Cost Metrics

Process Cost Metrics are values that are indirectly associated with the product, including:  

• ???

Return on Investment (ROI) is an economic metric that is used to measure the profitability and effectiveness of investments in lean manufacturing.

• ROI is important because it helps manufacturers to understand the financial impact of their lean initiatives, and to make informed decisions about where to allocate resources.

By calculating ROI in relation to lean manufacturing, manufacturers can prioritize investments that are likely to deliver the greatest financial benefits, and track the success of their lean initiatives over time.

• ROI can also help manufacturers to make the business case for additional investments in lean manufacturing, by demonstrating the financial benefits that can be achieved through improved efficiency, reduced waste, and better quality.

• Overall, understanding ROI is an important tool for manufacturers who want to achieve sustained success through lean manufacturing.

• To calculate ROI in relation to lean manufacturing, manufacturers need to first identify the costs and benefits associated with a particular lean initiative.

  • Costs might include things like the cost of equipment or materials, or the cost of hiring consultants or trainers to implement the initiative.

  • Benefits might include things like increased productivity, reduced waste, and improved quality.

• Once the costs and benefits have been identified, manufacturers can calculate the ROI using the following formula:

  • ROI = (Total Benefits - Total Costs) / Total Costs

  • For example, if a manufacturer invests $100,000 in a lean initiative and realizes $150,000 in benefits, the ROI would be calculated as follows:

    • ROI = ($150,000 - $100,000) / $100,000 = 0.5 or 50%

    • This means that for every dollar invested in the lean initiative, the manufacturer realized a return of $1.50, or a 50% ROI.