CAD Management Finances, Part 221 Jun, 2006 By: Robert Green
More strategies for getting the funding you need to equip your CAD department
In the last issue of CAD Manager’s Newsletter (click here for archives), I started a general discussion of the financial angle of the CAD manager’s job and presented some strategies you can use to approach your job using financial metrics. If you haven’t had a chance to read Part 1, please take the time to do so now because I’ll be building extensively upon the concepts from the first installment.
In this installment I’ll focus on taking your ideas for improvement and turning them into savings-generating ideas that you can take to your management. Even if you don’t consider yourself to be a financial CAD manager, take the time to read through these ideas and consider the possibilities. Here goes.
It’s All About Savings
In the previous edition I asked you to ponder three questions and come up with some possible answers. To recap, those questions were:
Where can I save?
Where are the broken processes in our company that cost us money?
Why do we do things the way we do?
If you haven't already done so, now is the perfect time to get out a blank pad of paper and start brainstorming all the answers. The end result of your brainstorming session should be an extensive list of cost-saving ideas that also result in faster, smoother, more-efficient processes. These cost-saving ideas will form the foundation of your CAD management savings plan, so it is important that you think the list through using some suggested guidelines.
No idea is too small. Even small cost savings can add up if enough users are affected.
No idea is off limits. Just because your company has always done things a certain way doesn’t mean that it can’t change.
Don’t change for change's sake; change for savings. If an idea for changing how you work can really cut down on CAD time, thus saving the company money, then that change is good. On the other hand, if you propose changing something because you like the idea but there’s no cost savings, then you might want to rethink the idea.
A Sample Case
With your list of savings-generating ideas in hand, the challenge becomes estimating how much money you could actually save with any given idea. Rather than relating a bunch of abstract concepts, I’d like to use an example scenario and then comment on it as I go, to illustrate some key ideas.
Scenario. You believe that you can save significant user time by creating a company-standard series of tool palettes for your 40 AutoCAD users. You envision enforcing standards more easily by having users insert items such as title blocks, standard xrefs, layer lists and so forth from the tool palettes rather than doing so manually.
Analysis. In this case you’ll need to estimate how much time users spend each day, on average, dealing with insertion of blocks, title frames, xrefs, layer lists and so forth. Then estimate how much time they would spend accomplishing the same tasks using the new standards. Finally, determine the difference, or time saved. Then you’ll figure out how much money you can save by applying the user’s labor rate and projecting the time to an annualized basis. For the purposes of this example we’ll assume the following:
Time saved per day: 20 minutes (0.33 hour)
User’s labor rate: $25/hour
Work days per year: 240
Total number of AutoCAD users: 40
The difficult part of the analysis phase is determining the average daily savings. I recommend asking power users for estimates of time savings and combining their numbers with your own estimate to get a ball-park savings estimate. You can then move forward with actual testing and timing to verify how long it takes to do things the old way vs. the new way.
Each idea on your savings list will require you to think through the process of measuring the savings potential of the idea. I view this as a good thing because the more you think about each idea, the more you’ll know which ideas are the true savings gems on your list. Hint: Don’t be afraid to get out a stop watch and time people while they work!
Savings calculation. We can see that saving 20 minutes per day for 240 days per year saves 80 hours of labor per year per user. Using the $25-per-hour labor rate, this results in $2,000 savings per year per user. For a 40-user CAD installation, the total annual savings amounts to $80,000!
Conclusion. Good things come in small packages. This example illustrates the concept that small changes in your software environment can actually lead to big savings when you have large user bases. The ideas that impact the largest number of users are typically the ideas that lead to the biggest savings.
Rewriting Your List
Now that you have an idea how to approach your savings list from an analytical point of view, go back and do a rough savings analysis for each item on the list. Obviously, you won’t get an accurate savings analysis by doing a rough estimate, but you will establish a relative way to prioritize your list. Here are the steps to use when prioritizing:
Sort by cost savings. First, rewrite your list based on estimated cost savings.
Sort by ease of making changes. Next, rewrite your list so that the ideas that generate the most savings and are easiest to actually implement are at the top of the list. By doing so, you will identify the things you can get done quickly yet still have a solid savings impact.
Sort by user support. Make an educated guess about which ideas toward the top of your list would have the greatest positive impact on the most users. Identify problems that have generated the most complaints.
When you’ve completed rewriting your savings list based on the above metrics, you will have identified the cost-saving ideas that are most visible to users and most likely to be accepted by users while generating the most savings and being easiest for you to implement. In other words, you’ll have the ideas that users love, management will love and won’t cause you too many headaches to implement. These ideas represent a win-win-win savings scenario that should be easy for you to tackle.
In the next installment of CAD Manager’s Newsletter I’ll show you how to use your savings list and factor in costs to obtain an ROI (return on investment) model for savings ideas that you can take to your management. I’ll also present more example scenarios for you to practice on.
So be thinking about your cost-saving ideas and writing up your savings list for next time. Until then.