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ROI and business case for digitalization in a CNC shop

Digitalization costs money and time. A business case shows whether it pays back, and when. This is how to build one for machine monitoring in a CNC shop, with a worked example that states every assumption.

Updated: 11 October 2026

Why a business case

A business case puts the cost of an investment next to what it returns and works out how long it takes to pay back. For a new CNC machine you do this as a matter of course. For software it happens less often, although the question is the same: do I get back more than I spend?

With machine monitoring, the return is not in the software itself but in what you do with the data. So the business case describes which losses you want to reduce and how you measure whether that works.

Step 1: measure where you are

Without a baseline, every business case is a guess. Record for each machine how many hours it is planned, how many hours it really runs, how much time goes into setups and workpiece changes and why it stands still. In many shops those numbers exist only as estimates. Then the first step is a few weeks of measuring without changing anything.

Step 2: name the benefits

Count only benefits you can measure and express in money. For a CNC shop these are usually the following four.

Recovered machine hours

Downtime you can see is downtime you can reduce: waiting for material, a program or an approval, a machine that restarts late after the break. Every recovered hour is capacity you already pay for. Convert it with your machine-hour rate, but only if you can actually fill those extra hours.

Shorter setups

With small batches, a lot of machine time goes into setups. Measured setup times show which parts and NC programs take longest. That is where SMED measures pay off most: preparing whatever you can while the machine is still running.^[1] Every minute of setup saved is a minute of extra production time.

Better estimates

Measured times show which parts keep running longer than estimated. A better price for those parts, or a faster process, is direct margin. How to approach that is covered in Post-calculation in machining.

Avoided overtime and investments

If you get more out of the existing machines, you can avoid overtime or an extra shift, or postpone buying a new machine. This is often the largest item, but also the least certain. Count it only if capacity really is the limit today.

What you do not express in money

Less paperwork for operators, a faster answer when a customer asks when a Production Order will be ready, fewer walks across the shop floor. Name these benefits in the business case, but do not count them.

Step 3: list the costs

• License. With Smart Factory you pay per machine per month. The connector and the apps are free, and every plan has unlimited users.
• Hardware. The connector runs on a Windows PC or server in your network that is always on. You need no sensors on the machine, but you do need a network connection to the control.
• Control options. Each control is read through its own interface, for example HEIDENHAIN DNC (option 18) on Heidenhain. Check whether that interface is active on your machines.
• Your own time. Someone who learns the system, the daily standup and the weekly review. Count those hours.

Core includes live machine status, OEE and utilization reports, timelines and part counting, among other things. Premium adds the Operator Panel, NC program version management and an API. Ultimate adds the ERP integration. The full comparison, with the price in your currency, is on Pricing.

Worked example

Every number in this example is an assumption, in euro. Replace them with your own figures.

• 10 CNC machines on the Premium plan: 590 euro per month, 7,080 euro per year.
• PC for the connector and network work: €2,500 one-off.
• Your own time in the first year: 100 hours at €50 per hour.
• Machine-hour rate: €80.
• Effect: 1 hour less downtime or setup per machine per week, 46 working weeks per year. At 80 planned hours per week, that is just over 1% of planned time.

The return is €3,067 per month, so the first-year costs are paid back in just under five months. To break even, you need to recover about 24 minutes per machine per week: 182 hours per year across 10 machines.

Also run a cautious scenario. If you can fill only half of the recovered hours, the return is €18,400 and payback takes a little over nine months. That shows how sensitive the business case is to your assumptions.

Step 4: agree when you measure

Decide in advance when you will compare the business case with reality, for example after three, six and twelve months. Use the same definitions as in the baseline: the same planned time and the same machines. Otherwise you measure a different definition instead of an improvement.

Common mistakes

• Counting benefits twice. One hour less downtime and one hour shorter setup can be the same hour.
• Counting recovered hours you cannot fill.
• No baseline. Afterwards you cannot tell whether anything changed.
• Counting only the license as cost and forgetting your own time.

Frequently asked questions

About Smart Factory

Smart Factory reads active time, setup time, workpiece change time and downtime straight from the CNC control. You pay per machine per month; the connector and the apps are free. More: Smart Factory and Pricing.

Sources

1. Shigeo Shingo: A Revolution in Manufacturing. The SMED System. Productivity Press, 1985

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