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Calculating a Robot's ROI

March 13, 2020
Determining the total cost and return on investment of an industrial robot is not a straightforward evaluation.

Data collected recently from Google Trends demonstrates that web searches for the phrase, “How much does a robot cost?” have doubled since 2009. From heavy-duty, six-axis arms to SME-friendly collaborative models, robot pricing can vary as wildly as the specifications of each machine.

Remember, the cost of deploying robotics can go far beyond the robot’s price tag. As well as installation costs, factories may need to build segregated work areas or additional backup power units before a robot can be deployed. That’s not to mention peripheral technology, such as sensors, variable robot grippers and any necessary mounting apparatus. When you factor in the robot’s engineering and maintenance costs too, budgeting isn’t always as easy as requesting a quote.

A report by the Boston Consulting Group suggested that in order to arrive at a solid cost estimate for robots, customers should multiply the machine’s price tag by a minimum of three. Let’s say a six-axis robot costs $65,000, customers should therefore budget $195,000 for the investment. A six-axis robot is a good foundation for many manufacturing operations: such a unit is able to move in the X, Y, and Z planes, as well as position itself using roll, pitch, and yaw movements.

That said, should installing the robot require the manufacturer to undertake a more extensive equipment overhaul, such as the addition of auxiliary machinery or conveyors, a multiplication of four or five times the cost of the robot may be required.

Then, of course, there are variable costs to contemplate. These include the labor, energy, materials, ongoing maintenance and production supplies required to deploy a robot successfully. Due to the varying nature of manufacturing facilities, estimated costs fluctuate dramatically according to the specific industrial sector and size of an operation. Plus, these costs are not always linear. Maintenance costs, for example, can change significantly during the machinery lifecycle.

Manufacturers can only calculate the ROI of an investment after establishing the robot’s total purchasing cost. Even then, manufacturers must consider several other elements, starting with robot use.

Consider this example: A manufacturer plans to use two SCARA robots to automate pick-and-place processes. “SCARA” is an acronym for Selective Compliance Articulated Robot Arm, meaning it is compliant in the X-Y axis, and rigid in the Z-axis. The robots will run for three shifts per day, six days per week, 48 weeks of the year. The equivalent labor usually requires two operators per shift, equating to six operators to complete the same throughput over a working week.

Using the lower average salary of a U.S. production operative as an example, at $25,000 per year, removing these roles would reduce labor costs by $150,000 a year. However, even with the deployment of a robot, human labor is not entirely eliminated. A good rule-of-thumb for labor estimations alongside a robotic system is 25% of current costs, reducing the total labor budget to an impressive $37,500 per year.

Subtract this figure from the total robot purchasing cost we determined earlier and manufacturers have an estimated ROI for the first year. Choosing a reputable supplier and robot manufacturer also will ensure the longevity of the machine, allowing users to reap these ROI rewards for years to come.

With this calculation in hand, the reward of robot investment clearly outweighs any risk. 

That said, there are some flaws in this method of ROI calculation. Unless a long-drawn-out procurement and production analysis is completed, many of these figures are estimates. What’s more, this process does not consider problems that could occur, such as equipment breakdown or unplanned downtime. For a true reflection of ROI, manufacturers should conduct a thorough cost analysis based on the operations of their facility, as well as a risk assessment.

But what about the complementary benefits of robots that aren’t considered in this calculation? Robots are predictable and therefore 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 reworks and improve the consistency of products. Each of these factors represents increases to a manufacturer’s profit, separate to the overarching ROI of the robot. 

Search queries for robot pricing are increasing, demonstrating a growing demand for productivity gains through robotic deployment. In fact, according to the Annual Manufacturing Report 2019, over three quarters of manufacturers are ready to invest in new technologies to boost productivity. Undoubtedly, robots will be among these investments.

High quality robots are interminably predictable and offer peace-of-mind for financial returns. As manufacturers consider investing in robotic technology for productivity, it’s vital they have a clear grasp of ROI validating purchasing decisions. 

Nigel Smith is the managing director of TM Robotics, suppliers of industrial robots. For advice on calculating robot ROI, or deciding on the correct robot for your application, call 847-709-7308 or e-mail [email protected].