How do you calculate the ROI (return on investment) on equipment purchases when you are considering automation?
While there are a number of considerations that weigh into the decision to automate any particular process, ROI in packaging automation is without doubt one of the most important. This helps decision makers at all levels within your organization prioritize capital expenditures that dovetail within the overall business plan to achieve profit and growth objectives.
And of course, not all processes are going to need automation. But if you have processes that require several people or have repetitive motion, then automation may be a good choice for your industry. It’s important to do the research before you jump in.
Initial investment cost of automation
As with any process improvement you’ll need to take into account all aspects of automation such as package design, facility requirements and transportation costs. Don’t forget, many automation steps can also enhance utilization of warehouse space and inventory control.
The total price for many automation projects may entail costs outside of the new equipment under consideration. There may be additional material handling systems, utilities and other technology that you would need to have upgraded to ensure the best overall efficiency and safety.
Will automation of your manufacturing processes reduce labor?
Are your employees having a hard time keeping up with demand? This can lead to burnout and high turnover.
Alternatively finding available labor has become increasingly difficult in many areas of not only North America, but also in the global workforce. Automation can many times assist in reducing headcounts, while increasing throughput; all without increasing the footprint of the physical production space.
Also, if you do decide to automate, will that allow you to re-allocate staff to areas that might be more productive? Don’t forget to look at the cost of automation vs. the entire set of labor costs. You will need to consider fully burdened costs such as insurance, payroll taxes, workers’ compensation and employee retention.
Using these factors, you can figure out how long it will take to recoup your investment.
Efficiency and throughput
Another factor to consider is: will automating your process provide added efficiency? For example, if you ship on pallets will you have less waste by changing from manual pallet wrapping to automated pallet wrapping?
At NOVA, the experience of our customers has shown us that automated packaging allows a far greater throughput than is possible manually . We’ve also seen the total labor cost elements impacted as well.
Miscellaneous factors unique to your business
Every industry has different needs. It’s nearly impossible to make sweeping statements about the factors that will have the greatest impact to your unique business demands.
Would your business benefit most from a totally redesigned packaging process, or could you achieve maximum benefit from simply retrofitting your existing machinery and process?
It’s necessary to evaluate all of the critical deciding factors in ROI in packaging automation before you arrive at a solution that accomplishes the greatest gain in profit and efficiency within the scope of your overall business needs and plan.
At NOVA Automation we pride ourselves in partnering with our clients to arrive at answers that help make sense of all of the complex factors surrounding capital process improvements and automation.
Download our free ROI calculator to get started on answering those questions.
In fact, the question may not be how much will it cost to automate and improve your packaging process.
The question may be how much will you gain by automating? Conversely, what are you losing by not doing so?