Digital Patterning ROI For Non Financial People - Part 2 of 3
In this 2nd of 3 parts, we look at the digital patterning ROI related to cost savings goals and productivity improvement goals.
In part 1, we asked the question “How much ROI is enough?” In part 2 we are going to look at very simple ROI models that take no more than 5 minutes. One will look at a cost savings perspective, the other will project a productivity increase.
The Simple Cost Savings ROI
The premise is very simple. Digital Patterning is faster than legacy hand patterning. If you are too busy to read the full article here is the punchline:
For those who want the details, let’s look at an example for a hypothetical manufacturer of soft goods using legacy hand patterning:
- They create patterns for 20 products a month, about 1 per day.
- Each pattern takes 6 hours of effort in an 8 hour shift but can take as long as 20 hours for complex parts.
- They receive a mix of physical models and digital files from their customers.
- The use a drape, tape, mark, and cut hand patterning process and they are pretty good at it.
- After hand patterning, they digitize the patterns and then work in 2D CAD to finish the patterns.
- A cost estimate, a marker, and assembly documentation is not included in the 6 hours and typically takes another 3 hours for a total of 9 hours per pattern.
- The total patterning time a month would be 20 products times 9 hours for 180 hours.
Based on this volume of work one license of digital patterning software would be enough.
- With digital patterning, each pattern, including a cost and a drawing would take around 45 minutes.
- Let’s assume the cost of digital patterning software and training is about $20,000. But keep in mind the actual cost may be a lot less.
Finally let’s assume a labour rate of $40 per hour. The chart below give a comparison of the savings over 1 month, 12 months, and 24 months.
With digital patterning you save:
- $6,400 a month on an operating basis. (Put another way, for every month you wait to implement digital patterning it costs your company $6,400.)
- $59,200 for the first 12 months.
- $138,800 over 24 months.
The digital patterning return on investment for:
- 1 year is 317%.
- 2 years is 508%.
If cost savings was your objective then the story ends here. But there is an additional benefit that you get for free.
Digital Patterning Productivity Increases
In our example, the production capacity shoots up 1,200% to 240 patterns, vs. a limit of 20 for legacy hand patterning. In most situations, this would be a no brainer, but lets quantify it a little more.
Assume the company makes a net profit margin of 15%. For and incremental 220 patterns per month, this would be a potential financial gain of $11,880 per month. (9 hours per pattern x $40 per hour x 15% profit margin x 220 incremental patterns per month)
We looked at two perspectives: Cost savings and productivity increase. The numbers in our example are hypothetical, but certainly representative of real life situations. Next week we look at ROI from a different perspective, the ability to shift from mass production to mass customization. Digital patterning is here to stay. It is growing fast and the ROI is easy to calculate and prove.