How to Calculate the ROI on a Connected Worker Initiative
Regardless of your industry, augmented and extended reality has the potential to revolutionize the way your teams function. But it’s not a decision to make lightly – implementing an AR/XR connected worker initiative can come with steep upfront costs.
One of the key questions that businesses ask is how to calculate the return on investment (ROI) of their AR initiatives. It’s not something you can answer off the top of your head, since an accurate estimate involves a multitude of factors beyond simply hardware cost.
Let’s take a closer look at these factors and how to estimate the ROI of a potential connected worker AR/XR initiative.
Operational Efficiency
Connected worker initiatives can impact operational efficiency in a number of ways. For example, AR/XR can be used to create virtual simulations of manufacturing processes and assembly lines. In warehouses, AR can help pickers improve speed and accuracy.
Broadly speaking, AR helps streamline complex tasks with digital overlays, checklists, and instructions – all within the worker’s field of view.
To calculate the ROI of AR operational efficiency, businesses can start by taking a closer look at:
How much money is the business saving by using AR to improve operational efficiency?
How much more productive are employees when AR is used to improve operational efficiency?
How much has the quality of products and services improved as a result of using AR to improve operational efficiency?
For example, if you're considering implementing AR/XR in a warehouse, take a critical look at your picking operations..
How much are pickers paid per hour?
What’s your current pick rate per hour?
What’s the accuracy rate?
What are your error-related costs for mis-picks? This can include factors like customer dissatisfaction and returns
By comparing your current metrics to what you could expect with a connected workforce, you can start to gather hard numbers about the potential.
Be sure to consider other areas of your business, too. Keeping with the warehouse example, what about stowing, and subsequently finding the products for picking? Knowing which row, rack, shelf a product is on because your team captured it the first time can and does influence time and costs to pick, or even worse, costs of “lost” items. You may find that some areas of your business will benefit more from AR than others. This can help shape your deployment strategy and get the most from your investment.
When calculating operational efficiency, just keep in mind that connected workers may need some time to adjust to the initial change. Productivity may temporarily dip as staff learns how to best leverage the new equipment. In order to measure this factor accurately, wait a few days or weeks before pulling any productivity metrics.
Training and Onboarding
One of the most common uses of AR in business is for training and onboarding. XR can be used to create immersive and realistic training simulations that can help employees learn new skills more quickly. Other companies use XR to record an expert’s first-person perspective as they complete a task, which can then be shared with trainees. That video can also be transformed into a procedure video and used by a connected worker while doing their job.
It can even be used to provide new employees with a virtual tour of the workplace and introduce them to their colleagues and responsibilities. The applications are endless!
To calculate the costs of XR training, businesses should track the following metrics:
How much time does it take to train employees using XR compared to traditional methods?
How much does it cost to develop and implement XR training compared to traditional methods?
How does my turnover rate affect training costs?
How productive are employees who have been trained using AR compared to employees who have been trained using traditional methods?
You’ll also want to consider the ways in which XR training saves your business money. For example, VR training exercises that place trainees in a virtual environment can save money on real-world materials. Successful VR training may also cut down on the frequency of costly accidents, both during training and beyond. These savings will ultimately contribute to a positive ROI.
Travel
XR/VR can also be used to reduce travel costs and improve remote work capabilities. With XR, you can create virtual meeting spaces where connected workers from different locations can collaborate in real-time. Additionally, XR can be used to create virtual tours of customer sites and product design.
When considering the costs of travel and XR’s impact, consider the following metrics:
How much money does the business spend on travel each year?
How much time does the business save by using XR travel and remote work solutions instead of traditional methods?
How much more productive are employees when they don't have to travel or when they are able to work remotely?
For example, let's say that a business spends $100,000 on travel each year. The business implements VR travel and remote work solutions and saves $50,000 in travel costs. Additionally, the VR travel and remote work solutions save employees 100 hours per year because they don't have to travel as much.
Based on this information, the business earns a 30% return on its investment in VR travel and remote work solutions.
Upfront Costs
There’s no way around it: XR solutions will have steep upfront costs, and it’s important to account for these in order for your enterprise to track the ROI and overall progress of implementation.
The upfront costs of VR initiatives can vary depending on a number of factors, such as the type of VR equipment used, the number of users, and the complexity of the VR application. It will also depend on whether you’re renting the equipment or purchasing it to own.
However, some common upfront costs include:
Hardware: The cost of VR headsets, controllers, other hardware, and storage solutions. How many workers will need to connect at the same time? Do you simply need smart glasses, or is it better to invest in full-dive reality headsets?
Software: The cost of VR development software and licensing fees. Can you find the software you need from a pre-existing software library? Developing custom content will hike up your prices.
To help defray costs, it’s often helpful to bundle your VR/XR solutions.
Maintenance and Updates
Once a VR initiative is up and running, there will be ongoing costs associated with maintenance and updates. These costs can include:
Hardware maintenance: The cost of maintaining, sanitizing, and repairing devices and other hardware.
Software maintenance: The cost of developing and maintaining software, along with any associated licensing fees.
Content updates: The cost of updating XR content to keep it fresh and engaging.
Fleet management services can manage all of these functions for you, and they can help you streamline the process of assessing these costs.
Launch Your Connected Worker Initiative with Ease
Calculating the ROI of XR initiatives can be complex, but it is important for businesses to do so in order to make informed investment decisions. By itemizing each expense outlined in this blog post, businesses can get a solid estimate of the ROI of their XR investments.
Curious just how much ROI you could get from a connected worker initiative? Get in touch with our team and we’ll help you run the numbers to make the most strategic decision.