According to Noria, the financial evaluation should take into account the time value of money and produce one or all the following value indicators:
- Discounted Payback Period (DPP)
- Internal Rate of Return (IRR)
- Net Present Value (NPV)
Annually, the net cash flow is computed by subtracting the costs from the benefits. The net cash flow figures for each year are discounted to account for the time value of money. The accounting or finance department assigns the discount rate, generally showing the inflation-adjusted needed rate of return or cost to borrow capital.
Once all the cash flows are estimated and discounted, prepare a summary table identifying the project valuation calculations management uses to check the value of the project and compare it to other opportunities
Reliability professionals must adopt a business philosophy to amend the technical philosophies we have adhered to before. It is a must for the reliability professional to speak the language of management and translate technical programs into business value propositions.
As oil analysis specialists, learning the skills outlined herein will enable you to avoid the mistaken dismissal of proposals that might have improved your firm’s profitability. If you lack these skills, you should develop them yourself, add trained staff, or secure professional services from a consultant who can help you develop, justify, and implement your lubrication management and oil analysis program.
MachineDiagnostics™
Implementing programs to diagnose incipient machine failure through oil analysis entails cost. As such, thorough planning must ensure that your resources are well-spent.
With CRE, you can start your MachineDiagnostics™ Program knowing you will have our full support at every step. Our program also includes a supportive Machine Wear Analysis Basic seminar on January 26, 2023, to ensure that your people know the best lubrication practices. This one-day seminar aims to impart fundamental knowledge on the use of oil to determine the condition of your critical mechanical assets, complete with a lecture, video presentation, hands-on sampling, and case study applications that are relevant to the industries today. If interested, please send us an email to receive the registration form.