Dan’s Biz Bookshelf: ‘Abundance: How We Build a Better Future’
Trouble in Your Tank: In Complex Systems, Design Rules Aren’t Optional
It’s Only Common Sense: The Phone Is Still Your Competitive Advantage
Happy’s Essential Skills: Engineering Economics (ROI)
August 10, 2016 | Happy HoldenEstimated reading time: 5 minutes
Copper/tin pattern plating line with rack strip: $400,000USD plus $15,000 installation, purchased in 1991, eight-year operating life, five-year depreciation
Capacity: 500 18" X 24" (450 mm X 600 mm) panels per shift. Load: 2 rows of 4 panels.
Process: load- micro etch- rinse- rinse- sulfuric acid- copper plate- dragout- rinse- fluoroboric acid- tin- dragout rinse- rinse- dry- unload- rack strip- dragout rinse- rinse- load.
Figure 2: ROI payback worksheet.
Figure 3: Cash flows for plating investment.
The equivalent interest rate that could be earned on the investment of $400,000 + $15,000 installation and startup is:
35.0% interest; this is the ROI, as calculated in Figure 2 and summarized in Figure 3 with its cash flows.
These tradeoffs can be seen in Figure 4, where I have calculated the cost of manual production for electroless copper and electroplating copper/tin versus four automation strategies.
Figure 4: a) Electroless copper curves of manual versus automatic cost per square foot; b) electroplating copper/tin curves of manual versus automatic cost per square foot[2].
Other Engineering Spreadsheets
Figure 2 shows an Excel Worksheet for the automation ROI. Other typical engineering spreadsheets could be:
- Major Equipment—New equipment versus old equipment or manual labor
- Yield Improvements—Yield improvement using new materials, process and machines
- Process Change—Process improvement using new materials, process and machines
- Technology Acquisition—Technology acquisition using new materials, process and machines
- Material Changes—Justification for changing materials
- Environmental Improvement—Justification for changing environment/energy equipment, processes or materials
- Safety Improvement—Justification for changing safety equipment, processes or materials
- Customer Required Change—Justification for changing materials or processes for a customer
Financial Functions in MS EXCEL
To help you get started with MS Excel, Figure 5 shows the 16 financial functions that are part of every Excel program.
Figure 5: The 16 financial functions that are part of every Excel program.
References
- The Principles of Engineering Economy, G. Ireson, 1964, McGraw-Hill.
- “Justifying Process Automation,” H. Holden, NEPCON, Anaheim, California, May 1972.
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