PRSM 2012 Best Practices - (Page 86)

hOw TO CALCuLATE rETurN ON iNvESTMENT AUTHOR stan schmidt, director of Facilities COMPANY stage stores, inc. chAllenge: The need for a facility manager to justify a major expenditure to the financial department is part of the daily challenges companies face. The following overview will provide helpful insight into the multiple aspects a facility manager must review when calculating Return on Investment (ROI). The basic ROI mathematical calculation will be the same: total cost/total savings*12= ROI. How managers arrive at the cost and savings will be different for each project. best PrActice: The best method to demonstrate calculating ROI is to use a real life example. ROI challenge - Provide ROI supporting documentation to support a request to install an Energy Management System (EMS) to manage HVAC and lighting at an existing building (financial department standard is 36-month ROI). Cost Calculation: The first step is to determine the costs involved in installing and managing the system for one year. • Equipment costs - all costs involved in purchasing the physical EMS system = $3,956 • Installation costs - all costs to remove existing equipment and install new system = $3,642 • Freight - cost to ship both new equipment and old equipment for reuse = $ 62.50 • Tax = $ 612.84 • Repair costs to old thermostat locations, painting, patch holes = $ 275 • Store associate labor to move fixtures and package outgoing shipments = $ 100 • Software programming for location = $ 35 Total estimated costs for this location = $8,683 Savings Calculation: The second step is the calculation of anticipated savings for the project. • Dollar anticipated savings for kWh reduction for a full year (use current bills for actual costs per kWh) = $2,865 • Anticipated savings (based on past history) on HVAC unit repairs related to less run time = $ 500 • Anticipated savings (based on past history) on lighting repairs related to less burn time = $ 250 • Reduction in HVAC service calls based on better unit issue analysis = $ 265 • Reduced management time to make thermostat schedule changes = $ 75 Total estimated savings for this location = $3,955 Actual ROI Calculation = total full year estimated cost ($8,683.34)/total full year estimated savings ($3,955.00) x 12 = 26.35 months. For this project, the financial department standard is 36 months. If presented properly, this project has a good chance of being approved. coMMents: Determining costs and savings when calculating ROI will require historically supported best-guess estimates. Be prepared to explain all estimates with statistical facts. Do not allow emotions to impact the calculations, just statistical facts. results: Each ROI calculation will be different and will require the facility manager to determine all elements that will need to be included in the calculation and presentation. The basic process of calculating the ROI will be the same for each project; however, the individual elements involved will always be different. The facility manager will be dealing with averages and best-guess estimates in almost every ROI calculation. Therefore, it will be critical that all supporting documentation not only makes sense but, is also easily understood by upper management. VeriFicAtion oF eFFiciency And sAVings cAPtured: The acceptance of your proposal based on ROI supporting documentation. 86 | 2012 Best Practices

Table of Contents for the Digital Edition of PRSM 2012 Best Practices

Conducting Multi-Site Paving Improvements to Ensure Continuity
Conducting Multi-Site Paving Improvements to Ensure Continuity
Exterior Rebranding
Exterior Rebranding
Getting the Most Value Out of Roof Management
Getting the Most Value Out of Roof Management
Pervious Concrete Pavement Solves Drainage Challenge
Pervious Concrete Pavement Solves Drainage Challenge
Pervious Pavement: Concrete Solutions to Driveway Stormwater Drainage and Sustainability Problems
Pervious Pavement: Concrete Solutions to Driveway Stormwater Drainage and Sustainability Problems
Applying Bipolar Ionization to Improve Indoor Air Quality and Save Energy
Determining Responsibility for Ceiling Leaks
HVAC Maintenance and Repairs Quote Review
Managing HVAC Energy Usage Without Installing an Energy Management System
Solving HVAC Issues on Landlord Operated Systems
Creating a Standardized Cleaning Chemical Program
Floor Replacement Planning and Execution
Improving Pest Control Monitoring to Maintain Store Cleanliness
Streamlining Store Cleaning Through Internal Benchmarking
LED Conversion Bolsters Ambiance, Bottom Line and Environment.
LED Gas Canopy Lighting Upgrade
Lighting Maintenance
Retrofitting Signage with LED Technology
Performing Basic Troubleshooting to Save Money
Implementing Repair Audits to Ensure Customer Safety
Improving Quality, Cost and Schedule Through Safety Education
Managing Extended Power Outages Through Emergency Response
Managing Risk Through Slip Resistance Testing
Creating Energy Teams to Pursue Opportunities
Formulating Green Solutions
Making Data Centers LEED Compliant
Outfitting Facilities with an Eye on ENERGY STAR Certification
Recycling Cooling Water From Air Conditioning Systems for Toilet and Landscaping Use
Sustainability-How the Facilities Team Can Contribute
Driving Down Waste Expense
Reducing Trash and Recycling Expense for Retail Locations
Transferring Compactor Maintenance to a Service Vendor
Waste Service Efficiency and Compliance
Waste Evaluation and Right Sizing to Reduce Cost
Asset and Service Warranty Tracking and Management: More Fully Realizing the Value of Budget Expenditures
Conducting an Organized Meeting
Proactive Maintenance Scheduling and Delivery
Repair Reductions by Participating in Design and Construction Table
Streamlining the Store Closing Process
Achieving Process Improvement Through Onsite Assessment of KPIs
Forecasting a Maintenance and Repair Budget
How to Calculate Return on Investment
Tracking Finances for Facilities
Centralizing Vendor Training and Management
Creating a Service Vendor Call Center to Save End Users’ Money
Answering a Call Status Challenge with an IVR Solution
Communicating Product Recalls Using a CMMS-Inspired Module
Doing More with Less and Saving Money in the Process
Ensuring the Accuracy of Web-Based Maintenance Requests
Establishing an End to End Procure-to-Pay Process
Leveraging Existing Technologies to Provide Updated Process Improvements
Quality Management of Bundled Periodic Services
Reduced Dashboard Time at Supply Houses
Parking Lot Management
Creating Best-In-Class Snow and Ice Management White Paper
Energy Savings/HVAC Air Filter Bypass
Managing a Retail Lighting Retrofit Project – Bright Ways to Improve Your Lighting and Your Bottom Line!
Managing Energy Usage with Interval Meter Calibration
Navigating the Department of Energy’s Higher Efficiency Regulations
Supplier Insights into Competitive Sourcing White Paper
Testing HVAC System Options to Reduce Costs and Labor
Understanding Retail Facilities Sourcing White Paper
Glossary of Acronyms and Terms

PRSM 2012 Best Practices