This document discusses estimating return on investment (ROI) for process improvements. It defines ROI as a measure comparing expected benefits to total investment. Calculating ROI involves estimating costs and benefits in dollars. Key factors affecting costs include infrastructure, human resources, and vendors. Benefits can be tangible, like increased productivity, or intangible, like customer satisfaction. The document outlines challenges in estimation and importance of understanding time value of money concepts like net present value when evaluating improvements.

1. Anand Paropkari Estimating ROI For Process Improvements

3. What is ROI? “ Return on Investment (ROI) is a measure of investment potential by comparing the expected benefits to the total investment.”

4. Significance of ROI Money is the language of business and quality efforts must be communicated to management in their language. - Juran

6. Elements of ROI

7. Elements of ROI ROI = (Total benefits – Total Cost) / Total Cost Benefits : Estimated benefits measured in dollars Cost : Estimated cost measured in dollars

10. Calculating ROI

11. ROI Example ROI = (235,000-210,000)/210,000 = 11.90% Net benefit = $25,000 235,000 Total 210,000 Total 100,000 Work Effort 95,000 Improved cycle time 25,000 Training 35,000 Vendor 140,000 Reduced defect and rework 50,000 Infrastructure Amount in $ Category Amount in $ Category Benefits Cost

12. Challenges

15. TIME.. The Missing Dimension

18. Future & Present Value At 10% interest per annum, Value of $1000 after 5 years will be $1611, OR $1000 is present value of $1611 earned in 5th year from now.

21. ROI Example Net benefit = $20,163