WEBVTT

00:00:06.833 --> 00:00:08.866
[Mitch]:
I love the total cost of ownership

00:00:08.866 --> 00:00:11.866
discussion as well because, you know,

00:00:11.866 --> 00:00:17.866
as I was kind of alluding to earlier,
the ROI adjustment, or changes

00:00:17.866 --> 00:00:20.666
maybe, that's happening over
the years has been:

00:00:20.666 --> 00:00:23.900
“what is total cost of ownership
and how do I define that?

00:00:23.966 --> 00:00:28.300
And is it believable?” because--
are there any accountants in the room?

00:00:28.366 --> 00:00:29.000
Okay.

00:00:29.000 --> 00:00:32.000
So at least in my experience,
when you have accounting,

00:00:32.066 --> 00:00:33.466
they want hard numbers.

00:00:33.466 --> 00:00:34.466
And the only hard number

00:00:34.466 --> 00:00:38.933
they can really accept
many times is the head count adjustment.

00:00:39.033 --> 00:00:44.500
So trying to define something else
like: “it's more efficient” or,

00:00:44.733 --> 00:00:47.533
we'll talk about benefits in a minute,
was a little more complicated

00:00:47.533 --> 00:00:50.333
but total cost of ownership
is still pretty hard.

00:00:50.333 --> 00:00:53.933
So total cost of ownership
is really your initial investment

00:00:54.000 --> 00:00:58.066
plus your maintenance costs
plus your operating costs.

00:00:58.133 --> 00:01:02.166
And then you figure out how
that investment-- what it meant to you.

00:01:02.233 --> 00:01:05.300
So those are pretty hard figures
you can use.

00:01:05.300 --> 00:01:10.200
You know what you spent, and I know
we have a gentleman here from UPS,

00:01:10.433 --> 00:01:14.100
and we deal with them
and total cost of ownership is a big deal.

00:01:14.166 --> 00:01:18.266
They're monitoring every piece of
equipment that goes into their facilities

00:01:18.366 --> 00:01:21.533
and what the maintenance
cost was over time.

00:01:21.633 --> 00:01:25.200
And so I think
that is a very critical piece.

00:01:25.266 --> 00:01:28.966
And I think as manufacturers, we can help

00:01:29.033 --> 00:01:31.200
end users understand what that looks like.

00:01:31.200 --> 00:01:32.900
[James]: So...

00:01:32.900 --> 00:01:35.900
so are there any questions so far?

00:01:36.066 --> 00:01:37.866
Yes. [Audience Member]:
How many assumptions

00:01:37.866 --> 00:01:40.000
do you make in the maintenance cost?

00:01:40.000 --> 00:01:42.300
[Mitch]: There are several assumptions
you should make

00:01:42.300 --> 00:01:45.100
and you should also
define your assumptions.

00:01:45.100 --> 00:01:45.533
Okay.

00:01:45.533 --> 00:01:46.966
Because, again, I think

00:01:46.966 --> 00:01:48.200
at least in my experience,

00:01:48.200 --> 00:01:50.366
the accountants are going to dig,
and dig, and dig,

00:01:50.366 --> 00:01:52.600
and they're going to ask
a lot of questions, and rightfully so.

00:01:52.600 --> 00:01:54.300
They want to make sure

00:01:54.300 --> 00:01:56.633
that it is believable
because they're going to move it up

00:01:56.633 --> 00:01:59.933
to a board level potentially,
or a higher level, and they want to go

00:01:59.966 --> 00:02:01.066
to answer those questions.

00:02:01.066 --> 00:02:03.400
So I think you just state
your assumptions.

00:02:03.400 --> 00:02:05.766
Be clear about them and move it on.

00:02:05.766 --> 00:02:07.800
Yeah. [James]: You had a question?
[Audience Member]: Yeah.

00:02:07.800 --> 00:02:10.666
Are a lot of people
placing a lot of value on IRR?

00:02:10.666 --> 00:02:14.033
The Internal Rate of Return,
which isn’t ROI?

00:02:14.100 --> 00:02:15.533
[Mitch]: In my experience

00:02:15.533 --> 00:02:18.100
a lot of companies,
at least that we're dealing with,

00:02:18.100 --> 00:02:22.500
some of the larger companies,
have created an IRR standard.

00:02:22.600 --> 00:02:24.466
Okay. Like inside the business.

00:02:24.466 --> 00:02:30.066
So if you're going to come to me with
a capital project, then give me options.

00:02:30.133 --> 00:02:33.733
Okay, give me good, better,
best or one, two, three or whatever.

00:02:33.833 --> 00:02:36.866
And one of them is going to have a payback
that's a shorter amount of time.

00:02:36.866 --> 00:02:39.466
One of them is going to have a payback
that's a longer time.

00:02:39.466 --> 00:02:41.800
And then what are those

00:02:41.900 --> 00:02:43.500
associated costs?

00:02:43.500 --> 00:02:44.033
I think as

00:02:44.033 --> 00:02:46.233
companies are getting bigger
and more progressive,

00:02:46.233 --> 00:02:48.466
that's something
they're wanting to do internally.

00:02:48.466 --> 00:02:51.500
And then if they're not that way,
I think it's a good thing

00:02:51.500 --> 00:02:54.900
for us as manufacturers, and integrators
to provide that.

00:02:55.000 --> 00:02:58.533
[Nils]: When you're looking at ROI,
it's just sort of imperative that you do

00:02:58.533 --> 00:02:59.866
your homework upfront,

00:02:59.866 --> 00:03:04.166
that you really look at all of the items
that go into this ROI.

00:03:04.266 --> 00:03:07.966
And so, for example, on maintenance costs:
think about if you have, preventative

00:03:07.966 --> 00:03:11.766
maintenance, you have spare parts
that are going to come into the equation,

00:03:11.833 --> 00:03:13.033
you're going to have training

00:03:13.033 --> 00:03:14.600
that's going to come into it--
[Audience Member]: The software

00:03:14.600 --> 00:03:18.366
development is one of the biggest pieces
that-- [Nils]: Exactly.

00:03:18.433 --> 00:03:20.700
And then look at look at

00:03:20.766 --> 00:03:21.800
the contracts.

00:03:21.800 --> 00:03:24.766
Maybe you're using outside contracts
for you

00:03:24.766 --> 00:03:27.766
seven by twenty four hour software.

00:03:27.800 --> 00:03:30.533
So you really want to be able
to pull those together.

00:03:30.533 --> 00:03:32.633
But the reason why you gotta do
your homework

00:03:32.633 --> 00:03:35.566
is because if you're going
to go to the executive and you're going to

00:03:35.566 --> 00:03:40.200
say, “I want to be able to justify
this.” You've got to show him line by line

00:03:40.200 --> 00:03:43.500
so the accountant can go ahead and say,
“yeah, he's got his math together.”

00:03:43.500 --> 00:03:47.666
And then you'll be able
to go ahead and say, “so this is actually

00:03:47.733 --> 00:03:50.266
what is going
to be part of my total cost.”