How Fast Can I Get My Return On Investment

Whenever an EXAIR product is sold to another business there is ultimately a question from a customer whether they know it or not. That question is very often, how fast will this product pay itself back in production gains, air savings, or decrease in downtime. One of the ways we offer this information is through our calculators.

The easiest method to determine how fast an EXAIR Engineered Solution will pay itself back is by knowing a few variables and then plugging them into our simplified Air Savings Calculator on the EXAIR site.

The Variables:
1. Current Customer Consumption (SCFM) or (SLPM) – We need this to have the baseline, it isn’t always easy to know off the top of your head so we offer items like the Digital Flowmeter or even the ability to send the product to us through the Efficiency Lab for a free diagnosis of consumption.

2. $ Cost of EXAIR Product – This is easy, you can even add in other known project costs to this that you want factored in for the return on investment. The more you add, the less it becomes a simplified ROI. Basic cost of the EXAIR product that is being installed is the best to keep it simplified.

3. EXAIR Product Consumption (SCFM) or (SLPM) – This can easily be obtained from our website or our Brain Trust, I mean Application Engineers who are always eager to talk about air consumption and other technical details. To really determine this we just need to know the operating air pressure and the model number.

4. $ Cost of compressed air/1,000 Cubic Feet – This is a value that may be known by the on-site utilities team, if not a good industry standard for the Midwest is $.25 USD. This has come assumptions on your kWh cost of energy and compressor efficiency. Again, if you want to dive deep into this, reach out to our Application Engineers, we are here for a reason.

That’s it, with those values input you can get a break down on how much air, and money you are saving and a simple payback in days of operation.

If you have questions on the math behind this, or how to determine/factor in some more information, contact one of the team members here and we will walk you through the best options to decrease your payback time and increase your efficiency.

Brian Farno
Application Engineer
BrianFarno@EXAIR.com
@EXAIR_BF


ROI: Super Air Knife vs. Drilled Pipe

Super Air Knife Drilled Pipe

Return on Investment, or ROI, is the ratio of profit over total investment.  Many people use it to check investment stocks, financial markets, capital equipment, etc.  It is a quantitative way in determining the validity for an investment or project.   You can use this ROI value to give a measurable rate in looking at your investment, no matter how big or small.  In this blog, I will compare the ROI between an EXAIR Super Air Knife to a home-made drilled pipe.  Let’s start by looking at Equation 1 to calculate the Return on 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. 

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 36” (914mm) blow-off device to cover the width of a conveyor.  One device will be an inexpensive drilled pipe and the other will be a high-efficiency EXAIR Super Air Knife.  The drilled pipe had (72) 1/16” (1.6mm) diameter holes spaced ½” (13mm) apart.  EXAIR manufactures the model 110036 36” Aluminum Super Air Knife with a .002” (.05mm) shim along the entire length.  The model 110036 has a retail price of $802.00 each.  The cost of the home-made drilled pipe was around $70.00 for material and labor.  What a difference in price!  It seems like the ROI should be in the negative, but is it?

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 $80.00 per hour (you can change this to your current labor rate).  The labor cost to install the knife is $80.00.   The Total Project Cost can be calculated as follows: $802 + $80.00 = $882.00.  The next part of the equation, Total Annual Savings, is a bit more in-depth, but the calculation is below.

To calculate the Total Annual Savings, the amount of compressed air used by the drilled pipe is around 261 SCFM (7,389 SLPM) at 60 PSIG (4.1 Bar).  The model 110036 Super Air Knife has an air consumption of 82.8 SCFM (2,344 SLPM) at 60 PSIG (4.1 Bar).  With an electrical rate of $0.08 per Kilowatt-hour, the electrical cost is near $0.25 per 1000 standard cubic feet or compressed air, 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 110036 Super Air Knife, it will save you (261 SCFM – 82.8 SCFM) = 178.2 SCFM of compressed air.  To put this into a monetary value, the annual savings will be 178.2 SCFM *$0.25/1000SCF * 60 Min/hr * 8hr/day * 250 day/yr = $5,346.00 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 = ($5,346.00 – $882.00) / $882.00 * 100

ROI = 506%

With a percentage value that high, we are looking at a payback period of only 40 days.  You may look at the initial cost and be discouraged; but in a little over a month, the model 110036 will have paid for itself.  And after using it for one year, it will save your company $5,346.00. 

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.  EXAIR has an Air Savings Calculator on our website to calculate the savings by replacing your inefficient blow-off devices. And, if you would like to team up with EXAIR to find ways to increase savings, improve productivity, and promote safety, you can contact an Application Engineer.  We can help you get started by defining your Return on Investment with EXAIR products.

John Ball
Application Engineer
Email: johnball@exair.com
Twitter: @EXAIR_jb

How to Calculate ROI (Return on Investment)

You may have asked…why should I switch over to an engineered compressed air product if my system already works? Or…How can your products be much different?

Manufacturing has always been an advocate for cost savings, where they even have job positions solely focused on cost savings. Return on Investment (ROI) is a metric they look toward to help make good decisions for cost savings.  The term is used to determine the financial benefits associated with the use of more efficient products or processes compared to what you are currently using. This is like looking at your homes heating costs and then changing out to energy efficient windows and better insulation. The upfront cost might be high but the amount of money you will save over time is worth it.

ROI Calculation

How is ROI calculated? It is very simple to calculate out the potential savings of using an EXAIR Intelligent Compressed Air® Product. We have easy to use calculators on our websites Resources where filling in a few blanks will result in an ROI when switching to a EXAIR product! Here they Are, Calculators.

I’ll go ahead and break down the simple ROI calculations for replacing open blow offs with an EXAIR Super Air Nozzle:

  • ¼” Copper Pipe consumes 33 SCFM at 80 psig (denoted below as CP)
  • A Model 1100 ¼” Super Air Nozzle can be used to replace and only uses 14 SCFM at 80 psig (denoted below as EP)

Calculation:

(CP air consumption) * (60 min/hr) * (8 hr/day) * (5 days/week) * (52 weeks/year) = SCF used per year for Copper Pipe  

(33) * (60) * (8) * (5) * (52) = 4,118,400 SCF

(EP air consumption) * (60 min/hr) * (8 hr/day) * (5 days/week) * (52 weeks/year) = SCF used per year for EXAIR Product  

               (14) * (60) * (8) * (5) * (52) = 1,747,200 SCF

Air Savings:

SCF used per year for Copper Pipe – SCF used per year for EXAIR Product = SCF Savings

               4,118,400 SCF – 1,747,200 SCF = 2,371,200 SCF in savings

If you know the facilities cost to generate 1,000 SCF of compressed air you can calculate out how much this will save. If not, you can use $0.25 to generate 1,000 SCF which is the value used by the U.S. Department of Energy to estimate costs.

Yearly Savings:

                (SCF Saved) * (Cost / 1000 SCF) = Yearly Savings

                                (2,371,200 SCF) * ($0.25 / 1000 SCF) = $592.80 annual Savings

With the simple investment of $42 (as of date published) you can calculate out the time it will take to pay off the unit.

Time Until payoff:

                (Yearly Savings) / (5 days/week * 52 weeks/year) = Daily Savings

                                ($592.80/year) / (5 days/week * 52 weeks/year) = $2.28 per day

                (Cost of EXAIR Unit) / (Daily Savings) = Days until product has been paid off

                                ($42) / ($2.28/day) = 17.9 days  

As you can see it doesn’t have to take long for the nozzle to pay for itself, and then continue to contribute toward your bottom line. 

If you have any questions about compressed air systems or want more information on any of EXAIR’s products, give us a call, we have a team of Application Engineers ready to answer your questions and recommend a solution for your applications.

Jordan Shouse
Application Engineer

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Hand Holding money Image from Pictures of Money Creative Commons license

The Basics of a Compressed Air Leak Detection Program

It is no surprise that compressed air can be a costly utility for industrial facilities. It can easily chip away at the bottom line finances if used carelessly and without planning. This is one of the leading reasons we have educated continuously on how to ensure this vital utility is used with safety and conservation in mind. If we have installed all engineered solutions at the point of use throughout a facility, there is still more to be saved. One of the easiest things to do with a utility system inside of a facility is to leave it unchecked and undocumented until something goes wrong. This does not have to be the scenario and in fact, starting a leak detection program in a facility can help to save up to 30% of the compressed air generated.

Leaks cost money!

That’s right, up to 30% of the compressed air being generated in an industrial facility can be exhausting out to ambient through leaks that run rampant throughout the facility. When the point of use production is still working fine, then these sorts of leaks go unnoticed. Another common occurrence goes something like this example: Maybe there is a leak bad enough to drop the packaging line pressure slightly, this may get fixed by bumping up a pressure regulator, production is back up and it is never thought of again. In all actuality this is affecting the production more and more with each leak.

The leaks add additional load onto the supply side. The compressor has to generate more air, the dryer needs to process more air, the auto drains dump more moisture, it all ads up to additional wear and tear also known as false load. All of this additional load on the system can add more maintenance which if left undone can result in system shut downs. One way to begin to eliminate this false load is to deploy a leak detection program. The steps are fairly easy.

Similar to our 6 Steps to Compressed Air Optimization, you start with a baseline of how much air the system is seeing and operating pressures. This begins the documentation process which is critical to the success of the program. Next, acquire an ultrasonic leak detector (ULD) and a layout of your compressed air system piping. Utilizing the ULD, test all compressed air piping along with equipment, and tag each leak that is detected. Next, begin to repair all of the tagged leaks and document the amount of compressed air savings with each repair. This again, is more documentation which leads to giving a quantitative value to the return on investment of the program. Lastly, schedule a follow up scan that recurs on a pre-determined basis to prevent the system from returning to it’s original leaky state.

EXAIR Ultrasonic Leak Detector

If you would like to discuss starting a leak detection program in your facility or have questions about the ULD or any point of use compressed air product, please reach out to an Application Engineer today.

Brian Farno
Application Engineer
BrianFarno@EXAIR.com
@EXAIR_BF