This month’s issue of the CIMx® Newsletter focuses on the risk to reward ratio in manufacturing decisions.  Each expense on the shop floor requires a business case and the most important two items in the business case are 1) the Return on Investment (ROI) and 2) the risk to reward ratio or cost to benefit ratio.  Moving toward a paperless manufacturing environment is a project that depends heavily on both of these items.  This newsletter addresses the risk to reward issue.

Successful Risk Taking

Most people agree that major advances or “breakthroughs” that create value involve someone who took a personal risk and succeeded in carrying it forward.  It is widely agreed that it takes risk to create economic value.  What is the difference between a risk that leads to a reward (or value) and a risk that falls short of achieving its goal?  There are many examples of both in the literature and in practice.  The key ingredients in a successful risk to reward result are knowledge, planning and execution.

Knowledge requires that you understand the possibilities and perhaps even look at examples of prior successes related to the issue at hand.  It is easy to acquire knowledge if you have the desire and perseverance.  

Planning requires an understanding of how to organize a project to minimize surprises and maximize your ability to adjust to unforeseen events along the way.  Companies with a string of successful projects can help organize the plan to achieve these results.  For example, use a pilot project under controlled conditions to determine the final requirements and ROI, then use an incremental deployment plan to manage the unknowns that will occur across the shop floor.  

Execution is the art of performing the plan with midcourse corrections as needed to successfully navigate through obstacles and surprises.  This is a path well traveled by those that take risks and make things happen in an organization.  Look around for clear examples of how to do it in your own company.

Reward to Risk Ratio for Paperless Manufacturing

Our experience is that a shop floor person can be 10% more productive if they have all of the information they need to do their job exactly when they need it and it is completely up to date and accurate. This is nearly impossible to accomplish with paper-based systems, but it is second nature for the right paperless system.

If a shop floor technician is salaried at $30,000 per year; a 10% productivity improvement translates to a savings of $3,000 per person per year.

What if you could install and maintain a paperless system for $300 per person per year.  You will make a profit of $10 for each $1 invested.  Can you afford not to do it?  In addition you will have quality improvements due to fewer errors – more $ gain.  You will no longer need to have resources tied up on processing paper – more $ gain. 

Is the potential reward worth the risk?  Many companies have chosen the right system for their operations and are already seeing these savings.  Are you?