Making a decision about buying a new production line? Keep it simple with Vedrai

16 Feb 2023 · 2 min 40 sec

To know in order to deliberate, said economist Luigi Einaudi. Today, any business decision must be
based on the effective use of information in a predictive way. The more data we have, the more
realistic the predictions we can make.

Whatever the question – buying a new production line, making an investment, hiring employees –
predictive Artificial Intelligence can provide the answer by examining the company’s economic and
financial variables (revenues, costs, productivity) and – through algorithms – detecting external
variables.

For example: what happens if I launch a new production line in my market? What will happen to
my company’s profit and loss account or balance sheet? What will happen to the company’s
Ebitda in a given period?

Although not one hundred per cent guaranteed, the accuracy of Artificial Intelligence in predicting
these scenarios is very high. This is because algorithms use macroeconomic market trends, such
as the availability of raw materials, stock market indices and even social media sentiment.

Buying a new production line? Let Vedrai’s virtual agents help you make the decision

This is the job of Vedrai’s virtual agents, a company whose mission is to bring Artificial Intelligence
opportunities to small and medium-sized Italian companies, developing solutions to support the
business decision-making processes of entrepreneurs and managers. Virtual agents are
specialised in monitoring the entire company, optimally allocating budgets and optimising
investments. They can analyse masses of internal data and external variables, transforming the
information into easily readable and usable indicators.
However, we shouldn’t think of virtual agents as systems to replace human beings in decision-
making, but rather navigators that point the way. For decisions impacting the company’s profit
and loss account, Vedrai offers entrepreneurs and managers the virtual agent James.
The entrepreneur can ask the virtual agent questions, and there are many possibilities: will my
company reach break-even point? And when? – and the virtual agent provides the answers simply
and quickly.
The core principle behind virtual agents like James is therefore to pre-empt decisions. But watch
out: a virtual agent provides the tools, analysing large amounts of data, but it is always the
entrepreneur or manager who steers the company in its decisions.

So, if a decision relates to the purchase of a new production line, by inputting the appropriate key
indicators you can get a forecast of the results you might achieve from the investment.

The KPIs for forecasting a new production line purchase

KPIs are quantifiable indicators of the effectiveness (degree of achievement of the objective)
and/or efficiency (cost-effectiveness in achieving the objective) of a process or sub-process, so “a
KPI must be: quantifiable, detectable and correlated with the internal business process objective.

To measure a process with KPIs, it’s necessary to create a map, i.e. to identify its exact outputs,
objectives and main activities”, as Prof. Matteo Golfarelli, Alma Mater Studiorum – University of
Bologna, writes.

According to Federico Della Bella, a consultant at P4I, the valuation of the investment should
always be kept in mind. With the discounted cash flow method and net present value (NPV), it’s
possible to estimate the present value of future cash flows, so that the best options in an
investment portfolio can be identified.

It should also be remembered that a project’s profitability can be assessed with EBIT or EBITDA,
cash flow and cash burn rate, to assess the actual liquidity needs.

Other possible balance sheet indicators are return on capital: ROE and ROTA, ROS, respectively for
return on equity, all assets and sales. And finally, the asset turnover ratio, i.e. how much the
company’s assets are actually utilised.

Ultimately, with a mix of input factors and output results, it’s possible to use the virtual agent’s AI
to effectively predict the effects of a business decision, such as the purchase of a new production