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Robotic Automation Return On Investment

If you’re considering automating all or part of your manufacturing process it’s likely you already recognize that robotic automation can reduce labor costs, increase throughput and improve part quality to boost your overall productivity. The next logical concern is justifying the cost.

A Cost Justification Example

Here is a typical scenario based on the following assumptions, excluding setup and changeover times:

1. CNC Machine Tools: 2
2. Operators Per Shift: 1
3. Hours Per Shift: 8
4. Work Shifts Per Day: 2
5. Days Per Year: 250
6. Annual Labor Hours: 4,000
7. Parts Per Hour @ 100% Production: 10
8. 100% Annual production (pieces): 40,000
9. Labor Rate Per Hour: $12.50
11. Benefit Rate Per Hour: $6.25
11. Total Labor rate Per Hour: $18.75

Here's how typical interruptions affect manual and automated production:

  Manual Automated
Lunch, breaks, etc. 10% 0%
Tool Changes 5% 5%
Tool Offsets 5% 5%
Material Handling 5% 0%
Part Inspection 5% 0%
Total Loss Efficiency 30% 10%
Net Efficiency 70% 90%

Based on these figures, we see that:

  • Operating at 100% efficiency would yield 40,000 pieces
  • Manual operation @ 70% efficiency yields 28,000
  • Automated operation @ 90% efficiency yields 36,000, or 8,000 additional pieces

Now lets look at the dollar and cents ramifications:

(NOTE: In the above illustration the 10% efficiency loss is due to machine down time. In the computation below the loss is 20% based on the amount of operator time involved, including material handling and inspection.)

Direct Labor Costs (Based on Above Assumptions)
  Manual Automated
Total Annual Direct Labor Cost $75,000 $75,000
% Of Direct Labor Applied To Production Costs 100% 20%
Direct Labor Dollars Applied To Production Costs $75,000 $15,000
Net Annual Pieces Produced 28,000 36,000
Labor Cost Per Piece $2.68 $0.42
Capital Investments Costs
  Manual Automated
Machine Tools (2 @ $250,000 each) $500,000 $500,000
Inspection Equipment $25,000 $25,000
Automation System $0 $200,000
Total Capital Investment $525,000 $725,000
Annual Amortized Capital Investment (5 Years) $105,000 $145,000
Net Annual Pieces Produced 28,000 36,000
Capital Cost Per Piece $3.75 $4.03

Although the capital expense amount is greater for the automated system during the 5-year amortization period, factoring in the labor savings as illustrated above brings the real costs into focus Investing in automation reduces the total cost-per-piece produced by 30.9%.

Cost Summary (Based On 2 Shifts)
  Manual Automated
Labor Cost Per Piece $2.68 $0.42
Capital Cost Per Piece $3.75 $4.03
Total Cost Per Piece $6.43 $4.44

In this scenario in which production increases from 28,000 pieces manually to 36,000 pieces from the automated system, with the $1.99 total cost savings per piece, the overall savings on 36,000 pieces amounts to $71,428.57. Plus, what would your profit be on the additional 8,000 pieces you can now produce? And how does this increased production absorb overhead expenses?

Here’s one more example, based on working 3 shifts to produce 54,000 pieces, which reduces the total cost-per-piece produced by 40%.

Cost Summary (Based On 3 Shifts)
  Manual Automated
Labor Cost Per Piece $2.68 $0.42
Capital Cost Per Piece $2.50 $2.69
Total Cost Per Piece $5.18 $3.11

Running 3 shifts increases production to 54,000 pieces from the automated system. The $2.07 total cost savings per piece brings the overall savings on 54,000 pieces to $111,780.

What About Your Specific Situation?

Every manufacturing scenario is unique, of course, and Gosiger Automation can help you determine how much robotic automation can save you. To learn more contact Gosiger Automation.

Leasing & Financing

An important ROI consideration is how you choose to pay for your Gosiger Automation system. Leasing, for example, offers flexible terms that can improve cash flow. Whether you plan to lease or finance, the experts at Connext specialize in helping machine tool users get the equipment they need with the best terms possible.

Keys Equipment Lease 1
ROI Capital Budgeting 2