The ROI of Safety in Manufacturing

The ROI of
Safety in
Manufacturing
Boost your bottom line with safety
management software
W H I T E P A P E R
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The ROI of Safety in Manufacturing
Boost your bottom line with safety management software
© Copyright 2016
Intelex Technologies Inc.
intelex.com
1 877 932 3747
intelex@intelex.com
@intelex
/intelextechnologies
/intelex-technologies-inc.
/intelexsoftware
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The ROI of Safety in Manufacturing: Boost your bottom line with safety management software
© INTELEX TECHNOLOGIES INC. | 1 877 932 3747 | INTELEX.COM

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Safety Investment Equals Increased Profit
Businesses in the U.S. spend more than $170 USB per year on occupational injury and illness related
costs that eat away at corporate earnings. In Manufacturing, the risk of severe injury or illness is
higher than most other industry sectors, making a proactive and holistic approach to health and safety
management imperative. According to OSHA, implementing a Safety Management System (SMS) in the
workplace can reduce injury and illness costs by 20 to 40 percent. The manufacturing industry is subject
to changing operating environments, inherent hazards due to processes and heavy machinery, and
reliance on temporary workers and contractors. Thus the opportunity for improvement and cost savings is
significant, making effective safety management the difference between operating in the black and running
in the red.
The first step is understanding not only what you have to lose, but what you stand to gain by implementing an
SMS into your organization’s DNA. According to the National Safety Council, $1 invested in an SMS returns
anywhere between $2 and $6. This stems from direct and indirect costs, with savings of an additional $4 of
indirect incident costs for every $1 in direct costs. These benefits are a result of management accountability,
cultural safety impacts, and ultimately reduced workplace injuries and fatalities.
Be a Leader Not a Laggard
Most manufacturing companies will have some form of an SMS in place to help support long-term business
goals. But in today’s world, organizations can’t proactively manage workplace safety without the help of
a powerful safety management software solution. The true ROI of safety lies in shifting your SMS from a
reactive operation that tracks lagging indicators to a proactive one that mitigates risk by leveraging leading
indicators to stop incidents before they happen.
Lagging Indicator – Measure the end result of the OHS processes, policies, and procedures.
A record of things that have already happened. Examples include OSHA recordable injuries
and lost workdays.
Leading Indicator – Focus on future health and safety performance with the intent of continuous
improvement. An indicator of what is being done ongoing to prevent worker illness and injury.
Examples include safety training, risk assessments and safety audits.
The big challenge that companies must address is how to
balance so many competing priorities while ensuring a safe work
environment: Changing customer demands; rapidly transformative
technologies; needs for increased operational efficiencies (better,
faster, cheaper products); and increasingly stringent regulatory
requirements.

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Put simply, lagging indicators tell the story of what has already happened providing the appropriate
statistics to demonstrate how well you are managing safety. Leading indicators will take your safety efforts
beyond compliance and allow you to identify areas of improvement that ultimately lead to a reduction in
incidents, workers compensation claims, and lost time. To be effective, the leading indicators you decide
to track and measure should be clearly linked to your desired outcome.
Who Really Uses SMS Software?
The short answer – Everyone. The following table describes some of the benefits that can be realized by
using software to manage safety issues at manufacturing facilities, as described from the perspective of
different roles in the safety organization:
For example, if your objective is to reduce vehicle incident rates by 20%,
you could perform root cause analysis on your incident and near-miss data,
then implement and track the impact of training and behavior based safety
programs that address these root causes.
Safety Coordinator/Specialist Safety Manager Director/VP of Safety
Single centralized tool to
properly track and report on
safety data, saving time and
reducing errors caused by
disparate systems
Improve visibility of facility and
department-level activities
while increasing accuracy and
timeliness of reports
Improve visibility into activities
across the entire organization
to boost efficiency and reduce
costs
Shift from “data entry” to
“data analysis” and focus on
corrective actions related to
near-misses
Reduce departmental costs
and shift from ‘reactive’
to ‘proactive’ corporate
processes
Significantly minimizes risk
across the organization and
protects against litigation and
loss of employee morale
Better equipped to address
existing and emerging
legislation: OHSAS 18001, ISO
45001, ISO 22000
Mitigate the probability of
non-compliance or incidents
at the plant and business unit
level
Ensure compliance with laws
affecting global operations to
minimize risk

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It’s important to understand the potential value a safety management software solution can yield for your
organization in the short and long-term. This will help validate or disprove any assumptions regarding
outcomes, and demonstrate the value of the software as it pertains to various stakeholders. Ultimately this
creates a strong business case for why effective safety management software needs to be a top priority.
Intangible ROI
A large part of this is driving user adoption to enforce a strong and trusted safety culture within your
business. An effective vendor will provide you the tools to speak to the different stakeholders in your
organization to establish trust and engagement at each level. An effective solution will clearly demonstrate
value to stakeholders and reflect their own pain points and objectives, from end-users concerned with
functional requirements, up to executive level management looking to reduce risks and increase profits.
Clearly understanding how their role is touched by safety management software and evidently improved
creates buy in, which results in adoption and fuels your safety culture. This is your intangible ROI and greatly
contributes to the overall business objective of creating a safer, more efficient and compliant organization.
Tangible ROI
An approximate estimate of ROI for safety management software can be determined by evaluating direct
and indirect savings opportunities, and incorporating those values into a final calculation. In this section we
will outline key inputs in calculating the ROI of a safety management solution for manufacturing companies.
1. Data Collection & Reporting
It’s not uncommon among companies that rely on a spreadsheet-based safety management approach for
safety managers/coordinators to spend a significant portion of their time (30 to 40 per cent) manipulating
spreadsheet data: pushing and pulling data to and from spreadsheets, other software, and data sinks. The
time spent on these tasks could be spent much more effectively on the floor, observing processes and
proactively seeking opportunities to create a safer work environment.
This approach is further compounded when adding near-misses, the cornerstone of a good SMS. In
many organizations near-misses are being done ad hoc, if they are considered at all, and are a significant
opportunity for savings if managed more efficiently.
S A F E T Y
F I R S T

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Sandy Smith, Editor of EHS Today
Smurfit Kappa Group was able to reduce the accident frequency
rate from 1.90 per annum to 0.83 and improve near-miss reporting
by 64% using Intelex. Key benefits of the software included: saved
time and resources; standardized processes and centralized data;
improved accuracy and quantity of data; and improved business
performance while reducing costs.
A comprehensive software solution can entirely eliminate the silos of data created by unintegrated,
disparate software systems and enable safety personnel to focus on more valued-added activities. For
example, safety management software should effectively send out notifications to Safety Managers or Full
Time Employees (FTEs) to alert them when a corrective action has not been completed – a significant issue
in many organizations as unfortunately these often fall between the cracks.
Table 1 illustrates the potential savings realized by reducing/eliminating the amount of time safety personnel
spends manipulating data through spreadsheets.
For the purposes of this table, the following assumptions were used:
i. Assuming an average annual salary of a Safety Manager/Coordinator is approximately $60,000.
ii. That the time savings through the implementation of a safety management software solution accounts
for 30 per cent of the time invested in professional responsibilities by a safety manager or FTE.
If we refer to the well-known ConocoPhillips Marine
Safety Pyramid, we know that when near-misses
< reportable incidents, this signifies a breakdown
in a company’s safety paradigm. On average,
every fatality can be associated with at least
300,000 at-risk behaviours. By effectively
tracking near-misses these behaviors
can be reduced/eliminated, resulting
in fewer fatalities and worker’s
compensation claims.
Company Size/Sites Employees H&S Staff Annual Savings
Small (3 sites) 350 1.4 $25,200
Medium (8 sites) 1,200 4.8 $86,400
Large (48 sites) 5,000 20 $360,000

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Note: In Table 1, the number of safety managers and coordinators is considered a surrogate for
the overall number of personnel involved in safety matters. Examples of key activities by non-
safety staff include reporting on incidences information and investigating and/or following up on
corrective actions related to incidences.
Pace Industries has seen a significant shift in safety
personnel’s time from inputting data into excel spreadsheets/
generating reports to assessing the appropriate corrective
actions using Intelex software. The end result was a 62%
reduction in the OSHA Recordable Rate, a 75% reduction in
Days Away, Restrictions and Transfers (DART) Rate, and an
85% reduction in the incident Severity Rate from 2012 to 2015.
2. Lost Time Injury
By ensuring that near-misses/reportable incidents are properly documented and corrective actions are
taken, many companies have demonstrated clear reductions (20% - 60%) in both lost time and alternative
work. These results will depend on the current state of your organization’s SMS – for example if your
company is currently not tracking near-misses and associated corrective actions at all, the reduction will be
on the higher end. This can be calculated by taking the average value for lost time over the last two years
and multiplying by the anticipated reduction.
Smurfit Kappa Group was able to achieve a 58%
reduction in Lost Time Injuries (LTIs) using Intelex.
As indicated above, a significant reason for this
reduction was related to a focus on near-misses
which resulted in a reduction of OSHA recordable
by 62%.

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Table 2 illustrates the potential savings realized by reducing LTI across the organization.
For the purposes of this table, the following values are assumed:
i. Assuming an average, fully loaded annual salary of a Safety Manager/Coordinator is approximately
$60,000 and works approximately 220 days/year (conservative value).
ii. Administration costs associated with LTI associated with a lost time is equal to 25% of the employee’s
salary.
iii. That the implementation of a safety management software solution will reduce LT by 40%.
Pace Industries’ lost days were reduced by 1,161 days
from 2012 to 2015 following the implementation of Intelex
solution. As indicated above, a primary reason for the
reduction was shift in Safety personnel’s time to prevention
versus data collection.
3. Workers’ Compensation Premiums
In the U.S., Workers’ Compensation premiums are typically determined by multiplying the base premium
(determined by the prevalence of injuries within a particular industry) by the Experience Modification Rating
(EMR) (determined by the company’s individual history of injury incidents). If the company’s current EMR is
>1.0 there is significant room for improvement and savings on premiums.
Company Size/Sites Number LTI Annual Savings
Small (3 sites) 10 $1,364
Medium (8 sites) 400 $54,545
Large (48 sites) 916 $124,909
EMR Classifications
Excellent 0.40 - 0.72
Good 0.72 - 1.00
Average to At Risk 1.01 - 1.25
At Risk to Adverse Projections 1.26 - 2.00

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In Canada Workers’ Compensation premiums are set by provincial agencies, e.g., WorkSafeBC. Typically
the agency will compare the organization’s costs to see if they are above or below the average for a
particular rate group - typically referred to as Experience Rating (ER). If costs are lower than average, the
company will receive a discount on premiums and if higher, they will pay a surcharge. Note that an EMR
over 1.0 may actually hinder a company’s ability to bid on certain projects unless an explanation of why the
rating is so high and what steps are being taken to lower the value is provided.
It is possible for an organization to modify its EMR/ER by implementing a robust health and safety program
that reduces the number of injuries within the company. Proactive measures developed through the
analysis of data provide indications of why, where and how accidents occur—the sort of data captured and
expressed by safety management software.
In 2002 Pace Industry’s Group Recordable Rate for OSHA
was 12.6, which meant a lot of employees were getting
hurt. That same year their die casting sector was listed,
was listed in the top 10 industries on OSHA’s watch list for
safety, and aluminum die casting was listed in fifth place
on the Bureau of Labor Statistics’ highest incidence rates
of total nonfatal occupational injury and illness cases in
private industry, with a rate of 15.9. By implementing a
proactive safety management system and leveraging Intelex
software, Pace Industries’ Worker’s Compensation Dollars
were reduced by $1.2 USM from 2012 to 2015.
Table 3 provides examples of potential impact of EMR ratings on companywide savings.
Since the savings expressed in the table would be achieved year over year, it is clear the initial software
costs and maintenance costs would be returned in their entirety over a three-year period.
Company Size/Sites Employees WC Premiums
Current EMR
Value
WMS Post
SMS
WC Premium
Savings
Small (3 sites) 350 $280,000 1.2 0.8 $112,000
Medium (8 sites) 1,200 $1,056,000 1.2 0.9 $316,800
Large (48 sites) 5,000 $5,600,000 1.2 1 $1,120,000

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4. Avoid or reduce government inspections and enforcement activities
Types of violations that may be cited and the penalties that OSHA may propose:(1)
Serious Violation - $1,500 to $7,000 depending on the gravity of the violation.
Other-Than-Serious Violation - $0 to $1,000 for each violation.
Willful Violation - $5,000 to $70,000 for each willful violation. An employer who is convicted in a
criminal proceeding of a willful violation of a standard that has resulted in the death of an employee
may be fined up to $250,000 (or $500,000 if the employer is a corporation) or imprisoned up to 6
months, or both. A second conviction doubles the possible term of imprisonment.(3)
Repeated Violation - Up to $70,000 for each violation within the previous 3 years.
Failure-to-Abate - Failure to correct a prior violation may bring a civil penalty of up to $7,000 for
each day that the violation continues beyond the prescribed abatement date.
Note: OSHA Penalties are scheduled to increase for the first time in 25 years in August 2016 by as
much as 80%.
For your organization’s ROI you will need to enter either historical or best estimate data of potential fines,
taking into account any legal counsel costs if pertinent to the particular violation. Similar to Lost Time, a
factor would then be applied to account for the reduction in these costs following the implementation of a
robust software solution – typically a function of the type of fines (administrative non-compliance versus
accident) and severity. As indicated above, a robust SMS that focuses on ensuring corrective action for
near-misses will substantially reduce the number of reportable incidents and fatalities.
Quick access to enforcement
activity and potential fines
Summary of Savings
The following table summarizes the savings discussed above (excludes government fines/enforcement and
brand damage) and may be conservative, i.e., underestimates the actual savings.
Company Size/Sites Employees H&S Staff Number LTI WC Premiums Total Savings
Small (3 sites) 350 1.4 10 280,000 $138,564
Medium (8 sites) 1,200 4.8 400 1,056,000 $457,745
Large (48 sites) 5,000 20 916 5,600,000 $1,604,909

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Budgeting for your SMS Software
CAPEX vs OPEX
It’s important to decide early on in the process which financial model will be used to purchase new safety
management software: capital expenditure or operating expenditure budget. These budgets don’t overlap
and are for distinctly different spending categories with potentially unique criteria and approval hierarchies
in place. There has been a notable shift in technology’s purchasing landscape over the last several years,
and this shift is especially evident in software. Software as a Service (SaaS) offers new purchasing options
beyond the traditional perpetual software licensing model. Rather than perpetual ownership, the SaaS
model utilizes your business’s operating budget and is included as part of your company’s profits and
losses. Manufacturing organizations have a great deal of fixed capital assets from manufacturing plants
and the land they are built on, to machinery and equipment used in the production of their products.
Safety management software is one aspect of their business they can easily transition to an operating
expense to maintain a leaner balance sheet and preserve cash flow.
Understanding the Benefits of SaaS:
• Lower up-front cost of SaaS makes securing budget significantly easier
• SaaS license fees are an operational budget expense which often times is more flexible
• SaaS infrastructure investment is on the provider for hosting servers and in-house administration
• ‘Pay-as-you-go’ means support and upgrades are included, so your business will always have the
most up-to-date, modern technology at their fingertips
Conclusion
Safety Management is inevitable in manufacturing, but rather than ‘going through the motions’ when it
comes to safety, make it work for you not against you. By understanding how to successfully leverage
your SMS with the help of effective safety management software, you hold the key to unlocking countless
opportunities for increased efficiency, improved processes, and safer workplaces that at the end of the day
put money back in your pocket.
Contact Intelex Today
If you’d like to have a conversation with an Intelex Account
Executive about how you can demonstrate the value of safety
software to your greater organization, please reach out to
us at intelex@intelex.com. Or find out what our software
solutions for EHS and quality management look like in action!
REQUEST A DEMO
1 877 932 3747 | intelex.com

The ROI of Safety in Manufacturing

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