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How to calculate the ROI of your conveyor equipment

Date: 29/03/2022

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While large companies have their own teams and departments to calculate ROI - return on investment, small business owners are often confused about the term Return on Investment.

Why is return on investment so important?

When you are running a business, your cash flow is determined. You bring in raw materials, you convert them into finished products, you sell them, you get money, and you return payments and wages to suppliers. But when you have to buy a capital asset or equipment, most of the money from your cash flow is immediately locked in. They are moved out of cash flow, which will affect your daily working capital.

Simply put, ROI is how you get your investment back. There is no direct ROI formula that gives you device ROI. This is because every business is different and every business owner has his own mindset to run and analyze his business. A small business owner must do a simple accounting of the difference before and after buying Conveyor Equipment? One has to analyze how the conveyor belt will make a difference? Once you understand this, you will see a huge amount of clarity for your ROI analysis.

- How do you make the decision to buy conveyors or capital equipment to automate your factory?
- Will it be a right decision?
- How much will it cost?
- How to justify this cost financially?
- Will it be a financially sound decision?
- What if the decision is wrong?

All of the above questions have an answer that is ROI - Return on Investment to help you make the right buying decision. Payback period tells you how long it takes to recover your investment?

Let's take an example

If you are looking for a packing conveyor where you want to sort raw materials. You see a direct reduction in manpower, there will be an increase in the number of categories. The quality of the graded raw material will be improved. For this you will have to maintain a record of everything, for example how much time it takes to arrange for a given quantity. How many other support workers are needed for the main sorting teams. What is the quality of the arrangement? How many times did the packing team complain about the sorting team? You can maintain such records.

You must mark the new scenario recommended. Required number of workers. New sort speed boost. You also have to consider the increased packing speed. Now the difference in this amount is your actual savings - it's your profit after buying the conveyor.

This process will also help you create requirements and specifications for the conveyor. When you do an in-depth assessment, you will understand whether power-assisted conveyors or gravity roller conveyors will work? What will be the length of the required conveyor belt? I may have to trial and error so variable speeds for the conveyor are needed.

Factors to calculate the ROI of Conveyor Equipment


1 - Cost of conveyor belt.

- The cost that you are paying the supplier

- Transport fee

- Cost of installation & trial run

- User training

The purchaser should communicate all possible information to the conveyor equipment supplier. Buyers should try to figure out hidden costs, such as some variation or replacement parts, electricity costs, etc. If you are planning to expand in the near future, the same cost should also be considered and assessed to fit the same equipment or capital budget.

2 - Labor cost

- Is there a reduction in labor due to the purchase of this conveyor equipment? Consider labor costs included

A - Direct salary

B - Indirect costs such as canteens, insurance,...

3 - Direct benefits to production

- Increased labor productivity - Due to the nature of work, labor productivity increases.

- Higher Speed ​​- Higher speed will increase sales higher hence profit increase.

4 - Conveyor maintenance cost

- What is the maintenance cost of conveyor equipment?

- Do I need to maintain my own staff for it?

- Is it maintenance free?

- What is the cost of preventive maintenance/year?

5 - Bank interest rate

- Bank interest on the amount invested

ROI = Benefit / Investment

ROI - return on investment is simply profit/investment. The higher the result, the higher the ROI. Higher ROI means faster return on investment.

ROI calculation steps

- Find out your current costs without buying conveyor equipment - C1

- The costs mentioned above C2

- ROI = (C1-C2) / C2 = Profit / Investment

Payback time

- Payback period = C2 / (C1-C2)

(Investment / Profit)

Intangible benefits

Intangible benefits that cannot be measured but affect the overall performance of the company or help improve the company's brand image.

- Labor supervision costs

Assume that the workforce is reduced from 20 to 10 by purchasing conveyor equipment. If reducing the number of employees by 10% surely the supervisor can have more time to do other priority tasks.

- Cost of product damage and brand image.

If a customer receives a damaged product, the company's brand image is negatively affected. Conveyor equipment reduces product handling and product maintenance. As a result, customer loyalty to the brand increases.

Are you intending to buy conveyor belts? Call us now to benefit from our expertise in this area. Hotline: 0966 966 032