Calculating Robot Return on Investment
The number one question when it comes to purchasing an industrial robot is “How much will it cost?” While it is understandable for companies to fixate on the purchase price of used robot, those considering robotic automation should really be asking “Will the robot provide a return on investment?” Industrial robots are a smart investment for most companies and will pay for themselves in the long run through reduced costs and productivity gains creating a positive cash flow. Instead of focusing on the initial cost of the ABB 6640, companies should focus on if they can recapture their initial investment in the articulated robot.
Determining if an industrial robot will earn back its initial cost is done by calculating the ROI (return on investment). There are several different ways to calculate the ROI for a robot and many robotic manufacturers have their own ROI calculators. The most basic and simplest method to calculate a robot’s ROI is the payback period method. The payback period calculates the amount of time it will take robot users to capture 100% of their investment in a six axis robot. It involves calculating the total cost of a robot or robotic system and dividing it by the total current monthly costs of a production. Most industrial robots have a payback period of two years or less. While this calculation is relatively simple and a good starting point to determine if the FANUC Lr Mate 200ic or another robot will earn back their cost, it does not capture the total potential in savings.
Other ROI calculations are more complex and calculate returns as a sum or percentage per year with the robot. This helps buyers see potential savings and productivity gains of investing in robotic automation as opposed to simply when they can expect a return. These calculations will factor in current fixed and variable costs of a production, estimated costs for running a robotic system, estimated savings, and probable earnings through productivity gains.
No matter which type of ROI calculation you use it is impossible to capture the total value of an industrial robot through a mathematic equation alone. ROI calculations are good for capturing the tangible benefits of an industrial robot, but there are many intangible and long term benefits that cannot be determined through an equation. Companies should also consider the indirect benefits of robotic automation when building their business case as these will also contribute to greater savings, manufacturing efficiency, and positive cash flow.
- • Safer Productions - Replacing workers with robots increases factory safety resulting in fewer disruptions and costs associated with worker injuries.
- • Stable Operations - Robots are reliable resulting in more stable operations with less material waste and worker shortages. Manufacturing uptime increases with robots.
- • Better Product Quality - Product quality will increase with the programmability and accuracy of robots. Better quality products reduce costly recalls, increase your customer base, and improve customer retention helping to increase revenue.
- • Higher Productivity - Cycles times can be significantly reduced with industrial robots. More products can be manufactured in less time increasing productivity.