Return on Investment
Your return on investment for engineering simulation tools may well exceed 300 percent. In the long run, the typical range is between 500 percent and 10,000 percent — an enormous range that is affected by how you use CAE within your product development process.
In practice, only a small percentage of companies report that they make explicit ROI determinations for CAE investments..
Determining ROI for Your Organization
Measuring ROI can be complex. A disappointing ROI does not necessarily indicate a bad value; instead, optimizing your engineering simulation processes may prove that the CAE investment was the right move.
The formula is quite clear:
Savings Cost of PDP without simulation-cost of PDP with simulation
ROI = __________ = _________________________________________________
Investments Cost of hardware cost of software cost of engineer time
PDP=Product Development Process
Approaches to Evaluate Savings
It is difficult to measure the intangible benefits of simulation on product quality and brand, but evaluating you financial investment is more straightforward. The approach that you use is specific to your own company. You may need to combine several approaches to reach a realistic figure.
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Even a few isolated product failures can damage an organization in the form of reputation, sales, stock price, warranty claims, legal costs, regulatory fines and credit rating. Pierburg, a leading German automotive supplier, quantified the negative impact (on product quality) of reducing cost and time to market The company boosted its investment in virtual analysis to improve quality and reduce warranty costs while meeting time and cost targets. The effects were not immediately apparent, but in time, It more than halved the initial warranty costs, which largely exceeded the increase in total engineering simulation cost.
The most direct way to calculate ROI is to evaluate savings related to physical prototyping. The U.S. Army reports their ROI totaled as much as 1,292 percent. France-based Gamma Point used a similar approach for evaluating its plastic profile extrusion die design:With simulation, the engineering team reduced the number of tests from six to only two.
Virtual engineering can lead to a deeper understanding of product behavior, so you can reduce production cost without affecting performance. One manufacturer reduced the energy needed for blow molding a plastic container, then decreased the cost of raw materials by 10 percent. The $12,000 savings resulted in a 14,250 percent ROI.
Bringing a new solution to market earlier can generate additional revenue, which directly impacts the top line. The quantitative measure involves evaluating time to market via a traditional design approach compared to systematic, parametric engineering simulation — as well as the expected additional revenue generated by this new product during this period. Automotive sensor supplier KSR International leveraged CAE to deliver smart pedals six times faster.
When engineering simulation is properly managed and the product development team has access to adequate data management tools, a designer quickly becomes more efficient. He or she can complete more projects during the same time period. The benefits go beyond cost savings to improved product quality.
In developing a revolutionary fan, Dyson engineers virtually test more prototypes than they would have using a traditional design approach. You can evaluate the impact in a conservative way by reducing engineering costs to match the number of traditional prototypes.