Calculating a Return on Safety

Nov. 14, 2011

By crunching the numbers on project cost, overall equipment effectiveness, direct and indirect injury costs and capital asset depreciation, a new Web-based tool made available by Rockwell Automation (www.rockwellautomation.com) helps calculate the annualized return on investment for safety integrated automation systems.

ROI Safety Calculator — J.B. Titus presents Rockwell Automation's Safety ROI Tool at the 2011 Safety Automation Forum.

A long-held axiom in automation and control discussions across industries is that there are two things for which an ROI (return on investment) cannot be calculated. Those two things are: security and safety.

Given the announcement made at Rockwell Automation’s Safety Automation Forum on November 11, 2011, that axiom may need to drop further mention of safety.

To address the issue of effectively calculating a return on capital expenditures related to safety integrated systems, Rockwell Automation approached J.B. Titus, machine safety consultant and owner of J.B. Titus & Associates, and asked him to develop an ROI tool for the task. According to Titus, the basic structure of the ROI took is simple — benefits divided by costs equals ROI. Assessing both the costs and the benefits are a bit less straightforward than this basic ROI calculation, however.

To help simplify the process, the Rockwell Automation Safety ROI tool developed by Titus comprises five categories of costs and benefits in the tool. The five categories are:

Project cost estimate — this estimate addresses the cost of controls, software, installation, training, etc.;

OEE (overall equipment effectiveness) analysis — this category addresses increases in availability based on factors such as typical cost and duration of unscheduled downtime, as well as performance increases based on higher production levels and resulting profit contribution;Increased capital asset depreciation — this is based on total project cost, residual value and depreciation over time;Direct injury costs — this category is used to address variable costs such as medical and rehabilitation costs, wages, and worker’s compensation;Indirect injury costs — which includes factors such as lost productivity, OSHA fines, repair costs, temporary employees, etc. An interesting feature of the tool in this category is the ability for users to adjust the ratio of indirect to direct injury costs ranging from 1:1 to 14:1 based on the end user’s company requirements.In this initial release of the Safety ROI tool, a quality improvement category is not part of the equation, but Titus says its addition is planned for forthcoming updates. Despite the lack of a quality improvement category, Titus says the tool provides ample evidence of the annualized ROI value related to the implementation of a safety integrated system sufficient for presenting to company executives.

The tool is optimized for access by smart phones and tablet PCs. The safety ROI tool is free to use and can be accessed at http://safetyroi.avidcom.com/php/index.php.