# Plant Consolidation Savings and Payback Calculator

> Source: https://netray.co/tools/plant-consolidation-savings-and-payback-calculator
> Publisher: Netray (netray.co), AI and integration engineering for ERP and manufacturing systems.
> Section: Free Tools

## Short answer

Nets the fixed cost and labor saved by closing a site against transfer penalties, freight and one-time closure costs, with payback and a five-year view.

## Category

cost-finance

## Industry

Discrete Manufacturing

## Audience

- COO
- Plant manager
- Finance director
- Operations strategy

## Tool

**Kind:** calculator

**Currency:** $

**Inputs:**

#### Annual fixed cost of the closing site

**Key:** closing_fixed

**Type:** number

**Default:** 2400000

**Min:** 0

**Step:** 50000

**Unit:** $

**Help:** Rent or depreciation, utilities, site overhead, insurance and indirect staff. Exclude direct labor.

#### Net positions eliminated

**Key:** headcount

**Type:** number

**Default:** 85

**Min:** 0

**Step:** 1

**Unit:** people

**Help:** After subtracting people added at the receiving site.

#### Loaded cost per position

**Key:** loaded_cost

**Type:** number

**Default:** 62000

**Min:** 0

**Step:** 1000

**Unit:** $/yr

#### Added fixed cost at the receiving site

**Key:** receiving_added

**Type:** number

**Default:** 650000

**Min:** 0

**Step:** 25000

**Unit:** $/yr

#### Added freight and logistics per year

**Key:** freight

**Type:** number

**Default:** 380000

**Min:** 0

**Step:** 10000

**Unit:** $/yr

**Help:** Longer lanes to customers or between sites.

#### Conversion cost of the transferred work

**Key:** conv

**Type:** number

**Default:** 9000000

**Min:** 0

**Step:** 100000

**Unit:** $/yr

#### Efficiency penalty at the receiving site

**Key:** gap

**Type:** slider

**Default:** 6

**Min:** 0

**Max:** 40

**Step:** 1

**Unit:** %

**Help:** Extra conversion cost from lower yield, learning curve or older equipment.

#### Severance and retention per eliminated position

**Key:** sev

**Type:** number

**Default:** 18000

**Min:** 0

**Step:** 1000

**Unit:** $

#### Equipment move and requalification

**Key:** move

**Type:** number

**Default:** 1500000

**Min:** 0

**Step:** 50000

**Unit:** $

#### Capital needed at the receiving site

**Key:** capex

**Type:** number

**Default:** 2200000

**Min:** 0

**Step:** 50000

**Unit:** $

#### Months of dual running cost

**Key:** dual

**Type:** number

**Default:** 4

**Min:** 0

**Max:** 36

**Step:** 1

**Unit:** months

**Help:** Months the closing site fixed cost continues during the transfer.

**Outputs:**

#### Gross annual savings

**Key:** gross

**Expr:** closing_fixed + headcount * loaded_cost

**Format:** currency

#### Transfer efficiency penalty

**Key:** penalty

**Expr:** conv * gap / 100

**Format:** currency

#### Added annual cost

**Key:** added

**Expr:** receiving_added + freight + penalty

**Format:** currency

#### Net annual savings

**Key:** net_annual

**Expr:** gross - added

**Format:** currency

**Primary:** true

#### One-time cost to execute

**Key:** one_time

**Expr:** headcount * sev + move + capex + closing_fixed / 12 * dual

**Format:** currency

#### Payback

**Key:** payback

**Expr:** if(gt(net_annual, 0), one_time / net_annual * 12, 0)

**Format:** months

**Primary:** true

#### Five-year net, undiscounted

**Key:** five_year

**Expr:** net_annual * 5 - one_time

**Format:** currency

**Chart:**

#### Net annual savings vs receiving site efficiency penalty

**Type:** line

**X:** gap

**From:** 0

**To:** 40

**Steps:** 21

**Series:**

- net_annual

**Disclaimer:** Excludes lease exit, environmental liability, asset sale proceeds, customer requalification delays, inventory builds and tax.

## Content

**Intro:** Consolidating plants rarely fails on the arithmetic of rent and headcount. It fails on transfer penalties, freight and the cost of moving. This calculator puts those on the same page as the savings so you can see how much cushion the case really has.

**Sections:**

#### How to use it

**Body:** Enter the closing site's fixed cost without direct labor, and treat labor separately as net positions eliminated. Then enter what you must add at the receiving site, extra freight and the efficiency penalty on the moved work. Add the one-time items: severance, equipment move and requalification, capital and the months of dual running. Use the chart to find how large the efficiency penalty can grow before the case disappears.

#### The method

**Body:** Gross savings are the closing site's fixed cost plus the loaded cost of eliminated positions. Added cost is receiving site fixed cost, freight and the efficiency penalty on transferred conversion cost. Net annual savings are the difference. One-time cost sums severance, move, capital and dual running. Payback is one-time cost divided by net savings, and the five-year figure is net savings times five minus one-time cost.

**Bullets:**

- The penalty on moved work is often the swing factor.
- Dual running is the closing site's fixed cost over the transfer period.
- Customer requalification can delay savings by quarters.

#### Reading the result

**Body:** With the defaults the net saving is about $6.1 million a year against about $6.0 million of one-time cost, so payback is about 12 months. A penalty of 6 percent costs about $0.54 million a year, and at 40 percent the net savings fall sharply. Treat the penalty and the transfer timeline as the two numbers to stress, and add the excluded items before taking the case to leadership.

#### Common mistakes

**Body:** Business cases often double count labor, forget the duplicate cost during transfer, or assume the receiving site absorbs volume with no added fixed cost. Another error is ignoring safety stock needed to cover the move. Pull plant-level cost, headcount and routing data from the ERP so both sites are measured the same way.

**Cta:** Netray can help assemble plant-level cost, routing and headcount data from your ERP so a footprint decision uses comparable numbers for each site.

**Faq:**

#### Why separate fixed cost from direct labor?

**Answer:** Combining them leads to double counting and makes it hard to see what moves with volume. Fixed site cost goes away when the doors close, while labor depends on how many positions are net eliminated after the transfer.

#### What efficiency penalty is typical?

**Answer:** There is no universal figure. It depends on equipment age, operator experience and part complexity. Use the receiving site's actual yield and labor standards on similar parts, then test a high case in the chart.

#### Should the result be discounted?

**Answer:** For a final decision, yes. The five-year view here is undiscounted for simplicity. Put net annual savings and one-time cost into your NPV model at your hurdle rate, with the timing of each cash flow.

#### What is missing from this model?

**Answer:** Lease exit, asset sales, environmental cleanup, customer approvals, inventory build for the move, tax and the risk of losing key people. List them separately and add them before presenting the case.

## Search terms

plant consolidation business case, plant closure savings calculator, footprint consolidation roi, facility consolidation payback, manufacturing footprint optimization, site closure cost estimate, production transfer cost, close a plant calculator

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