Solution
Return on Investment (ROI)
Bluestar PLM, a leading ERP-based Product Lifecycle Management solution, delivers measurable financial returns by streamlining engineering workflows and unifying product data across organizations. By integrating seamlessly with Microsoft Dynamics 365 for Finance and Supply Chain Management, it eliminates silos between engineering and manufacturing, driving efficiency and reducing operational costs.
Published: 21. October 2020
Table of contents
Understanding ROI in the context of Bluestar PLM
It is self-explanatory, that companies can achieve great benefits from having a master set of data, where they can reuse item structures, BOMs, documents and drawings, while improving worldwide collaboration and still keep their complete tracking and traceability.
Break-even of Bluestar PLM: 8.32 minutes per workday.
Increase in revenue per Engineer: $4370.00
Example: Break-even point of Bluestar PLM
There are more than just pure procurement costs to consider before calculating the break-even point of a PLM-system. To calculate the break-even point of Bluestar PLM, we initially need 1. the cost of engineering, 2. the cost of licenses and 3. the cost of implementation.
1. Calculating engineering costs
In this example, the cost price for an engineer is estimated as $7500 per month working 40 hours per week.*
- An engineer has 22 workdays per month.
- This gives the engineer 176 workhours per month.
- This gives a salary per hour of $42.61 for the engineer.
*According to the U.S. Bureau of Labor Statistics (BLS) engineers have a median annual wage of $91,010. Please see references below.
2. Calculating acquisition costs
| Task | Cost |
|---|---|
| Total monthly subscription costs (100 full-access users) | $10.000 per month |
| Implementation costs of Bluestar PLM | $80.000* |
| Internal costs of the implementation | $100.000 |
| Expected depreciation time | 5 years** |
*Depends on which solution and modules you choose.
**Depreciation is a way of allocating the costs of an investment over its useful life expectancy. In this case, we assume the only “investment” is the implementation, as it is a one-time investment and as fixed monthly costs are not depreciated in ordinary accounting policies. Internal costs are an estimate that covers the expected costs of the internal resources needed to acquire a PLM system.
How do we calculate the total cost of license and implementation?
The foundation of calculating the licens and implementation cost is = (((implementation costs + internal costs) / number of users) / years depreciation) / month per year + monthly subscription cost per user. With the example of 100 users this gives us = (((100,000 + 80,000) / 100) / 5) / 12 + 100 = $130 per user per month during 5 years depreciation.
What is the break-even point?
The break-even point is the level of efficiency (in terms of the value of hours) per engineer needed to cover the fixed costs; the level at which the company does not make either a profit or a loss on the fixed costs (implementation + monthly subscription) of Bluestar PLM.
Calculating the break-even point during 5 years of depreciation
The break-even point during the first 5 years can be calculated by: Total cost of subscription and implementation per engineer / engineer, salary per hour.
Break-even point per workday: (3.05 / 22 workdays) * 60 minutes = 8.32 minutes per workday.
Calculating the break-even point after 5 years of depreciation
The break-even point after the first 5 years can be calculated by: Total cost of subscription per engineer / engineer, salary per hour.
Break-even point per workday: 100 / 42.61 = 2.35 hours equivalent to 6.40 minutes per workday.
Conclusion
The engineer needs to save at least 8.32 minutes (during depreciation) and 6.40 minutes (after depreciation) of their time per workday in order to reach the point of break even.
Example: Increase in efficiency
Note! The Engineering ROI is based on the assumption that the average engineer will create a revenue for the company equivalent to 3 times their monthly salary. Is this example, we estimate an increase in efficiency of 20%.
| Type | Value |
|---|---|
| Cost price per engineer per month | $7,500 |
| Revenue from engineer | $22,500.00 |
| Increase in efficiency | 20% |
| Expected revenue from engineer | $27,000.00 |
| Difference | $4,500.00 |
| Cost of Bluestar PLM (during depreciation) per month | $-130.00 |
| Increase in revenue | $4,370.00 |
Conclusion
When the expected difference in revenue due to increased efficiency of the engineer is deducted the cost of Bluestar PLM, we get a final expected increase in revenue of $4,370.00 per month.
Ready to unlock your organization’s full potential? Contact Bluestar PLM today for a tailored consultation.
