Well, I was more calculating payback of optimizing a process. IE we now produce 20 units instead; this would be due to automation. Of course, the automation has a capex cost but what I was trying to imply is that if we speed up process by 2x, it now costs us 1/2 the labour charge per unit. Therefore, assuming you can now fulfil the freed up hours with work that at minimum, that covers the overhead costs, you have now saved 1/2 the cost in labour, or added that to your bottom line. (Work to cover the overhead as otherwise, your savings is non existent if your actual costs never changed. But assuming your shop rate is based on your allotted hours, if you fulfil those freed hours to continue your allotted hours cost for covered overhead, then you have effectively reduced your unit cost in half, on that particular job)

And that savings would thus be your calculation of paying back the intial capex investment…

Moreover, it’s only that direct savings if you were to only fulfil that work via covered the overhead costs still; if you fulfil that time with more work that’s profitable, then you’ve not only added the savings but you’ve utilized your time more effectively for even more profit ? Am I crazy?

Would this still apply in manufacturing? As in, of course mfg is producing goods and your main goal is efficiency and producing more units, but considering it’s not your product and your manufacturing for others, units per hour would still be a good metric to track and show overall efficiency and capacity but moreover, tracking profitability per hour would still be a good metric as it would at least tell you the profit potential over time, the cost of opportunity in comparison to other jobs, etc. right?

But essentially, for surface level simplistic perfect world scenario, if x operator produces 10 units an @ $50/h, and we now produce 20 units, we’re effectively saving $50 sn hour by this upgrade or change.

But not only am I saving $50, my actual profit per hour greatly increases as originally, let’s say I was making $5 a unit, now @ the double rate I’m making $7.5 a unit, and I can actually produce double units so my profit per hour has more than doubled, even tho my real profit is essentially $50 an hour?