Capital Expense or Investment?
Having been in the dust collection and industrial ventilation space for over two decades, here is a very common roadblock that companies tend to encounter - how to justify the cost of an On-Demand Industrial Ventilation System. Often, the operators at manufacturing companies get sold on the benefits of an on-demand system but are unsuccessful in getting management approval for the purchasing decision. The potential savings that an Ecogate On-Demand System can make the financial decision a no-brainer after appropriate analytical consideration.
In this article, we’ll break down how the purchase of an Ecogate On-Demand System is actually a nearly guaranteed investment, unlike many others that come with extensive risk.
Easy to Make Investment
If your bank were to offer you a $200,000 Certificate of Deposit that paid 35% with a 20-year life we can all see how logical the decision would be to purchase the CD and anxiously wait for the tremendous return on our investment. If you didn’t have the cash available, you could easily justify securing a loan from another institution for an interest rate of say 7% annual interest and still have a net return of 28%. This hypothetical financial decision, presented as shown, is very easy to make.
How an Ecogate System Makes Financial Sense
While the previous Bank CD example is obviously too good to be true, many Ecogate users are benefitting from financial returns at this level or higher. How is how this is possible?
Ecogate customer savings can often start before the installation of the project does. There is very often some sort of a capital investment rebate offered by local or national suppliers of electricity. We’ve seen many projects with substantial rebates offered by the electricity supplier ranging from 10-40% of the total cost of the project. Ecogate can assist you in finding and facilitating any rebate you may qualify for.
Capital expenditures associated with the products that a business manufactures and sells are perceived as “good news/bad news”. Good in that this often means expansion is needed but bad in that who wants to spend more money! It is possible to view the addition of an Ecogate system to this expansion as more bad news in that it is not MANDATORY for the expansion and could be perceived as a means to save some capital investment money.
What needs to be kept in mind though is that an Ecogate system will reduce the cost of electricity for the life of the system generating an overall reduction in cost (net savings). The time frame to be considered needs to be multi-year not exclusively the day of purchase. When in doubt it helps to remember the old adage - “ a penny saved is a penny earned!”
When we say that an Ecogate system can save you on average 60% of your dust collector’s electricity bill, what we’re really saying is that an Ecogate system can earn you around 60% of your dust collector’s electricity bill - 60% saved is 60% earned.
Higher profit margins are what every business aims for. To achieve this there are two approaches.
Increase sales and/or lower costs. While your other capital expenditures can help you increase sales, an Ecogate On-Demand system can help you lower your costs, and thus work towards the same goal - higher profit margins!
A typical dust collection system has a life cycle of 20-30 years, that’s plenty of years of an Ecogate system paying you every month. Beneath the surface, that’s also 20-30 years of maintenance costs! You’ve already spent a lot of money on your equipment and machinery, you shouldn't be spending more than you need to on maintenance.
Machines don’t last forever, therefore the goal becomes to make them last as long as possible before the inevitable higher maintenance costs arise. An Ecogate On-Demand system will not only make your entire system more efficient but will also offer you workstation utilization data to help you do preventative maintenance. Here’s an article covering this in more detail - spoiler, the hidden maintenance costs can be higher than everything we’re discussing here.
We talked about capital expenditures and for the most part, they’re needed to grow your business. However, there are definitely some instances where they are not needed, and having the option to skip on a capital expense could mean thousands of dollars back into your pocket.
Say you have a dust collector that can support a specific number of workstations. What happens after you’ve reached that number of workstations but you find that you still need one or two more? Traditionally, you’d have to buy a new collector or run your current collector at less than desired velocity. The new collector is a lot of money and it also comes with a permanent increase in electricity and maintenance costs. With Ecogate, you have the flexibility to add those two additional workstations without needing to purchase a new collector. You can read more about this plus see an actual case study that benefitted from this.
On a smaller scale, say you needed to move, add or remove workstations. Having to guess how to reroute ducts or which machines to move where is not efficient and can cost you time and money. An Ecogate system with a greenBOX MASTER gives you the ability to do this easily with an intuitive interface you can reconfigure your dust collection system. This plus your workstation utilization data can help you be efficient and quick whenever a change is needed.
As if all those savings weren’t enough, here are a few more bonus ways an Ecogate system can help you save. First, the HVAC costs or savings in this case. To keep your factory at a comfortable temperature your HVAC system is working double-time to recycle all the air your collector is extracting. With an On-Demand system, your collector is working efficiently, reducing the volume of air you need to pay to put back into your building. Here it is in more detail.
If your factory is in a cold region, then you’re familiar with the additional costs this brings. First, as you know, during freezing seasons you must keep air moving through your dust collector filters - otherwise, they malfunction. This means that the system must be on during weekends as well, regardless of production, just to keep the filters from freezing. With Ecogate, you have an Anti-Freezing Mode which can have HVAC savings add up really quickly.
7 Year ROI Case Study
While we have multiple projects each year with an achieved return on investment (ROI) of under 2 years, let's review a recently completed project with a longer time to recoup the associated investment. Here’s a real case study with an ROI of 7 years! Let’s unpack this project to see how it was still a good financial decision.
Canyon Creek Cabinets
The project was done back in 2019 and called for $206,105 for an Ecogate system to be installed. Before we signed this project off, we knew that there was a nice incentive that Canyon Creek Cabinet could use. In their case, they qualified for one that covered over 50% of the project costs! After all reviews and tests were completed, the incentive turned out to be $110,895. This left Canyon Creek with a net investment of $95,210.
Even after such a nice rebate, the ROI was 7 years. This is only factoring in the direct electricity savings from the dust collector, which as we know is not the only savings an Ecogate system brings. The yearly savings was estimated to be $18,520. With all this info, let’s do the math.
RETURN AGAINST ORIGINAL INVESTMENT
-$95,210 Net Investment + $18,520 Yearly Savings
-$76,690 + $18,520 Yearly Savings
-$58,170 + $18,520 Yearly Savings
-$39,650 + $18,520 Yearly Savings
-$21,130 + $18,520 Yearly Savings
-$2,610 + $18,520 Yearly Savings
+$15,910 + $18,520 Yearly Savings
+$34,430 + $18,520 Yearly Savings
+$52,950 + $18,520 Yearly Savings
+$71,470 + $18,520 Yearly Savings
The system will continue in operation for several years after, but for this article we’re stopping at 10 years. In the ten years, Canyon Creek would save an estimated total of $185,200. Add another ten and the math is super simple. In theory, this would keep going and going similarly to the bank offering you a CD with guaranteed interests.
Of course, Canyon Creek is and will continue to benefit from all other savings that were not used in the calculations above. This would only bring the ROI closer and the yearly savings higher.
Key Benefits Beyond Savings
As great as the rebate and all these savings are, Canyon Creek and many others choose Ecogate for benefits beyond savings. An Ecogate On-Demand system offers many other benefits. Below are just the key benefits for your reference, if you’d like to read more you may visit our Key Benefits page.
Built for the Future
Sometimes you need to expand and other times you need to optimize your factory floor. Adding, removing, or replacing with no workstation utilization data can be very costly. With an Ecogate smart system, you can do so confidently as you’ll have the data needed to make tactical decisions and our greenBOX MASTER comes with an intuitive interface that allows you to easily reconfigure everything.
Brings your Factory into Industry 4.0
The fridge, vacuums, cars, lightbulbs, everything is getting smarter, yet many factories are staying behind. In the new era of Industry 4.0, those who don’t embrace the technology advantages will suffer greatly. An Ecogate system offers you full automation with remote access & analytics. Our data analytics automatically streamlines daily reporting to maintenance managers and monthly overview reporting to the management team.
Reliability in Industrial Settings
Your factory needs to produce high-quality products at high volumes. This calls for heavy-duty machinery as well as fast-paced environments. Your factory does not have room for cheap installations as the maintenance and replacements will cut into your production. We have tested our gates in the toughest environments to be able to offer you the best reliability for your peace of mind. Tough and made to last in an industrial setting.
Improves Factory Safety
Offering a safe work environment is enough reason to have high safety standards. As if that wasn’t enough, failing to do so can result in some of the most costly catastrophes your factory can encounter. An Ecogate system significantly reduces your chances of a factory fire or explosion. It also reduces other risks such as air quality for your employees - which if ignored can lead to fatal health conditions. The cherry on top, Ecogate is the only system to offer NFPA 664 compliancy.
Helps the Environment
There are two environments an Ecogate system will help you with. The first one is your factory floor. Systems with Ecogate are significantly quieter, which studies have shown improves productivity. On a larger scale, you’d also be doing your part for the planet by lowering your carbon footprint - which many shareholders are demanding that factories take responsibility. If that doesn’t attract you, know that many energy companies are offering rebates because producing the same amount of electricity saved is three times more costly.