Payback, ROI and NPV.
Use it to make the business case for an improvement. Enter the investment, annual saving, running cost and discount rate, and it gives payback, ROI, NPV and a cumulative cash flow chart.
Net annual benefit = saving minus ongoing cost.
Payback = investment ÷ net annual benefit. NPV discounts each year at the rate above. Savings from time and waste reduction count only if the freed capacity is used or the cost actually leaves the budget.
The ROI calculator turns an improvement into numbers that management and finance understand.
Payback (months) = one-off cost ÷ monthly savings. ROI % = (annual savings − annual cost) ÷ investment × 100.
A $3,000 fixture saves 20 minutes per shift on two shifts, five days a week, at $60 an hour. That is about $10,400 a year, a payback of about 3.5 months and a first-year ROI of about 247%.
Many businesses accept under 12 months; small kaizens often pay back in weeks.
Only if it is redeployed to valuable work, reduces overtime or avoids hiring. Otherwise call it capacity gained.
Yes. Add them as estimated costs avoided, but show them separately from hard savings.