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Justifying Automation in Your Factory

Whether you’re new to automation and robotics, or building on existing automation, making a solid business case is an essential step in the process. However, justification needs to reach beyond finances. Having buy-in from all stakeholders will greatly improve the odds of success for an automation project.

When determining what level of automation is appropriate, it’s important to consider multiple factors, including the following:
• Overall objectives for the automation project
• A complete ROI picture that includes soft costs
• Labor considerations
• Minimizing risk and planning for success

What are the overall objectives for the automation project?
This question used to have a simple, straightforward answer: reduce labor costs. However, today’s automation solutions can support a more complex business strategy while still making sense financially. For example, does the factory need more flexibility? Being able to ramp up and scale back without having to hire and let go of workers can be a powerful driving force to implement automation.
Are there not enough reliable workers available to keep production running? In recent years, the skills gap and labor shortage in manufacturing have become a serious issue. Providing a safe, pleasant work environment is also frequently becoming a factor that feeds in to the human resources part of the equation.

What is the complete ROI picture, including soft costs?
The ROI calculation used to be simple: compare the capital spent now versus labor as an ongoing cost. Regarding initial hard costs, a common benchmark is seeing payback in 2 years or less. This ROI of under 2 years is frequently achievable, but sometimes misses the mark of including non-financial objectives, and including soft costs to encompass the total cost of ownership.

Today’s ROI equation needs to look at the limits to growth and efficiency without automation, as well as the soft costs incurred with automation. Soft costs will include training, and can also include services tied to the automation such as monitoring and data collection and analysis for Internet of Things (IoT) solutions. With IoT monitoring, predictive maintenance can come into play and significantly reduce down time. If automation can increase OEE from 70% to 85%, ROI will be realized even faster.

The good news for training soft costs is that current automation solutions are typically much easier to use than before. Depending on the specific application, automation can even be as simple as an intuitive touch interface, with no programming skills required.
Of course, the initial purchase cost of the machinery is still a primary consideration. However, with new lower cost options such as cobots, taking a first step into the world of automation doesn’t have to be as big of an investment as would have been required a decade ago.

What are the actual labor considerations?
Comparing automation costs to labor costs isn’t so simple any more. As mentioned in the above points, the availability and reliability of labor can’t be taken for granted. If there isn’t enough workforce availability, then automation becomes a necessity, not an option.
With labor shortages, the cost of not automating can be expensive idle time when a machine operator can’t be found to work a shift, resulting in penalties for missed deliveries, and reputational damage. And, understanding the true cost of overseas labor can make that option less attractive compared to implementing automation.

Unexpected safety regulations can also come into play regarding distancing for human workers. If minimizing risk is a priority and one of the main objectives of the automation project, then the ROI equation needs to look at risk scenarios.
Even for companies that have a solid work force in place, retention is still an issue. If increasing employee retention is a priority, then automation can help take over some of the dirty, dangerous jobs. A factory with new technology that offers a safe environment with ongoing investments in training will be more competitive and better able to attract and retain energetic, enthusiastic, reliable workers.

How will you minimize risk and plan for success?
The importance of planning for success in initial projects cannot be overstressed. The best way to get buy-in from management and employees is to demonstrate the benefits of automation in action. Simulations can give a good idea of how the automation will work on the floor, and minimize the risk of surprises. Another risk factor to consider is the turnover process. What happens when the integrator leaves? How easy is it to train personnel on the new equipment and keep it running?

When evaluating success, look beyond the project itself, and see what happens to the people involved. Are they freed up for higher level strategic tasks? Are people showing up for their shifts? Has retention and recruiting been affected? Factors that go beyond operational efficiency are key to the overall success of the implementation.

To learn more about justifying an automation project, contact sales@ehrhardtsolutions.com

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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 sales@ehrhardtsolutions.com

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Press Release: Ehrhardt Automation Systems

Press Release: Ehrhardt Automation Systems

Granite City, Illinois July 22, 2019

Ehrhardt Engineered Solutions Rebrands to Ehrhardt Automation Systems adds Industry Expert to Sales Organization.

“I am pleased to announce that as of today Ehrhardt Engineered Solutions has changed its name to Ehrhardt Automation Systems. Our decision to re-brand is driven by the change in our market focus and reflects where we are today as a company” says Jason P. Beatty, President. “The new name honors our founders of this respected 80 year old machine builder while reflecting our current offering as a world-class automation and robot systems integrator.

Rebranding the company is important for our customers and other stakeholders and especially for talent attraction”, said Beatty. “Assembly automation, flexibility and robot integration have become key value drivers for our customers and partners and is one of the reasons that we have also added new bench strength to our sales team. I am also announcing today that we have hired industry veteran Craig Witt to our management team to drive sales and growth within Ehrhardt Automation Systems.

“Craig will join us as our Vice President of Sales. We welcome Craig’s past clients to reach out to him for automation inquiries, sales, service and support needs”, concluded Beatty.

“As a career champion of advanced automation solutions and complex systems sales, I am excited to join Jason Beatty and the management team at Ehrhardt Automation Systems. The automation systems industry is experiencing significant growth and robotic integration is helping our customers increase quality, retain skilled workers and reduce manufacturing costs. I look forward to working with manufacturers and exploring new opportunities in diverse markets for Ehrhardt” said Mr. Witt.

About Ehrhardt Automation Systems:
Ehrhardt Automation Systems is an automation system and robot integrator based in Granite City, Illinois. The company has been building precision automation, custom machines, assembly automation and factory automation systems for over 80 years serving automotive, HVAC, consumer, electronics, medical and nuclear markets.

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Company contact: Craig Witt at 877-386-7856 | email at sales@ehrhardtautomation.com

Press contact: Jim Beretta | Customer Attraction jim@customerattraction.com