The Cost Benefit of Automation

Automation savings extend beyond labor costs

Decades ago, manufacturers that were considering using automation compared the cost of automating against the direct cost of labor they’d be replacing. Adding the number of people, shifts, and hours provided a benchmark to use for determining ROI.

That same basic calculation can be used as a starting point today; the benchmark ROI of an automation project now is typically under 24 months.

However, that historical capital expenditure calculation excludes many important factors that should also be considerations:

• Is human labor even available?
• What additional strategic advantages does automation offer?
• What is the total cost and value of ownership?

Using automation to solve the labor shortage in manufacturing
With the current labor shortage in many factories, the benefits of automation extend well beyond basic cost justification. When factories cannot fill open labor positions, they can’t meet production requirements. The need to increase production without recruiting will often drive a company to invest in automation. The costs of not being able to fulfill orders and losing customers has long-reaching implications that extend beyond a basic ROI calculation.
In addition to keeping production running, automation also helps companies attract workers. People who are interested in working in manufacturing are more likely to choose a company that is actively investing in automation and robotics and is poised to be competitive now and in the future. As well, for people looking for security, a company that has recently invested in automation will appear more stable and secure than a company that isn’t modernizing its operations.

Instead of replacing workers with robots, manufacturers are adding robotics and automation and retraining their valuable labor force for positions that include working with collaborative robots and using automation solutions.
Benefiting from the strategic advantages of automation
In addition to using automation to help attract and retain labour, automation offers many other strategic advantages.
Elevating health & safety levels by automating dangerous jobs
Using automation and robotics for dull, dirty, dangerous jobs can help factories develop an impressive safety record. Health & safety levels can be a deciding factor for potential employees, investors, and customers.

In addition to reducing dangerous jobs, robots can also be used for repetitive movements, leaving humans with ergonomic jobs that won’t cause repetitive stress injury.
Increasing scalability and flexibility with automation
When companies first started implementing automation, the cost equation was most favorable for industries like automotive manufacturing with low mix, high volume production needs. Now, with the reduced cost of automation and the availability of collaborative robots, automation makes financial sense for factories that have a wide range of higher mix, lower volume production runs.
With an automated line or automated production cells, manufacturers can be better equipped to take on bigger orders, or to offer a wider range of options.
Raising quality levels using the repeatability and reliability of automation

A properly programmed robot can perform the same movement the same way with a higher degree of accuracy than a human. New vision capabilities give robotics an even higher capacity for quality control and repeatability. Depending on the type of production being done, this high repeatability and quality potential can be exploited to a manufacturer’s advantage. As well, with data collection and management, traceability can also be incorporated into the manufacturing process.

Winning contracts with automation as a competitive edge
If a customer is comparing several manufacturers, and you’re able to offer the quality, reliability and efficiency benefits of using an automated solution, you’ll have an edge over the other factories using older, less reliable systems. The better-equipped factory will seem more likely to be able to deliver in-spec goods on time.
Understanding the total cost and value of ownership

When evaluating the cost of automation, it’s important to consider the manufacturer’s situation: are they in a survive-or-die scenario or are they in a position to invest in longer-term growth? Automation can provide the solution to both of these issues, and both must be considered in order to budget properly.

With too much focus on immediate needs, future growth won’t be supported; but, with too much emphasis on the future, the current financial position of a company can be compromised. It’s important to discuss potential growth plans with an implementer so that the foundation for a future phase of automation can be accommodated while respecting immediate needs and budget constraints.

The planning and implementation process are also important factors to consider. Having an experienced implementation team that can design a robust system, provide the integration needed with other systems, and deliver the system on time is invaluable.
As far as tangible goods that must be accounted for, there is the cost of the new machinery, plus spare parts and maintenance. For tangible value, the decreased cost of rework and rejects should be factored in.
Although it can be tempting to simplify the ROI calculation, to maximize your investment in automation, it’s essential to consider all costs and all value gained over the productive life of an automated solution.

If you are looking to integrate automation in your factory and need some advice, Ehrhardt Automation Systems would like to help. Reach out to one of our talented applications engineers at