How Long Does It Take to Realize Cost Benefits from IIoT Capital Expenditures?
The struggles of adopting the Industrial Internet of Things (IIoT) are widely known. Often, they come back to the same core issue: money. Capital investments are costly for a business to burden and in the relatively new age of smart manufacturing, many are hesitant to absorb the cost. But what if you had a timeline for return on investment (ROI)? If you could see how long it would take to realize value from those investments, you could better plan to fund them. Now, we have a snapshot of that information.
According to an IIoT report by Altizon, smart manufacturing has “officially left the pilot stage.” What this means is enough companies have adopted IIoT tech, and data is now available showing how that tech is being used. More importantly, it offers insight into cost vs. ROI — a question many manufacturers want answered. The report splits IIoT into several broad categories to better gauge ROI. Here’s what data from 115 initiatives over 62 factories currently shows:
- Condition-based maintenance. 53% of companies saw ROI in 6-12 months, with another 29% seeing returns in 12-18 months. 15% saw returns in less than 6 months, while 6% waited more than 18 months to see ROI.
- Productivity improvement. 55% of companies waited 6-12 months for ROI. About 33% saw ROI in less time — just 6 months. 2% of companies saw immediate ROI (<2 months), while about 10% waited up to 18 months.
- Quality improvement. The ROI for this segment is much more cut-and-dry. 57% waited 6-12 months to gauge any ROI; 43% waited 12-18 months.
- Energy optimization. 59% of companies saw ROI in 6-12 months, 32% waited up to 18 months for returns, and 9% had to wait more than 18 months to recoup their investment.
- Predictive maintenance. Half of all companies waited just 6-12 months to measure return, while 25% waited 12-18 months, and another 25% waited more than 18 months to recoup costs.
While still very preliminary, this data is incredibly insightful. It shows a benchmark of about 6-12 months for ROI across the board, regardless of the technology. It also informs manufacturers about which segments of IIoT have faster payback periods. Using this data, companies can make more informed decisions about where they invest their money and how the ROI benefits them. Case-in-point, the same Altizon survey also showed average ROI across a variety of mediums:
- 5% average top-line revenue growth
- 13% average productivity improvement
- 5% average energy savings improvement
- 16% average indirect cost savings
- 3% average costs saved in tooling
Beyond the data gleaned from pilot programs and early adopters, there are also tools and resources available for manufacturers to anticipate their own ROI. IIoT payback calculators and other CapEx tools provide a basis for understanding the full scope of the investment, while data streams from the IIoT systems themselves set the bar for benchmarking improvement.
Early results show IIoT is worth the investment. The sooner manufacturers make that investment, the sooner they’ll start to see ROI. From the data available, it’s likely to be within a year or two!