Return on Investment (ROI)
Bluestar PLM offers a scalable module-based PLM solution for Microsoft Dynamics 365 Finance & Supply Chain Management, delivering different levels of integration with CAD, PLM and ERP, fitting your unique business needs. Start simple by CAD/PDM + ERP Connectors, explore a single business system by having CAD + PLM + ERP with Bluestar PLM, or move your business towards enterprise product configuration by choosing the Product Configuration Module.
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. But how much does a typical engineer need to improve their time to make the investment pay off?
Increase in revenue per Engineer: $4370.00
We’ve done the math and present you with an example below.
Break-even point of Bluestar PLM (example)
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 per user?
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 month: 130 / 42.61 = 3.05 hours per month.
- 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 month: Monthly subscription costs 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.
Increase in efficiency (example)
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.
What have our customers accomplished?
Although we are still in the process of measuring the entire time to market, through the first 75% of our process we are seeing tasks completed 20% sooner… Errors resulting from our bill of materials have reduced from 60% to below 10%
Previously, it took us two to three minutes just to configure one part, then we had to create the drawings manually afterwards. With Bluestar, it takes about 90 seconds to both configure the part and create the CAD drawing. There is really no comparison when it comes to what you can gain by having software like that.
The largest is that the PLM is inside our ERP system. That allows us to access financial information on components and costs, and with regards to change management, it helps us understand the implication of inventory levels and purchase transactions instantly. The technical engineering information also flows across systems which creates huge time savings as we don’t have to go between them and tie them together with hand-written reports
This will be very powerful for us and will really bring engineering and operations together – it will change the way we work in our factories and increase efficiency in engineering change and product data control companywide.
Bluestar PLM has greatly improved our company’s operational efficiency and we benefit from having implemented the system across all of our global offices
We’ve reduced time spent on ECO processes by 80%. We’ve reduced document control time on ECO tasks by 60%- 80%
Poul Bak Pedersen
Sales Director EMEA
pbp@bluestarplm.com