Cost - Benefit of Fiber Laser Cutting Machine in an Engineering Company as a Starting Point on Digitalisation

Technical Insulation Services is a Lithuanian-owned company located in a seaport city of Klaipėda city, in Lithuania. Established in 2005, the company operates in facilities covering 1,400 square meters. Currently, the company manufactures ducts, air conditioning systems, ventilation, heating pipelines, sheet metal bending products, and other non-standard sheet metal products. Additionally, the company installs and maintains its products.

Before intervention, the company faced several challenges:

• Some parts and products could not be made in-house due to limitations with existing machinery, resulting in outsourcing and revenue loss.

• Parts cut with the current plasma cutting equipment required additional processing, which increased costs, reduced efficiency, and hurt competitiveness.

• The plasma cutting equipment was often fully occupied, risking delays, potential contractual penalties, and damage to the company’s reputation and relationships.

The company's manufacturing processes and the percentage of time each process takes in product manufacturing:

• Metal cutting and post-cutting processing: 25-30%

• Bending: 20-25%

• Preparation of additional materials: 10-15%

• Assembly: 25-40%

• Marking/packaging: 5%

The value created in different processes varies, with "Metal cutting, post-cutting processing" being one of the most crucial. This process takes up more than a quarter of the total time, and without it, the company could not perform other manufacturing processes.

To address these challenges, the company needed to purchase a Fiber Laser Cutting Machine. However, this required a bank loan. Consultants from the EDIH4IAE.LT consortium conducted a cost-benefit analysis, demonstrating the benefits and necessity of acquiring the Fiber Laser Cutting Machine for the company's operations.

Consultants from the EDIH4IAE.LT consortium provided targeted assistance to ensure the successful adoption of the Fiber Laser Cutting Machine. The process included the following key elements:

1. Needs Assessment and Equipment Comparison:
TIS's production processes analysed and compared the performance of the current Eckert Jantar Plasma Cutting Machine with the proposed Fiber Laser Cutting Machine LeMans LM3015GF. The analysis demonstrated clear advantages of the new equipment, including:

• Cutting Speed Improvements: A fourfold increase in cutting speed for zinc and aluminum materials, significantly reducing production time.

• Precision and Quality: The laser cutter eliminated the need for post-processing, improving overall product quality and reducing costs associated with outsourcing.

• Efficiency Gains: Reduced bottlenecks and enhanced workflow due to the faster and more reliable operation of the laser cutter.

2. Consultants’ Support in Securing Financing:
The project was entirely financed using the company’s own funds and a bank loan. EDIH4IAE.LT consultants played a crucial role in preparing the documentation required for securing the loan. This included conducting a detailed cost-benefit analysis that demonstrated the machine's potential to improve operational efficiency and profitability. The analysis was instrumental in building a compelling case for the bank, ensuring approval of the loan.

3. Implementation Process:
While EDIH4IAE.LT consultants did not conduct training or assist with equipment trials, their advisory services streamlined the procurement process, ensuring that TIS acquired the appropriate technology to address its challenges effectively. TIS independently managed staff training and equipment integration into their production workflow.

This collaboration highlighted the importance of expert guidance in navigating financial and technological decisions, enabling TIS to successfully implement a transformative digital solution.

At the onset of the challenge, consultants from the EDIH4IAE.LT consortium conducted a digital maturity assessment, evaluating the need, benefits, and feasibility of the solution.

The expected benefits from fully utilising the new machines include:

• The new CNC Laser Cutting Machines was expected to allow the company to fulfill orders or produce the same products up to 6-7 times faster, significantly reducing the cost of production and enhancing the company's manufacturing capacities. Occasionally, the company had to decline orders due to inability to meet the delivery deadlines requested by the customers.

• The new machines are significantly more advanced than those available to other companies in the region, making the company competitive in providing metal cutting services to other manufacturers.

• The new machines are expected to expand the capability to supply/produce more complex products in the longer run, helping to avoid expenses associated with purchasing similar services from other companies, and simplifying the coordination of deadlines regardless of sub-contractors.

The anticipated financial benefits from fully utilising the new machines in the longer run are:

• A saving of about 120-126 hours/month in operator working time, translating financially to about 1200-1250 EUR/month.

• Saving the work/ job hours of 2 additional employees in the processing after cutting, about 240-256 hours/month, which financially translates to about 1900-2050 EUR/month.

• A saving on currently purchased cutting services of about 3000-4000 EUR/month.

• The opportunity to sell cutting services amounting to about 5000-10000 EUR/month.

The benefits of the currently installed equipment are expected to be fully realized in a year.