Benefits of R&D and Consultancy
TWI Bulletin, July/August 1995
Mike Ellis has a BSc(Eng) in Metallurgy from Imperial College and a PhD on the subject of fracture mechanisms in a 2 1/ 4Cr-1Mo pressure vessel steel, from Cambridge University. He has worked as a Research Associate for the National Research Council of Canada (NRC) and as a Senior Metallurgist for Alcan International Ltd in Banbury. Mike joined TWI's Materials Department in 1992, and has since completed an MBA at Warwick Business School. He is currently employed carrying out Business Development activities and securing funding for European Collaborative projects.
John Harrison joined TWI in 1962 to work on fatigue. He later became responsible for TWI's work on fracture and was appointed Head of Engineering Research. Now, as an Associate Director of TWI, he manages the company's consultancy services. He has over 70 published papers on fatigue and fracture, and chaired Commission XIII of the International Institute of Welding (fatigue) for 15 years.
A recent survey conducted on TWI's R&D and Consultancy projects has shown excellent return on investment. Mike Ellis and John Harrison report.
TWI offers five main products to its Member Companies.
- Information and Core Services
- Consultancy and Project Support Services
- Contract R&D Services
- Technology Transfer Services
- Training, Qualification and Personal Membership
Although all these services offer significant benefits to participating industry, these benefits are not necessarily easy to quantify. For some time TWI has promoted the notion that if a Member Company consults and ultimately contracts TWI at the start of one of their own projects, costly failures may be avoided.
This cost-effective way of using TWI is shown schematically in Fig.1. If TWI is consulted at the design and concept stage, ie at the start of the clients' product development, the cost of the consultation is relatively cheap compared to the problems which could emerge during the manufacture, construction or post-manufacture stage. Legal costs could be incurred with problems arising at later stages.
Fig. 1. Schematic showing the escalating cost of problems encountered at various stages in the development of a product
This survey attempts to attach a financial figure to the benefits which are associated with TWI's Consultancy and Contract R&D Services.
Survey method
On completion of a number of Consultancy and Contract R&D projects a questionnaire was sent to the clients. The format of this questionnaire is shown in Table 1. The projects surveyed originated from a wide range of industries; materials manufacture, offshore fabrication, power generation, oil production, automotive, electronics, shipbuilding and Formula One cars, etc. Typical projects included design consultation, product development, failure investigations, R&D activities, materials joining and surfacing ventures, training courses, advice on best manufacturing practice, mechanical testing of materials and structures and prototype production.
Table l: Format of Questionnaire
| Benefit items | Benefits of project
(please circle) | Quantification
of benefits |
| Increased Sales | Y | N | U | £ |
Product
Development/Improvement |
Cost-savings/Reductions in:
- Materials
- Labour
- Downtime
- Overheads
- Rework/Scrap
- Maintenance
- Inventory Holdings
- Other savings
|
Y
Y
Y
Y
Y
Y
Y
Y |
N
N
N
N
N
N
N
N |
U
U
U
U
U
U
U
U |
£
£
£
£
£
£
£
£ |
| Productivity improvements | Y | N | U | £ |
| Quality/Reliability improvements | Y | N | U | £ |
| Service life extension | Y | N | U | £ |
| Safety enhancement | Y | N | U | £ |
| Capital investment decisions | Y | N | U | £ |
Financial impact on business not
attributable to any of the above | | | | £ |
| Y - yes; N - no; U - unquantifiable |
A total of 361 questionnaires were sent. From this mailing, 102 were completed and returned, this gives a response rate of 28%. Projects analysed varied in cost/size, ranging from £200 up to £70,000. The distribution of these project costs is shown in Fig.2. Total cost of the projects was approximately £750,000, (giving an average of £7,350 per project).
Fig. 2. Distribution of project cost
The initial project benefits were broken down into specific areas as shown in Fig.3. Not all projects gave immediate benefits (15%), and if benefits were perceived, they were not necessarily quantifiable (37%). However, from the results of the survey, 48% of the projects showed immediate quantifiable benefits. These were separated into specific type:
- number of projects benefiting ( Fig.4a)
- annual financial benefits ( Fig.4b)
- one-off financial benefits ( Fig.4c)
Fig. 3. General breakdown of questionnaire returns
The major benefits to sponsors appeared to be product and quality/reliability improvements ( Fig.4a). Other significant areas of benefit include safety implications, downtime and scrap savings.
In terms of annual costs benefits ( Fig.4b), productivity improvement figures were high along with a number of benefits not attributable to the list associated with the survey. Annual savings in inventory, overheads and downtime also scored high. Unlisted benefits included valuable information and good will from prospective clients/customers.
One-off benefits ( Fig.4c) included significant savings in avoiding downtime, and capital investment decisions, with reduced maintenance and scrap giving rise to significant cost benefits. As before, unlisted benefits also have a high standing. In this case financial implications associated with legal claims and a combination of clients R&D and enhanced product capability being perceived as advantages.
Fig. 4. Benefits broken down according to the benefit items and: 4a) Percentage of projects
4b) Quantified annual benefits
4c) Quantified one-off benefits
Other important findings from the survey showed that decisions were made on the strength of the results of these projects which gave total savings of approximately £7,000,000 in lost downtime, and also that investment decisions with a capital value greater than £20,000,000 were made following Contract R&D and Consultancy with TWI.
From an overall perspective, the benefit to cost ratios are shown in Table 2. The largest benefit/cost ratio for annual benefits and one-off benefits were 185 and 1,208 respectively. These values were associated with projects addressing process development increasing annual sales (benefit/cost ratio equal to 185) and major capital investment decisions (benefit/cost ratio equal to 1,208). Overall, the clients have benefited by a ratio of 6:1 for benefits/costs for annual savings and a 40:1 ratio for one-off benefits. In other words, the average initial project outlay represented an excellent investment and should be well recovered by future benefits.
Table 2 Overall benefit/costs analysis
| | Annual benefits | One-off benefits |
| Total benefits | £4,530,000 | £30,059,000 |
Mean benefit/
Cost ratio | 6 | 40 |
Largest benefit/
Cost ratio | 185 | 1,208 |
| Total cost of projects (£750k) |
Summary
This relatively simple survey has emphasised the importance of Contract R&D and Consultancy projects to industrial companies. The variety of industries surveyed, and the range of problems covered, indicate the diverse nature of TWI's expertise. The projects, in terms of cost, had a range of values showing TWI's flexibility in dealing with large and small projects. This survey has clearly indicated the benefits which Industrial Members can derive from utilising TWI's services. Advice, in general, is available at a relatively small cost and can be geared up to save time and money.
