Much has been written regarding correlating the use of metrics for ROI justification and new equipment and processes. Nothing mentioned here is intended to degrade the ROI process, but rather, we need to amplify the justification of process equipment to include more hidden data. There are many hidden costs that lay hidden under the water line and often get lost at the point of justification. Indirect costs such as the time it takes to report incidents, lower employee morale, work stoppages and bottlenecks, retraining of new employees, and the accommodation of injured personnel all create and add soft costs that can really add up, affecting the bottom line and often become critical in helping us tell the rest of the story.
Lost Time Accidents – Direct and Indirect Costs
According to the National Safety Council Injury Facts 2015 edition, the average cost of a workers compensation claim was $36,894. The American Society of Safety Engineers estimates that indirect costs of those claims are often 20 times the direct costs. The costs can be staggering (Liberty Mutual estimates American Companies lost over $14.2 Billion in 2011 on overexertion-related injuries alone), and we often forget the hidden costs of injuries when calculating the numbers in order to justify an expenditure or capital improvement. To get an accurate number, we must include all hidden costs in our calculations – they are real and impact our businesses every single day. Think about the amount of production each worker must make up to pay for a single lost time accident based on these numbers. Think about your project in terms of how much production do you need to make up to pay for the direct and indirect costs of an injury. After adding up all costs, your return on investment from automated equipment may suddenly become a lot greater than you first expected.
Ergonomic Injuries – (MSD, CTD) Most Frequent Type of Injury on the Job
Over 1/3 of all injuries in the workplace are ergonomic in nature and caused by overexertion including strains, sprains, or tears. According to a recent article published by the National Safety Council, the average direct cost of an ergonomic injury is sprain/strain injury is $12,800 dollars; cumulative trauma is $14,000, and a lower-back injury is $25,800. By applying the direct to indirect cost multiple to these numbers, you can see just how fast one injury to an employee’s back or shoulder can cost from $50,000 upwards to $100,000 using a very low 4x multiple for indirect costs.
Worker’s Output Determined by Perception of Process
Industrial Psychology novels have been written explaining the impact our machines and processes have on the worker. The worker perceives a process being designed one way, and thus, the worker acclimates to the process to produce the given product. The workers’ effort is influenced by production flow thereby creating an environment that sometimes creates opportunities for overexertion, stress on the body et al. Simply put, if this is what I am given to do the work, I should meter my effort by it.
If we can find better methods for how humans engage with our production designs we have the following potential benefits: Improved designs mean happier customers, fewer costly redesigns, and the less likelihood of accidents or injuries. FlexPAC focuses on assisting businesses in improving the workflow and how humans interact with that workflow to improve productivity and reduce the likelihood that an injury will occur in the workplace. Whether it’s analyzing direct or indirect (soft) costs, it takes a team to rationalize equipment expenses, capital expenditures, and FlexPAC has the resources to help you analyze your production need to ensure dollars are spent wisely.
We are here to help you create a safe, productive business, and that takes a lot of heavy lifting – sorry we couldn’t help ourselves! Be safe, be productive!