Are you getting a good daily ROI? (Small Foundry Management).

Return on investment (ROI) is something that we've heard about since our days in Economics 101. Figuring out what we're going to get from our investment before we make it is logical and smart business. I doubt that there are many foundries that make significant modifications on their operations without calculating the ROI. If a new core machine is going to be purchased, its impact on the operation is sure to be calculated.

Unfortunately, I haven't noticed the same diligence on the little projects that we get involved within during day-today operations. Hours can be spent trying to circumvent some little thing that is a minor aggravation. This isn't limited to the shop floor or even to our own decisions. Time can really be soaked up when the boss says to look at something that bugs him, but isn't significantly impacting the bottom line. Of course, we technical people are infamous for spending $5 to solve a five-cent problem.

Impacting the Cost

I learned the lesson of paying attention to ROI on small projects early in my career. I was plant metallurgist at a pipe shop that was melting about 200 tons/shift in cupolas. I always had a long list of things that people wanted me to try, and somewhere along the line, I gained a reputation of being interested in refractories. It seemed as if every other week I was running some kind of experiment to improve our refractory costs.

One day, I noticed something in our charge makeup that indicated to me that we could save some money by making a change. I ran some tests, and the idea was a good one. My simple little change resulted in a 1 cent/lb cost-reduction. At the time, we were in one of those crunches where all costs were being scrutinized very carefully. I told my boss of the change, and I was the hero of the week.

I liked the feeling and decided it was time to get the credit for all the money I had been saving on my refractory projects. I got out my notes and started adding things up. I came up with a pretty impressive figure. That is, it was impressive until I divided by the pounds of metal we melted. I forget how many zeros there were to the right of the decimal point, but the important point was all my changes weren't really impacting the cost of our product.

Optimizing ROI

I made up my mind that before I started any other project, I would look at the effect on the bottom line before spending any time on it. By developing a list of the things that people wanted me to try and estimating what the savings would be, the odds of success and how much of my time it would take, I was able to determine what I was going to work on next.

I wish I could tell you that I continually updated that list and followed it faithfully throughout the rest of my career. There were times that I found a problem particularly interesting and spent hours on something not all that important. Sometimes something important did come from those "interesting problems," but most of the time it was not a very profitable result. I should have been working on things that I knew would have had a greater impact on the operation.

Of course, there's also the challenge of deciding what is important and balancing what can be accomplished with little effort versus what requires considerable effort. That's where your job as manager comes in. You've got to weigh those things and decide what project you should be working on.

At times you'll be criticized for choosing the wrong option. An employee or colleague may be irritated that you aren't addressing the problem that bugs him. Of course, unless you're extremely secure in your position, there's nothing as important as what the boss tells you to be working on.

With all that being said, I can guarantee that you'll make better decisions by "choosing" what you're doing rather than merely reacting to the latest thing on your desk. If you choose, you'll get a better return on investment from your time.