Calculating robot ROI

Determining the return on investment (ROI) of a robot isn’t straightforward, says Nigel Smith, managing director TM Robotics.

“When you factor in the robot’s engineering and maintenance costs, budgeting isn’t always as easy as requesting a quote. In addition to installation costs, you may need to build segregated work areas or additional backup power units before a robot can be deployed,” Smith says. “And, that doesn’t include peripheral technology, such as sensors, variable robot grippers, and other necessary mounting apparatus.”

A Boston Consulting Group report suggested that to arrive at a solid cost estimate for robots, customers should multiply the machine’s price by at least 3x. Should the robot require a more extensive equipment overhaul, it may be necessary to multiply by 4x or 5x the price.

“Then there are variable costs which include labor, energy, materials, ongoing maintenance, and production supplies to deploy a robot. These costs can fluctuate depending on the industry sector and size of the operation,” Smith says. “Manufacturers can only calculate the ROI after establishing the robot’s total purchasing cost. Even then, manufacturers must consider other elements, starting with robot use.”

Consider the following example. A manufacturer plans to use two selective compliance articulated robot arm (SCARA) robots to automate pick-and-place processes. Robots will run three shifts a day, six days a week, 48 weeks a year. It would require six operators to complete the same throughput. With a $25,000 per annum salary, removing these roles would reduce labor costs by $150,000 a year, however, human labor is not eliminated. Labor associated with robotic systems cost about 25% of pre-robot personnel expenses, reducing the total labor budget to $37,500 per year. That becomes the starting labor-cost savings number, from which manufacturers should subtract the robot cost to estimate ROI for the first year.

There are some flaws in this method, as many figures are estimates. For a true reflection of ROI, manufacturers should conduct a risk assessment and a thorough cost analysis based on their facility’s operations. But what about the complementary benefits of robots that aren’t considered in this calculation? Robots offer peace-of-mind for delivering productivity gains to improve a factory’s bottom line. For instance, eliminating the likelihood of human error in manufacturing processes can reduce scrap material, minimize rework, and improve product consistency. Such indirect benefits can be difficult to measure in dollars, but the improvements can be tangible.

Manufacturers are ready to invest in new technologies to boost productivity. However, it’s vital to have a clear grasp of ROI validating purchasing decisions.

TM Robotics Inc.
http://www.tmrobotics.com