Calculating Savings with a Barcode Equipment Tracking System
You are buying equipment that you know you have. You are spending time looking for equipment. Jobs are delayed because of equipment not being available. The solution, as you see it is to implement a barcode equipment tracking system. The question managers and company owners ask is; “How do I estimate the savings if I purchase a barcode equipment tracking system?” Systems like Tool Hawk™ from General Data are designed to save time and money but how do we quantify the savings. The following is a step by step process to calculate the savings. If you sit down with pen and paper it will be very surprising how much you spend to manage tools and equipment and how much is saved using a barcode equipment tracking system.
Step 1: What is the cost to replace lost or stolen inventory?
Calculate the total cost of tools and equipment you now own. Divide that number by the number of tools and equipment you have in inventory. This will give you and average cost of each piece of equipment. Once you have this try to estimate the percentage of tools and equipment you have replaced each year in the past. This will give you a good guide as the cost going forward to replace lost or stolen equipment.
A good barcode equipment tracking system like Tool Hawk™ could, if implemented correctly, reduce that number to zero.
Eliminating unnecessary purchases should be the first number on the spreadsheet to justify a barcode equipment tracking system.
Step 2: What do you spend in employee time managing equipment inventory?
This is an area that is often overlooked when looking at a barcode equipment tracking system. You have tool room workers, managers and owners spending time trying to find equipment needed to complete the work. The savings here is calculated by asking yourself what is the average per hour salary for these people.
Then try to re-create and estimate the amount of time each week is spent looking for tools and equipment. Be conservative with your estimate. Multiply the number of hours by the average per hour salary to come up with a cost.
While this number seems “fuzzy”, think about want more productive activities could be accomplished if all these people were not wasting their time looking for equipment. Well-designed barcode equipment tracking systems, like Tool Hawk™ can save 50%, 60% or more of this time.
To be conservative, take 50% of this cost and add it to the calculation
Step 3: What is the cost if work is delayed because of missing equipment?
This could, potentially, be the largest drain on the bottom line. Delayed jobs slow down cash flow and delays future work. It is difficult to calculate but a conservative estimate could be projected. Look at the past year and try to re-create any job that was delayed because critical equipment was not available. Estimate the average worker salary and the amount of time each was unproductive.
Multiply these numbers and add that to the calculation.
Step 4: What does it cost to maintain equipment?
It is not only important to look at equipment replacements and loss of productivity but also the cost to keep equipment properly maintained. Estimate the number of tools and equipment that were replaced because they were not properly maintained. Tool Hawk™ includes a robust maintenance functionality to warn of future preventative maintenance dates and the cost of each repair.
In addition, Tool Hawk™ tracks the condition of equipment and tools as they are checked out and checked in from employees. This adds accountability to the use of equipment.
Estimate the number of tools and equipment that were replaced in the past year due to improper maintenance and add that to the calculation.
Step 5: What is the cost of a good barcode equipment tracking system?
For an equipment tracking system to be considered good it must be easy for the users to work with and powerful enough to capture transactions accurately. Tool Hawk™ does all that and more. Add to the cost durable barcode labels, barcode scanning equipment to make the system easy to use and reliable.
Add steps 1 through 4 to come up with calculated savings total. Divide that number by 12 to come up with monthly savings. Divide the total cost of the barcode equipment tracking system by the monthly cost. This will give you the number of months needed before the barcode system pays for itself.
TOTAL SAVINGS/YEAR ÷ 12 = MONTHLY SAVINGS
BARCODE EQUIPMENT TRACKING SYSTEM ÷ MONTHLY SAVINGS = #MONTHS ROI
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