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.
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.

    Companies in this Article

    Sponsored Recommendations

    Understanding and Using E-Stops

    E-stops, or emergency stop switches, are used to ensure machine as well as personnel safety. They are used to provide a consistent and predictable failsafe response on a wide ...

    Demystifying motor disconnect switches: What are they and how are they used?

    From conveyor belts to drum mixers, motors are used in virtually every industrial application to drive machinery. Equipment downtime is the main motivation behind monitoring and...

    Full Line of DIN Rail Terminal Blocks Video

    Altech offers an extensive line of DIN Rail Terminal Blocks including all major Connection Technologies available in the industry to meet requirements for a vast variety of applications...

    The Value of Integrating DIN Rail Cylindrical Fuse Holders Into Your Designs

    What short circuit currents do I have to consider when purchasing a DIN rail cylindrical fuse holder? That data is available from the manufacturer. For example, Altech cylindrical...