What are Project Benefits?
Project Benefits are the target or actual business value that an improvement project can deliver to your organization. These project benefits should be converted into Annualized Dollars*, and identified as Hard Savings* or Soft Savings*.
How to Calculate:
- Identify the Improvement you made or plan to make.
example 1: We did a process flow optimization for our nursing staff.
example 2: We worked on yield issues in the factory
- Identify & Quantify the Metric which were improved.
example 1: We reduced 300ft of walking each day for the nursing staff
example 2: We improved the yield of the product from 85% to 93%, an 8% increase.
- Translate the change in process metric into Dollars.
example 1: 300ft each day is 10 minutes for 12 nurses or 120 minutes per day, at $45/hr =$90.
example 2: 8% yield at $23 per unit = $1.84 saved per unit.
- Annualize the Savings. Most organizations implementing Lean choose to count improvement projects on a 12 month basis.
example 1: $90 per day x 250 days per year = $22,500 labor saved
example 2: 8% yield at $23 per unit for 358,000 units = $658, 720 per year.
If you would like more examples and an excel template to help you calculate additional types or project savings you can download an additional template.
*Many organizations choose to Annualize project savings or to count 12 months worth of a single process improvement project. KPI Fire allows you to input values over multiple years, or to use other types of savings types, not limited to Hard or Soft Savings.
Check out this resource for determining Hard Savings vs. Soft Savings in Lean Continuous Improvement Projects
“One of the easiest failure points to avoid in your Lean programs is failing to track Project Benefits”, Cedro Toro
Direction: Benefit or Cost
- Added to parent Benefits.
- Can be input as negative or positive values.
- Subtracted from parent Benefits.
- Input is automatically entered as negative values.
- Best Practice: Use the “< Cost” direction for all cost benefits to gain insight with ROI and Payback Period calculations.
Project Benefit Tile Views
- Multiple display options available for visualizing project benefits over time (Total,Year, Quarter, Month, Bowling)
- Top-Level Benefits can be added by editing the Project Workflow, if unlocked.
- Add Sub-Benefits by selecting the parent Benefit and then clicking the plus sign in the level beneath it
Other Popular Project Benefit Configurations:
The default template in KPI Fire will use Total Savings = Hard Savings(+), Soft Savings(+), and Project Costs(-), however some customer have configured other Project Benefit types to match different approaches to quantifying Project Benefits. Here are a few examples:
A) Project Benefits with focus on identifying the 8 Wastes:
Total Savings (Level 1)
-Hard Savings (Level 2)
–Reduce Defects (Level 3)
–Reduce Inventory (Level 3)
-Soft Savings (Level 2)
–Over Production (Level 3)
–Waiting (Level 3)
–Non-Utilized Talent (Level 3)
–Transportation (Level 3)
–Motion (Level 3)
–Excess Processing (Level 3)
B) Project Benefits for NIST/MEP Program Goals
-Cost Savings (Level 1)
–Hard Savings (Level 2)
–Soft Savings (Level 2)
-Sales Impact (Level 1)
–New Sales (Level 2)
–Retained Sales (Level 2)
-Employee Impact (Level 1)
–Retained Impact (Level 2)
–New Employees(Level 2)
-Investment Impact (Level 1)
–Investments made (Level 2)
–Investments avoided (Level 2)
C) EBITDA Impact with Sub Accounts:
Net Ebitda Gain
–Variable Cost Reduction
–Fixed Cost Reduction
–Direct Cost Reduction
-Ebitda Gain from Revenue
–One time Expenses(-)
–Amortized Capital Expenses(-)
-Accounts Payable (DPO)(-)
Capital Investments (-)