I recently received a comment on one of my posts I thought was so important that, though sent privately, I asked if I could share it. Fortunately, he agreed, so without further ado:
I have seen your posting ‘Controlling the Uncontrollable’ and fully agree that controlling the temp. fluctuations of paints will benefit the business results, but very few companies go for this option, the main reason being:
- If you look at the total cost of production of painted coils, paints and thinners make only 10% of the total cost ($0.26 USD/m2). The solvent/thinner usage is 8-10% of the total paint usage ($0.013 USD/m2).
Approval for new capital investments in many organizations is linked to ROI. [Though] I have recommended installing St. Clair’s temp. controlling system, my colleague has informed me that providing management a justification from the point of ROI is still an issue.
(It’s fair to note that this has been edited to protect the identity of the company in question.)
No ROI – No Project…
AR is absolutely correct! The fundamental truth is that all capital projects must meet some kind of ROI (Return On Investment) criteria if they are going to be considered viable. This is generally well-defined in terms of a maximum time over which the savings will exceed the amount spent. While this used to be an extended period – often up to 5 years – in recent years this has been reduced to the point where a one year ROI is standard in many (most?) corporations. So, if you’re even going to submit, make sure you meet this important metric first!
A Common Mistake
But AR also reveals one of the most common mistakes we see when people are putting together a capital project – laser focus on a single opportunity. In this case, it appears that only reduction in solvent usage is being considered for determining the ROI of the project and, while important, this is inadequate to offset the costs.
Just as it is important to consider all of the costs involved – equipment, piping, wiring, in-house labor, outside contractors, downtime, training, testing, etc. – a savvy project manager also knows that it is just as important to identify all of the expected savings. In this case – a coil coating operation – the reduction in solvent usage often also improves finish quality by reducing blisters (especially edge blister), solvent pop, and orange peel. It is also often associated with gloss improvement. But it goes beyond that. Because there are less solvents to deal with in the oven – especially in the first couple of zones – it is also often possible to increase line speed on many products. That represents an increase in throughput that can both decrease cost and increase production capacity.
Another benefit of adding paint temperature control to a coil coating operation – at least in the way that we go about it – is that we focus on reducing paint film variations. This improves color control and reduces paint usage – and the savings in paint often far exceed the savings in solvent!
Identify ≠ Use!
For any given operation, there may also be other things improved by controlling paint temperature, but by my count, we just came up with 10 areas that will produce cost savings! When these are documented and totaled up (something for which we have developed customized, easy-to-use tools) the total savings almost always show an ROI of less than one year. But with this surplus of opportunity comes complexity in proving the result of your project on the other end. It may become a nightmare tracking and reporting all of those variables to justify that you did what you said you were going to do – a very important part of any capital project!
The key then, is to conservatively quantify and document all of the opportunities, sort them from highest savings to lowest (pareto analysis), then add them up until you have enough of the “heavy-hitters” to justify your project…then stop! Usually the top 2 – 3 are more than sufficient. It isn’t that the other items on the list won’t happen – they will – and that is just frosting on your cake. With this approach, you can show that you exceeded your projections with a minimum of tracking. Less work for you – greater impact for the company! Yes, it’s trite, but it’s a win-win!
So, the next time you’re evaluating at a capital project, follow these few simple rules to make sure that your bases are covered. Your success rate will definitely improve!