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Calculating true ROI for robotic automation

Robby Komljenovic
By Robby Komljenovic Chairman & CEO, Acieta

When considering a new robotic automation system, one of the biggest concerns can be the weight of the initial costs. While such a large capital expense may be hard to swallow at first, it’s industry-proven that manufacturers see an average ROI of 24 months from robots.
To arrive at a true ROI, it is necessary to not only compare the robot costs with the hourly wage of a human operator to do the same job for the same number of hours but also many other business costs and higher profit potential.

Calculating costs

There are many hidden costs to having human operators. Some of our manufacturing customers have reported that their true costs, when adding extra expenses, can be about double that of an operator’s hourly wage.

1. Hiring-related costs

Retaining workers for repetitive tasks can be challenging. Finding new help can be expensive. And it can be hard to retain these workers in such jobs, which means the hiring process may need to happen often.

2. On-boarding costs

How much time does your team spend training a new worker? There will likely be a lull in your productivity while a new employee is learning and perfecting job responsibilities. There also can be additional training costs for jobs that require an outside-sourced training program.

3. Worker benefits

Your company invests in its workers to stay competitive. Benefits may include medical insurance, investment matching, paid time off, continuing education and life insurance. When these costs are added up, they often total quite a bit compared with just the hourly wage you pay each employee. By comparison, a robot needs none of these.

4. Safety-related expenses

It’s hard to predict if or when a work accident may happen, but it is a realistic possibility for any manufacturer. This includes the company’s risk insurance and safety-gear costs. In the case of a serious accident or injury, a company may need to come up with unplanned fees and settlements.

Clow Valve Co. adopted robotic automation mostly to enhance worker safety. By switching to robots for handling heavy parts in loading and unloading machines, the Oskaloosa, IA-based firm eliminated a workplace hazard.

Higher profit potential

If a robot can increase production and reduce scrap, the new volume potential and reduced waste needs to be factored into ROI.

1. Higher productive time

A robot continuously works and never slows down. It consistently hits the same cycle time every minute of the day. It does not take breaks. It does not stop for lunch. It does not talk about the football game or the latest show on Netflix. Your robot will simply produce more parts day in and day out than a human.

Central United Corp. has used robotic automation for loading and unloading parts for years, but a recent upgrade in robotic technology improved cycle times by 25% and uptime by 6%, giving the Wisconsin-based firm a competitive edge.

2. Better quality and less scrap

A robotic system’s repeatability allows for less scrap and waste than what a person can achieve. Commonly, robots perform at more than 99% efficiency. Compare this with the level you get today to find your true ROI.

A Minnesota job shop called AA Precision Tooling saw a 60% increase in gross output by adding a robot to load and unload its turning lathes and milling machines.

3. Higher capacity

A robot has the potential to provide additional revenue from increased production and capacity. In many cases, customers have seen additional capacity on their equipment as a result of adding robotic automation, where they have been able to secure incremental work to utilize the freed-up capacity on their machines. This additional revenue stream will drive your ROI to levels beyond just two years.

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