Introduction
As the purchase of industrial robots is on the rise and even the estimations for owning a robotic technology increases among the masses. The curiosity to know the proper cost and return of investment of a robotic system isn’t very clear and straightforward. You might need to do proper research or consult an expert on the same.
Well, you are lucky here on two counts.
A, you have found your expert!
B, here we come in as a one-stop place to let you know the correct cost and return of investment of owning a robot.
How to calculate
Let’s first understand that as robots become popular technology, the need becomes more evident. But before investing in a robot you should have a complete understanding.
To determine the total cost and return on investment (ROI) of a robot isn’t a simple process. It is to be remembered that the net cost goes far beyond the price tag of the Robot:
- This includes a multitude of processes, like installation costs, and subsystems before the robot can perform any functions.
- Sensors, variable robot grippers, cables, and connectors, with all the mounting hardware and preparation.
When you begin to calculate the robot’s engineering or maintenance costs, budgeting isn’t always as easy a task as just asking for the quote.
So here we go,
To Calculate the Return of Investment
When in any industry a process is to be automated, the entire planning starts with budget finalization and ends with the calculation of return on investment based on manpower reduction, cycle time reduction leading to electricity saved, products manufactured in a given amount of time, and overheads saved. As the automation economy is of utmost importance for any industry, this factor is always given a lot of weightage.
Calculating the cost of installing a robot
In general, the cost of installing a robot is not small. Also, we need to keep in mind that it is never the case where only a stand-alone robot is installed at a given location but also the peripherals that come along with it.
These peripherals can wary from power units to large Special Purpose Machinery, conveyors, and vision systems.
Next, one needs to consider variable costs like,
- labor, energy, materials, ongoing maintenance, and production supplies required to deploy a robot successfully.
Due to the varying nature of manufacturing facilities, these costs can fluctuate dramatically. The actual cost and ROI can only be calculated post-installation, as many factors like sudden breakdown/damage or unplanned downtimes are not considered during the initial calculations. However, an estimate of ROI has to be calculated before buying a robot.
Therefore, the cost of the robot, peripherals, SPMs, electricity, vision systems, manpower, and inventory all add up to give the cost of installation and operation of a robotic cell.
Additional Benefits of installing a Robotic System
The benefits of a Robotic system are not only to reduce the time, manpower reduction and cost reduction but it also reaps other benefits like saving space and improving safety because a robotic system can automate a task in a space which is generally less by 50% of that required by manual process due to its agile nature and compact design,
- increasing process efficiency and process flow in terms of material movement,
- increasing product consistency and quality. For example in a MIG welding cell where the weld pool remains consistent and the quality increases by removing the human error.
Calculating the ROI
In many areas like chemical manufacturing and Food-pharma where human intervention is not advised and allowed, adding robots helps save capital and in a way safeguard manpower from hazardous activities.
In layman terms,
ROI = Gains from Investment – Cost of Investment
Gains from investment -Additional gains made due to increasing in productivity and replacing activities that were done manually
Cost of investment – the one-time capital cost of purchasing and installing the robot, as well as the total operating cost of the robotic system.
Obviously, the gains made from the installed robot will accumulate over time. The cost of the investment is generally high. Hence, there always exists some time frame in which the installed robot pays for itself. Let us look at some costs and gains.
First, the operational cost of the manual process is calculated by considering the following factors:
- number of workers per shift,
- number of shifts per day,
- total operators and annual compensation of the operators which gives us the total labour cost.
Second, the cost of investment comprises the following factors:
- the total proposed robotic system price,
- number of robots in the system,
- number of robot operators per shift,
- number of shifts per day,
- total operators and the annual compensation of the operators and
- estimated electrical cost of the system which gives us the system cost.
Example:
Taking a real-world robotic automation example that assumes the robot will work three shifts a day, five days a week, 50 weeks a year and neglecting electricity for ease of calculation:
Current labor costs: Two operators per shift x 3 shifts = 6 operators x $100,000/operator = $600,000/year
Total system cost: $255,000
Labor with robotic system: Estimate 25 percent of current labor costs, i.e., $600,000 x 25% = $150,000/year
Labor cost savings: Current labor costs ($600,000) less labor for robotic system ($150,000) = $450,000
ROI: $195,000 in the first year ($450,000 – $255,000)
Hence, one can see that this robot installation will pay for the costs incurred within the first year.
Let us have a look at an example in INR (comparatively lesser labour costs operators and more number of operators per task):
Current labor costs: Four operators per shift x 3 shifts = 12 operators x Rs.2,40,000/operator = Rs.28,80,000/year
Total system cost including all peripherals: Rs.18,00,000
Labor with robotic system: Estimate 25 percent of current labor costs, i.e., Rs.28,80,000 x 25% = Rs.7,20,000/year
Labor savings: Current labor costs (Rs.28,80,000) – labor for robotic system (Rs.7,20,000) = Rs.21,60,000
ROI: Rs.3,60,000 in the first year (Rs.21,60,000 – Rs.18,00,000)
Hence, the cost of the robot system is paid for in just over a year. Those numbers look pretty good. In fact, the robot will last for many years (approximately 5-7 years).
Therefore, once the initial robot cost is covered within its time of installation, the payback dramatically increases.
A good rule of thumb is to always target no more than a two-year ROI, which will still derive five years of solid returns in a typical robotic application.
Conclusion
The return of investment of a Robotics System also depends on the type of robot being considered. Our blog gears you with the basic checklist before getting you started.
Having discussed a few key points, watch this space for more information on Robotics!
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