Manufacturers and distributors face rising costs of labor and benefits, burdensome government regulations and a shortage of skilled workers. In light of these human resource challenges, investing in automated equipment may seem like a cost efficient alternative to relying on people. But automation can sometimes end up being more expensive and time consuming than management expects.

Be Realistic About the Upsides

Have you ever heard a robot complain about long hours or unsafe conditions, threaten to file a lawsuit against you, ask for a longer lunch break, take a sick day or demand a raise or expanded health benefits? Automation can clearly reduce a company’s human resource headaches and decrease labor and benefits costs. Attracting, hiring and retaining top notch employees can be difficult and time consuming.  Automated equipment can help manufacturers meet production demands, especially in remote areas with limited sources of trained workers. Automating your plant may be easier and less expensive than training existing workers or luring skilled people from urban areas to work for you.

Other potential upsides include:

Greater Efficiency and Quality
Robots, if properly programmed and integrated into the surrounding systems, can perform certain tasks faster and with fewer errors and less waste than humans. Automated equipment is well suited for large production runs, as well as repetitive, dangerous and labor-intensive tasks. Examples include welding parts, performing pick-and-place tasks and cleaning up chemical spills. But if you run small batches of custom work, it could very well be more efficient to stick with humans.

Enhanced Brand Image
Automated production lines and the use of robots can help differentiate your business from competitors, setting you apart as “cutting edge.” Press releases and social media posts about your investment in automation could boost your brand’s image as an innovator and/or a high-quality producer.

Improved Morale
Employees are seldom satisfied doing the same mundane tasks, day after day. By automating repetitive tasks, your work force can be freed up to perform high-tech custom work and to program robots for the next run. In addition, assigning dangerous or strenuous work to robots can reduce work-related stress, accidents and health issues among employees. Of course, morale benefits will be tempered if automation results in the elimination of several positions or employees fear their jobs are in jeopardy.

Consider a Full Range of Pitfalls

The biggest downside to automation is the initial cost and the transition. It is critical to crunch the numbers and perform a complete cost-benefit analysis before making the investment. Rather than purchase equipment outright, most companies finance or lease the equipment to spread the cash outflows over five to ten years. However, financing costs could increase significantly as interest rates increase or if lawmakers curb the federal tax deduction for interest expense, as has been suggested under certain recent tax reform proposals.

Also consider the transitional costs of automation, which include direct costs as well as indirect soft costs: How much it will cost to train employees to operate, program and repair the equipment? What will the incremental insurance, utilities, repair and maintenance cost? What kind of learning curves will result, and how long will it take to perfect the production line process and avoid quality control issues? What waste and material scrap will be incurred with errors in the transition? Do production lines need to be revised to avoid unexpected bottlenecks that may occur as cycle times and setup times are altered by automation?

Though machines do not complain, call in sick or ask for raises, they do show wear and break down, sometimes at the most inopportune times, necessitating a formal maintenance program. If you are not disciplined enough to follow a maintenance schedule, consider leasing the equipment from a company that will also maintain it. Additionally, as with any type of technology, it is important to evaluate cyber threats that automation might bring. Could your robots be hacked or infected with a virus that shuts down your production line?

Plan Ahead

The key to successful automation is proper planning. Before moving forward with the purchase of new machinery, perform a thorough cost-benefit analysis to evaluate whether the benefits of transitioning from humans to robots justify the costs. We are happy to assist you with this projection.

For more information, contact your ORBA advisor or 312.670.7444. Visit ORBA.com to learn more about our Manufacturing and Distribution Group.