduction in operating costs is often quite noticeable.
At home, installing energy efficient windows (spoiler alert: your builder probably used the cheapest ones he could find…mine sure did) or upgrading appliances & HVAC can cost a pretty penny, but you’ll also see your electric bill go down.
EXAIR Corporation has a worldwide reputation for providing highly efficient compressed air products for industry. Our Engineering Department has a company-wide reputation for being data fanatics…which is key to allowing us to provide our customers with ample information to make the best choices to optimize your use of your compressed air.
It’s not hard at all to calculate your potential savings from the use of an engineered compressed air product, assuming you know how much air your current device is using. If not, we can tell you if you can send it in for Efficiency Lab testing (free and fast; call me to find out more.) Here’s an example for a VERY typical situation: replacing an open copper tube blow off with an EXAIR Super Air Nozzle:
A 1/4″ copper tube uses 33 SCFM @80psig
A Model 1100 Super Air Nozzle uses 14 SCFM @80psig
33 SCFM X 60 min/hour X 8 hours/day X 5 days/week X 52 weeks/year = 4,118,400 SCF
14 SCFM X 60 min/hour X 8 hours/day X 5 days/week X 52 weeks/year = 1,747,200 SCF
4,118,400 – 1,747,200 = 2,371,200 Standard Cubic Feet of compressed air savings
If you know your facility’s cost of compressed air generation, you can calculate the monetary savings. If not, we can get a good estimate via a thumbrule used by the U.S. Department of Energy that says it typically costs $0.25 to generate 1,000 SCF of compressed air:
In 2019, the cost of a Model 1100 Zinc Aluminum Super Air Nozzle is $41.00. Daily savings (not counting weekends) is:
$592.80 ÷ 260 days (5 days/week X 52 weeks/year) = $2.28 daily savings
Meaning the payoff time for the $41.00 investment in the Model 1100 is:
$41.00 ÷ $2.28 = 17.9 days
Or…just over three weeks. Now that I’ve shown you the math, I’d like to introduce you to the EXAIR Cost Savings Calculator. Just enter the data, and it’ll check your math (because I know you’re going to do the math anyway, just like I would.) It even does the ROI for you too.
If you’d like to find out more about how – and how fast – EXAIR Intelligent Compressed Air Products can pay off for you, give me a call.
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I have a friend who participates in a process known as “extreme couponing.” She has multiple subscriptions to the Sunday edition of our major newspaper, and a couple of local papers that also have coupon inserts. When I see her at the grocery store, she’s got two 4″ binders full of baseball card holders, all stuffed with multiples of clipped coupons, organized by store aisle. The insane amount of money saved is a big factor in her being able to be a stay-at-home mother, which is something else she’s pretty good at.
Now, extreme couponing isn’t for everyone. Even beginners to the process can buy a year’s worth of paper towels for next to nothing. However, that may take up so much room in their house that they need to rent a storage facility for other belongings that folks like you and me simply keep in the garage or basement. It also takes a LOT of time and effort to do it right – as well as discipline. Saving half (or more) on a truckload of stuff you don’t need (or will never use) is a waste of money, time, and space. In fact, I know people who have abandoned extreme couponing for those very reasons…the “return on investment” just isn’t there.
That’s the deal in industry too. Anyone tasked with finding and exploiting efficiencies – or finding and eliminating inefficiencies – is going to be looking at return on investment. Like extreme couponing, though, it has to make sense in all aspects of the operation. For example:
*An OEM taking advantage of a quantity discount for components or subassemblies has to not only have the storage space available, but also has to consider the turnover rate…it costs money to keep product on the shelf.
*A machine shop considering a tooling upgrade has to compare the cost difference with the increased performance and/or lifespan of the “new and improved” product. A tool that costs 10% more but lasts twice as long is probably a good deal. A tool that costs twice as much but lasts 10% longer might not provide the “bang for the buck.”
*Any facility, before switching a service or utility provider, will “run the numbers” on promotional rates, contract terms, etc. before making a commitment.
Unlike extreme couponing, EXAIR makes it easy – and beneficial – to evaluate the return on investment:
*Our catalog (if you don’t have the latest, get it here) has complete performance & operational data on all of our products. This is great if you know what you want it to do.
*If you’re not quite sure, our catalog also has a good number of actual application write-ups for most of our Intelligent Compressed Air Products. You may be able to find something that’s similar to what you want to do, and further inform your selection from there.
*Once you’ve chosen a product, you can use the Calculator Library on our website to determine actual dollar cost savings associated with replacing a current compressed air powered device with an EXAIR product.
*No matter how detailed the discussion, and how confident a plan we may make, the age-old saying about how it “looked good on paper” proves itself every now and again. When this happens, all catalog products are covered by our 30 Day Unconditional Guarantee. If you’re not satisfied for any reason within 30 days of purchase, we’ll arrange return for full credit.
*Let’s assume that we’re pretty good at this (because we are) and it actually DOES work out (because it usually does) – we can calculate your new (and improved) operating costs and compare them with the cost of your previous devices. If you don’t have the instrumentation (flow meters, sound level meters, etc.,) this is a free service we provide in our Efficiency Lab. Send it in, and we’ll do a full performance test & issue a comprehensive report, all at no charge. And if you qualify for a Case Study, we can even save you some money on your next order. Contact me for more details if you’re interested.
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Any time you’re planning to purchase something, the return on investment (ROI) is an important thing to consider. Whether you’re considering buying new windows to improve on your heating and cooling costs, looking at replacing outdated appliances with newer and more efficient models, or purchasing an Intelligent Compressed Air Product, how quickly that product will pay for itself can help you to make the right decision.
Last year, my wife and I purchased our first home. In the backyard, was a nice, big in-ground pool. While it was something we did look for, it requires a bit of maintenance during the summer months to keep the water clear and things running smoothly. Who wants to swim in a pool ridden with dirt, leaves, bugs, and debris floating around? Certainly not me, which meant I needed to spend some time brushing the sides of the pool and vacuuming to keep everything clean. For our first season, we elected to tackle this task manually. Not only was this time consuming, but it was also not very effective. To brush the sides and steps, skim, and vacuum took about 2 hours each time. I was doing this 2x per week to keep everything looking good. Over the course of a 15-week pool season here in Southwest Ohio, I spent approximately 60 hours just keeping the pool clean.
We were interested in the robotic pool vacuums available at our local pool supply store, but we balked at the initial price of them. After spending all this time doing it myself, I began to think that it would pay for itself relatively quickly (depending on how much I valued my own labor 😊). Allocating the cost of the robotic vacuum over the six-year life expectancy, as well as taking into consideration how much time I had spent cleaning the previous year, made this decision much more palatable. We went ahead, bit the bullet, and purchased one for this season. I must say, just two weeks in and my pool is cleaner than it ever was last year. We’ve only run it twice!! It only takes 5 minutes to connect and drop in. I reduced my time spent from 4 hours per week to 10 minutes per week. Consider me a happy consumer.
If you follow the EXAIR Blog, you’ll know that one of our primary focuses is saving customers money by reducing their compressed air operating cost. Recently, I wrote a blog post about a customer that replaced an inefficient solution with some EXAIR Super Air Knives. Let’s take a look and see how quick these knives were able to pay for themselves:
The previous solution consisted of (3) nozzles operated at 50 psig, consuming a total of 51 SCFM. This line was run continuously for (1) 8-hour shift, (5) days per week. The average cost for compressed air is $0.25 per 1,000 SCF (based on $0.08/kWh).
51 SCFM x 60 mins x 8-hours x $0.25/1000 = $6.12 per day
Replacing the inefficient nozzles with (3) Model 110003 Super Air Knives reduced the overall consumption to 17.1 SCFM when operated at 50 psig.
17.1 SCFM x 60 mins x 8-hours x $0.25/1000 = $2.05 per day
This led to a total savings of $4.07 per day, just by swapping out the inefficient product with the EXAIR Super Air Knives. So how quickly will they pay for themselves? Each Model 110003 Super Air Knife carries a list price of $199.00. Since we were using (3) on each line, their total investment per line was $597.00 USD.
$597.00/4.07 = 146.68 (147 days)
On the 147th day (less than 30 weeks, based on a 5-day workweek), the Super Air Knives have paid for themselves. Afterward, that $4.07/day/line goes straight to the bottom line. You’ll be hard pressed to find many products that will pay for themselves in less than one year, but at EXAIR we see this day in and day out. Stop throwing your money out the window with inefficient compressed air solutions. Reach out to an EXAIR Application Engineer and see how quickly your blowoffs can start paying YOU.