How do you measure the ROI of automation and robotics?

1 What is ROI and why is it important?

ROI is a ratio that compares the net profit or savings generated by an investment to the initial cost or expenditure. It is a common metric used to assess the financial viability and performance of a project, program, or strategy. By calculating the ROI of automation and robotics, you can determine whether they are worth implementing, how long it will take to break even, and how much value they will add to your operations.

2 How to calculate the ROI of automation and robotics?

The basic formula for calculating the ROI of automation and robotics is:

ROI = (Net benefit / Cost) x 100%

The net benefit is the difference between the benefits and the costs of automation and robotics over a given period of time. The cost is the total amount of money spent on acquiring, installing, operating, maintaining, and upgrading the automation and robotics systems. To calculate the ROI, you need to estimate both the benefits and the costs of automation and robotics, which can vary depending on the type, scale, and scope of the project.

3 What are the benefits of automation and robotics?

The benefits of automation and robotics can be divided into two categories: tangible and intangible. Tangible benefits, such as increased productivity, reduced labor and material costs, improved quality and consistency, enhanced safety and compliance, and lowered energy and waste consumption, can be measured and quantified in monetary terms. Intangible benefits, on the other hand, are those that cannot be easily measured or valued in monetary terms but still contribute to the organization's performance and competitiveness. These include increased customer satisfaction and loyalty, improved employee morale and retention, enhanced innovation and flexibility, strengthened reputation and brand image, and reduced risk and uncertainty. To estimate the benefits of automation and robotics accurately, you need to identify the key performance indicators (KPIs) that reflect your goals and objectives, collect data on the current values of these KPIs before implementation, then compare them with expected values after automation is implemented.

4 What are the costs of automation and robotics?

When estimating the costs of automation and robotics, it's important to consider the two categories of expenses: capital and operational. Capital costs are those that are incurred once or infrequently, such as the purchase or lease of automation and robotics equipment and software, installation and integration of automation and robotics systems, training and certification of staff and operators, and testing and debugging of automation and robotics processes. Operational costs are those that are incurred regularly or continuously, including maintenance and repair of automation and robotics equipment and software, energy and utility consumption of automation and robotics systems, upgrades and updates of automation and robotics equipment and software, as well as replacement and disposal of automation and robotics components and materials. To accurately calculate the costs associated with an automation or robotics project, you must identify all sources of expenditure, as well as collect data on the current values as well as expected values over the lifetime of the project.

5 How to compare different options of automation and robotics?

The ROI of automation and robotics is a relative and dynamic value, dependent on the assumptions, parameters, and scenarios used to estimate the benefits and costs. To make informed decisions, you need to compare different options of automation and robotics, considering factors such as the payback period, break-even point, sensitivity analysis, risk analysis, and opportunity cost. This will enable you to identify the optimal solution that maximizes the ROI while minimizing risks and trade-offs.

6 How to improve the ROI of automation and robotics?

The ROI of automation and robotics is not a static or final outcome, but rather a continuous and iterative process that can be improved and optimized by monitoring, evaluating, and adjusting the performance and efficiency. To do this, you should align automation and robotics with your strategic goals, conduct thorough research and analysis before investing, choose the right type and level of automation for your needs, integrate automation with existing systems and processes, engage and empower staff and stakeholders in the journey, leverage data and analytics to measure outcomes, and seek expert advice from providers. By improving the ROI of automation and robotics, you can increase the value of your manufacturing operations while gaining a competitive edge in the industry.

7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?