Original article date: October 1998
The justification for buying capital equipment is all a question of arithmetic says WILL BOURN sales manager of Modular Automation. Or is it?
The cost of automation can be quite high particularly when it employs the latest robotics vision systems and welding technology. There is often a chicken-and-egg decision to make when considering automation. With insufficient market share the volumes are too low to necessitate automation But without automation the unit cost will remain too high and perhaps the quality too.
By applying a simple discounted cash flow forecast even the lowliest accounts clerk should be able to make a reasonable assessment of the financial sense of capital investment.
But is it always so simple? Rarely. And many of the criteria by which we judge the practicality of major automation projects have little or nothing to do with money – at least not at first sight. So what are the practical factors that decide the viability of any automation project?
Let’s tackle the tricky one first. People are one of the most significant costs in any manufacturing process. Therefore reducing the number of people in any one project will have a dramatic effect on its feasibility. You can easily make a rough approximation of the cost savings by costing one person working a single shift at (UK pounds)15 000 per annum. By that calculation if automating a continuous process would save two people then the cost saving is six person-shifts or (UK pounds)90 000 per annum. If you require a two-year payback period it’s worth spending up to (UK pounds)180 0 on the automation. Simple? No not quite that simple.
This assumes that the people who are replaced are found “gainful and acceptable employment” elsewhere within the factory. If not additional payments will be required. There is of course also a social element to be considered and not least the effect on morale of the remaining workforce.
And there’s much more to consider. The problem might not be how to deploy your workforce but how to recruit one. Some geographical areas have a chronic shortage of skilled and semi-skilled labour. In areas where this is a problem increasing levels of automation might be the only sensible option even if the strict application of a cost analysis doesn’t justify it.
The working environment is also a major factor when considering automation. Whether the application requires clean room hygiene or is such a hostile environment that manual intervention is impossible automation may be the only answer almost irrespective of costs. Semiconductor manufacture for instance requires a very high level of automation to avoid contamination. Conversely applications using heating or pressing could be dangerous to the operator. So too applications where the actual environment itself is too hazardous (heat dust etc.) such as foundries and nuclear establishments.
But probably the greatest and most irresistible reason for automation is quality control. Many companies recognise that automation or semi-automation is the only practical way of ensuring the quality of their products eliminating failures and costly returns or recalls. In the automotive industry for example first-tier suppliers are generally only considered for contracts if they employ automated processes. Here however high the cost of automating the cost of not automating when it really should be necessary can be quite devastating.
- Modular Automation
- Tel: 0121 766 7979
- Will Bourn