Should you automate? Calculating ROI on your next Automation Project

Does it make financial sense to automate a particular task? Should you automate task A or task B? It’s important to know the answer to these questions before launching an automation project. Properly calculating projected ROI is one key to making a good decision on your next project. So, how do you calculate projected ROI?

In basic terms, ROI stands for Return On Investment. ROI models vary from company to company, but it’s common for manufacturers to target an ROI of 18-24 months on their automation investments. Sometimes, ROI targets can be as short as 12 months. Properly calculating projected ROI is an important step for any project engineer or plant manager, as it ensures that 1) the selected task will pay for itself in an acceptable time frame 2) that the project with the biggest ROI is selected over other possible projects.

Common inputs to computing ROI in manufacturing  uses many of the following inputs

  • Machine loading time
  • Machine cycle time
  • Machine unloading time
  • Parts produced per week
  • Part shape
  • Part width: min and max
  • Part length: min and max
  • Part weight: min and max
  • Parts produced per week
  • Number of parts held in hopper
  • Time to load parts hopper
  • Time before refill
  • Time spent refilling
  • Fully loaded hourly rate of machine operator

Why must you know the part shape, part dimension to calculate ROI? The parts dimensions inform the robotic arm required, which is a major cost factor in any automation project. Other variables are closely tied to machine operator requirements for supporting the automated task. With these inputs, it is possible to choose an appropriate automation solution (and the associated cost), and calculate how long the automation investment will take to achieve ROI. READY has built an ROI calculator that automatically performs the complex ROI calculations. Simply input the data associated with your task to receive an instant ROI projection informing how quickly your project should achieve ROI.

To get a better understanding of the factors that influence the ROI of a project, so you can better plan, and maximize success on future projects, download our ROI-focused whitepaper with the deceptive title: Automation is Too Expensive. Software is the Solution.