This bachelor degree project was carried out at Saab AB Service and Repair, Arboga, Sweden. The objective was to design, construct and implement a new stable and reliable method of measuring the continuous vertical displacement (height) of the military search radar PS861 mounted on a hydraulic powered elevator. The end product needs to be durable enough to be fully operational in the harsh environment of an outdoor elevator shaft and yet as accurate and precise as possible since one of its purposes is to calibrate control equipment. Previously used technique has proven not to meet any of the above mentioned properties. A prototype using a high resolution quadrature output rotary encoder has been developed, allowing a completely digital interface. This new method has been evaluated in laboratory environment where tests have been conducted regarding both reliability and validity. The tests show that the new digital system provides highly improved accuracy and precision and in addition to that, the sensor with its IP-64 classification ensures operation even in the worst conditions. The technology developed in this project is also versatile and may be used in other situations where rotational motions are to be measured. Real life tests have not yet been carried out, but future test results will determine whether the product will replace the old system or not.