Beyond ROI

When you’re building the business case for a capital project, you need to assess the tangible benefits it will bring. Return on Investment (ROI) is the indicator commonly used for this, and it generally focuses on financials – the point at which savings and value generated from an investment fully compensate for costs.

But it’s also important to factor in the intangible benefits – the soft ROI elements – that contribute to your success.

The first blog in this series looked at the financial variables driving ROI – and how to calculate them accurately using predictive simulation. This blog takes a deeper look at the soft ROI benefits you get from using predictive simulations to build your business case.

What soft ROI elements can you benefit from?

Predictive simulation helps when you’re considering ways to boost capacity – like building a new facility, installing a new line or introducing automation. They offer a risk-free way to test complex system designs, flag unforeseen issues and determine the best approach.

As well as helping you make more informed decisions on payback periods for different investment choices, predictive simulation also delivers important soft ROI elements, including:

• Enhanced productivity
• Streamlined communication
• Greater confidence in your business case
• Improved risk mitigation
• Faster stakeholder buy-in

Let’s look at each of these in more detail.

Enhanced productivity and streamlined communication

Building a business case can involve lots of back and forth with different departments and vendors as you specify requirements, calculate costs and set project key performance indicators (KPIs). Using traditional methods of calculating ROI, like spreadsheets, can then turn into a MENSA-level puzzle as you grapple with complex cyber-physical systems.

Predictive simulation streamlines this process, so you can build your business case faster. Once you understand the different variables affecting expenditure and determine the options for consideration, you can build a flexible model (digital twin) that does the heavy lifting for you. Instead of having to go back to colleagues each time you want to explore a new scenario, you can just adjust the parameters in the model, letting you experiment with everything from inventory levels to robot usage.

Greater confidence

Predictive simulation enables you to say a project will deliver ROI when certain parameters are met.

For example, Italian cosmetic company L’Erbolario used our Twinn Witness predictive simulation software (formerly under the Lanner brand) when planning a new logistics warehouse. The model showed that the proposed facility design would still achieve its targets if there were minor deviations in target batch weights. However, if weights exceeded 12.5% of the target, there would be a total bottleneck.

Improved risk mitigation

There are so many risks involved in a capital project. Beyond major ones like pandemics, there are design and specification issues, price fluctuations, weather, material and resource availability, logistics hiccups and regulatory roadblocks and more.

Predictive simulation helps you account for all these risks. By showing you how processes are affected by scenarios, you get visibility of bottlenecks you hadn’t considered. This facilitates long-term planning, because you can avoid problems you wouldn’t otherwise be able to foresee.

For example, Ford in the UK has used predictive simulation over 4 decades in its planning processes to boost productivity and validate decisions. The simulation-enabled ways of working have helped it support plant teams worldwide and drive multi-million-pound savings in production programmes. Because the modelling has demystified key uncertainties, Ford has been able to address risks based on fact-based, scientific analysis.

Faster stakeholder buy-in

Because predictive simulation gives more confidence in your recommendations, it also speeds up decision-making processes. The board considering the project or the bank considering your funding application can see an informed, evidence-based justification for the proposal.

Electric motor and pump manufacturer Hayward Tyler said that using predictive simulation yielded a ‘lottery win’ reaction from stakeholders. ‘With simulation, I was able to go to the bank and get the funding for our project, as well as prove to all of management that the design would work,’ said Oliver Buhlinger, Senior Manager.

What soft ROI benefits are missing from your planning process?

Contact us to see how predictive simulation will help you find blind spots and build a robust and holistic investment case for your capital project – so you benefit from both financial and soft ROI elements.