What are the most effective ways to measure the ROI of predictive maintenance techniques?

1 Define your goals

Before you can measure the ROI of predictive maintenance, you need to define your goals and objectives. What are the main problems or challenges that you want to solve or prevent with predictive maintenance? How do these problems affect your key performance indicators (KPIs), such as availability, reliability, quality, safety, and profitability? How do you measure these KPIs and what are your current baselines and targets? By answering these questions, you can establish a clear and realistic scope for your predictive maintenance project and align it with your strategic goals.

2 Identify your costs

The next step is to identify and quantify the costs associated with predictive maintenance. These costs can be divided into two categories: upfront and ongoing. Upfront costs are the initial investments required to implement predictive maintenance, such as hardware, software, sensors, data integration, training, and consulting. Ongoing costs are the recurring expenses incurred to maintain and operate predictive maintenance, such as data storage, analytics, maintenance actions, and support. You should also account for the opportunity costs of not implementing predictive maintenance, such as the potential losses from breakdowns, repairs, and inefficiencies.

3 Estimate your benefits

The benefits of predictive maintenance are the positive outcomes and savings that result from avoiding or minimizing the problems or challenges identified in the first step. These benefits can be expressed in terms of increased revenue, reduced costs, or improved quality, safety, and customer satisfaction. For instance, predictive maintenance can lead to reduced downtime and unplanned outages, extended equipment life and reduced replacement costs, lower energy and material consumption, fewer defects and rework, improved compliance and risk management, and enhanced reputation and customer loyalty. To estimate these benefits, you need to use data and assumptions to project how predictive maintenance will improve your KPIs compared to your current baselines and targets. Additionally, you should take into account intangible benefits that are difficult to quantify but still valuable such as employee morale, innovation, and learning.

4 Calculate your ROI

Once you have identified your costs and benefits, you can calculate your ROI using a simple formula:

ROI = (Benefits - Costs) / Costs

This formula will give you a percentage that indicates how much return you can expect for every dollar you invest in predictive maintenance. You can also use other metrics to complement your ROI calculation, such as payback period, net present value, internal rate of return, or benefit-cost ratio. These metrics can help you compare different predictive maintenance scenarios and options and evaluate their feasibility and attractiveness.

5 Communicate your value

The final step is to communicate your value proposition to your stakeholders and decision-makers. You need to present your ROI calculation and supporting metrics in a clear and compelling way that shows how predictive maintenance will help you achieve your goals and objectives. You should also address any potential risks, uncertainties, or limitations that may affect your ROI estimation and explain how you will mitigate or overcome them. You should use visual aids, such as charts, graphs, tables, or dashboards, to illustrate your data and findings and highlight the key points and messages. You should also tailor your communication to your audience and their needs and expectations and use relevant examples and stories to engage them and persuade them to support your predictive maintenance project.

6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?