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How to Find ROI for Kaizen Projects

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  • #54193

    Priyanka
    Guest

    I was trying to figure out a way to find ROI for Kaizen Projects .. Any suggestions ?

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    #194148

    MBBinWI
    Participant

    Let’s see, perhaps the difference in costs before – after divided by the amount of the investment? Just a thought.

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    #194150

    Prabhu V
    Participant

    Hi Priyanka,

    The formula for determining project ROI is:

    Project ROI = ((Financial Gain or Loss Β– Project Cost) / Project Cost) X 100.

    From my experience, the ROI indicator can be collected for each year until the projectΒ’s survival in the organization.

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    #194162

    Chris Seider
    Participant

    @MBBinWI nicely stated…

    Let’s complicate it by calculating NPV. :)

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    #194171

    MBBinWI
    Participant

    @cseider – given the current interest rates, why bother?

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    #194190

    Mike Carnell
    Participant

    @MBBinWI and @cseider It is actually refeshing to see a Lean person concerned about ROI or IRR. It gets a little irritating hearing the Lean dogma response to “What is the ROI?” coming back as “You are asking the wrong question.”

    It has been way to many years of listening to the Lean Purists tell us the reduce waste and can’t figure out what it is worth.

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    #194196

    ivan
    Participant

    what is the difference between ROI fo a full fledged LS project and a Kaizen Event? Sometimes Kaizen results will take a few months/yr before benefits accrue?

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