How to Calculate Return On Investment or ROI for Asset Tracking
As companies expand their operations and increase their asset base, they need to keep track of their assets, including equipment, tools, and vehicles. Asset tracking software is an effective solution for this purpose, helping organisations monitor the movement and usage of their assets in real-time. But how can you determine the return on investment (ROI) of asset tracking software?
In this article, we’ll learn about the key factors involved in calculating ROI for asset tracking, including cost savings, time savings, and improved efficiency. We’ll also address potential concerns or objections, such as the cost of implementation and the complexity of the technology. By the end of this article, you’ll have a better understanding of how to build your own ROI calculator for investing in asset management software and its potential benefits for your company.
Cost Savings
One of the most significant benefits of asset tracking software is cost savings. By keeping track of your assets, you can identify ghost assets (assets that are on your books but don’t actually exist), reduce the need for emergency repairs, and optimise preventive maintenance schedules. All of these factors can lead to cost savings over time.
Time Savings
In addition to cost savings, asset management software can also save you time. Instead of spending time manually tracking assets or searching for missing items, you can use the software to locate assets quickly and efficiently. This can help you reduce downtime and improve your overall operational efficiency.
Improved Efficiency
An effective asset tracking system can also improve your overall efficiency by automating many of the manual processes involved in asset management. For example, you can use the software to schedule maintenance tasks, generate reports, and track employee usage of assets. This can help you streamline your operations and reduce the time-consuming administrative tasks associated with asset management.
Calculating ROI
To calculate the ROI of asset tracking software, you need to consider the cost of implementation, the expected savings in cost and time, and the expected increase in efficiency. You can use the formula below to quickly create your own calculator.
ROI = (Total Cost Savings – Cost of Asset Tracking Software)/Cost of Asset Tracking Software
Total Cost Savings = Hours saved * Hourly rate + Improved Utilisation Savings + Reduced Losses Savings + Reduced Maintenance Costs Savings + Insurance Savings + Improved Purchasing Control Savings
To calculate each savings category:
Hours saved: Multiply the number of hours saved by the hourly rate of the employees whose time was saved.
Improved utilisation: Subtract the percentage of unused assets prior to implementation from the percentage of unused assets after implementation, and multiply by the total asset value.
Reduced losses: Subtract the value of losses prior to implementation from the value of losses after implementation.
Reduced maintenance costs: Subtract the total maintenance costs prior to implementation from the total maintenance costs after implementation.
Insurance savings: Subtract the insurance premiums prior to implementation from the insurance premiums after implementation.
Improved purchasing control: Subtract the cost of over-purchasing prior to implementation from the cost of over-purchasing after implementation.
Add up the total savings in each category to get the Total Cost Savings. Then, subtract the Cost of Asset Tracking Software from the Total Cost Savings and divide by the Cost of Asset Tracking Software to get the ROI.
Potential Concerns
Despite the potential benefits of asset tracking software, there are some concerns that businesses may have. For example, the cost of implementation may be a concern for some companies, as well as the technical complexity of the technology. However, with the right implementation plan and training, these concerns can be addressed.
Case Study – Engineering
This example looks at an engineering firm that specialises in manufacturing custom machinery for various industries. With a growing business and increasing demand for their services, they were faced with the challenge of keeping track of their expanding asset base, including machinery, tools, and equipment, as well as stock and inventory. This led to lost assets, wasted time searching for missing items and inefficient maintenance schedules.
To address this challenge, the firm decided to invest in asset tracking software. They chose a solution that allowed them to monitor the movement and usage of their assets in real-time, automate maintenance schedules, and generate reports.
The implementation of the software resulted in significant improvements for the firm. They were able to reduce the time spent manually tracking assets, which allowed them to focus on more important tasks. They were also able to identify ghost assets, which saved them money on insurance and taxes. Additionally, the software allowed them to optimise preventive maintenance schedules, which led to reduced downtime and improved operational efficiency.
To measure the improvements, the firm tracked the time spent on asset management tasks before and after the implementation of the software. They also tracked the number of missing or lost assets and compared it to the same period in the previous year. They found that they were able to reduce the time spent on asset management tasks by 30%, and the number of missing or lost assets was reduced by 50%.
Overall, the investment in asset tracking software was a success for the firm. By reducing the time spent on asset management tasks and optimising preventive maintenance schedules, they were able to save money and improve their operational efficiency.
Conclusion
Asset tracking software can provide significant benefits for businesses, including cost savings, time savings, and improved efficiency. By calculating the ROI of asset tracking software, companies can determine the potential benefits of implementation and make an informed decision about whether it is the right solution for their needs. With the right implementation plan and training, businesses can maximise the benefits of asset tracking software and improve their overall operational efficiency.
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John de Robeck2024-03-26 10:29:322026-03-10 10:57:34SoftwareSuggest Awards – FMIS recognised for easy implementation
