Automation ROI

While the payback period for automation investments in manufacturing can vary depending on the scope and scale of the project, manufacturers typically aim for a payback period of approximately one to three years. Keep in mind that more complex automation projects and those that have a larger scale may have longer payback periods. Smaller projects with immediate cost-saving potential could have shorter payback periods.

To calculate ROI, use our online calculator tool located above.

The main cost components to consider when calculating the ROI of an automation initiative include: 

• Automation equipment costs. These include the cost of purchasing or leasing automation equipment. 
• Installation costs. These include expenses related to integrating and setting up an automation system. 
• Training costs. Expenses for training employees to use and maintain the automation system are counted as training costs. 
• Maintenance and support costs. ROI calculations must include ongoing expenses for maintenance, repairs and technical support. 
• Downtime costs. These costs account for potential losses due to production interruptions during the implementation phase.

Automation can lead to reduced labor costs by minimizing the need for manual labor and streamlining processes. To quantify labor cost savings, compare the labor costs before and after automation implementation. Consider factors like reduced headcount, saved labor hours, and potential redeployment of workers to more value-added tasks.

In addition to direct cost savings, automation can offer several other benefits to manufacturing, including: 

• Improved quality. Automation can lead to increased product consistency with fewer defects. 
• Increased production output: Production capacity and output can be boosted by automation. 
• Enhanced safety: With automation, the risk of workplace accidents and injuries can be reduced. 
• Faster time-to-market: Automation can expedite the production process, in turn reducing lead times.

As you run your numbers and use our Automation ROI calculator, you might also consider: 

• Implementation costs. Initial investment in automation can be significant.
• Technology obsolescence. With rapidly evolving technology, you may need future upgrades or replacements. 
• Workforce adaptation. New automated processes often require additional training for employees and time to adapt to new processes. 
• Integration complexity. Integrating automation with existing systems can be challenging. It’s important to have a partner in automation to help guide your organization throughout the transition. 

With automation, manual intervention in production processes is reduced. Automation also minimizes errors and optimizes cycle times. It enables continuous and consistent operation, which results in higher production efficiency and an increase in throughput.

Cost reductions associated with automation may include: 

• Reduced waste. With automation, you can minimize material waste and rework.
• Improved quality. Fewer defects translates into lower costs associated with product recalls and returns. 
• Energy efficiency: Optimizing energy consumption can be a benefit of automation. 

To account for ongoing maintenance and support costs in the ROI analysis, you should estimate the annual expenses related to routine maintenance, repairs and software updates over the expected lifespan of the automation system. Once you have this sum, subtract these costs from the net benefits to determine the net ROI after accounting for maintenance expenses.