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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