Reliability Improvement ROI
Test whether a reliability investment pays back within its useful life from reduced downtime and maintenance cost.
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Based on your results, these related decisions are available.
How this works
A reliability investment is screened the same way as other capital improvements: annual savings from fewer failures and less downtime, net of any change in ongoing maintenance cost, checked against the investment for payback within its useful life. Positive annual savings alone don't make the case; if payback takes longer than the asset's useful life, the investment never actually pays for itself.
Assumptions
- Failure rate and costs are constant across the useful life
- No ramp-up period; full benefit assumed from year one
Limitations
- Does not model MTBF or Weibull reliability curves
- Screens one investment at a time, does not rank alternatives
Sources
Payback and ROI follow Blank and Tarquin, Engineering Economy (8th edition), the same source used for Automation ROI Planner.
Worked example
A machine fails 12 times a year, each costing 4 hours of downtime at $500/hour, plus $8,000/year in maintenance, for $32,000/year today. A $60,000 reliability upgrade with an 8-year life cuts failures to 4/year but raises maintenance to $14,000/year, for $22,000/year, a $10,000 annual saving. Payback is 6 years, inside the 8-year life, so the case is a go. If the same upgrade cost $300,000 instead, even an 83% reliability improvement would take 37.5 years to pay back, well past any reasonable life, so the case flips to no-go despite the larger reliability gain.
Common use cases
- Justifying condition monitoring, better PM, or a reliability redesign
- Comparing a reliability fix against replacing the asset outright
- Catching the case where a large reliability gain still isn't worth the cost