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)
Each year, calculate the net cash flow by subtracting costs from benefits. Then discount the annual cash flows 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.
After estimating and discounting all cash flows, prepare a summary table that outlines the valuation metrics management uses to evaluate the project and compare it with 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, you must develop the skills outlined here. These skills help you avoid dismissing proposals that could improve your firm’s profitability.
If you lack these skills, develop them internally. You can also hire trained staff or engage a consultant. A consultant can help you build, 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. This session helps your team understand best lubrication practices.
This one-day seminar provides fundamental knowledge on using oil analysis to assess the condition of critical mechanical assets. It includes lectures, video presentations, hands-on sampling, and relevant case studies for today’s industries. If interested, please send us an email to receive the registration form.