The Hidden ROI of Automation for Manufacturers

For the manufacturing sector, automation is no longer a luxury but a necessity. With over 63% of manufacturers already integrating automation technologies in their production processes, the question isn’t whether to automate but rather how to do it strategically.

Traditional calculations often focus on the immediate financial impact of automation, like reduced labor costs or increased output. However, this narrow view fails to capture the full picture of automation savings. In this guide, we’ll look into the often-overlooked benefits of automation — the hidden ROI of automation that can truly transform your manufacturing business.

Whether you’re a seasoned manufacturing executive or a business owner exploring automation for the first time, this guide will go beyond the traditional view of automation ROI. The goal is to help you understand the complexities and reap the full rewards of this technological revolution. By the end, you’ll understand why automation isn’t just about cutting costs — it’s about accessing a future of growth, innovation, and resilience for your manufacturing business.

Free eBook: The Transformative Impact of Automation for Manufacturers

Beyond the Balance Sheet: The Intangible Value of Automation

While traditional ROI calculations can provide a glimpse into the financial benefits of automation, they often fail to capture the full power of its impact. The true value of automation extends far beyond immediate cost savings, encompassing a range of intangible benefits that can significantly enhance your manufacturing operations.

Let’s uncover the hidden ROI of automation – the ripple effects that can revolutionize your efficiency, productivity, and workforce dynamics. We’ll look into how automation can help your business achieve controllable growth, streamline processes, and create a more agile and innovative work environment.

By understanding these often-overlooked benefits, you’ll hopefully gain a deeper appreciation for the transformative potential of automation and discover how it can propel your manufacturing business to new heights of success.

The Ripple Effect of Efficiency

Automation’s impact on efficiency translates directly to profit. By streamlining processes and optimizing workflows, automation can significantly reduce waste and downtime, leading to substantial cost savings that may not be immediately apparent until you see the changes to your P&L.

• Waste Reduction: Studies have shown that automation in manufacturing can reduce waste materials by up to 30%. This translates to less money spent on raw materials, fewer defective products, and a smaller environmental footprint. While the immediate financial impact of reduced waste might be challenging to quantify, the long-term benefits are undeniable.

• Downtime Minimization: Unplanned downtime is a major drain on manufacturing resources. According to Aberdeen Research, a single hour of unplanned downtime can cost a staggering $260,000. Automation can minimize downtime by up to 20% by proactively identifying and addressing potential issues before they escalate into costly breakdowns.

• Liberating Resources for Growth: The combined effect of waste reduction and minimized downtime frees up valuable resources—both financial and human. With fewer resources tied up in fixing errors, reworking products, or dealing with equipment failures, manufacturers can allocate more capital and manpower towards innovation, research and development, and expanding into new markets. This creates a powerful compound growth generator, as these investments ignite further efficiencies and opportunities, rapidly advancing overall business growth.

Ultimately, automation creates a ripple effect of efficiency that affects every area of your manufacturing operations. By tackling the hidden costs of waste and downtime, automation helps you to unlock new avenues for growth and profitability.

The Productivity Multiplier

The impact of automation on productivity is a key driver of the ROI of automation. Studies have shown that a staggering 75% of companies using industrial automation experience a 10-12% increase in productivity. This surge isn’t just a case of machines working faster than humans:

• Consistent Output: Automated systems operate with unwavering precision, maintaining consistent output levels regardless of shift changes, fatigue, or human error. This predictability allows for accurate production planning and reliable delivery schedules, ensuring that your customers receive their orders on time, every time.

• Reduced Errors: Human error is inevitable, even in the most well-trained workforce. Automation eliminates many of the manual tasks that are prone to mistakes, significantly reducing the likelihood of costly defects and rework. This not only saves money but also enhances the overall quality of your products.

• Better Workflows: Automation allows for the seamless integration of various processes, eliminating bottlenecks and optimizing the flow of materials and information throughout your production line. This streamlined approach reduces lead times, enabling you to bring products to market faster and gain a competitive edge.

• Faster Time-to-Market: With enhanced efficiency, reduced errors, and optimized workflows, automation accelerates the entire production cycle. This means you can respond more quickly to market demands, introduce new products sooner, and capitalize on emerging opportunities.

• Increased Customer Satisfaction: Ultimately, the productivity gains achieved through automation translate to happier customers. By delivering high-quality products on time and at a competitive price, you build trust and loyalty, ensuring long-term success.

The productivity multiplier effect of automation is a game-changer for manufacturers. By integrating this technology, you’re not just investing in machines — you’re investing in a future of increased efficiency, streamlined operations, and satisfied customers. This is the true ROI of automation.

The Workforce Evolution

Understanding the workforce evolution is crucial to maximizing automation ROI for manufacturers. Of course, automation’s impact on the workforce is a complex and often debated topic. While it’s true that up to 57% of manufacturing tasks could theoretically be automated with current technologies, the reality is far more nuanced. Automation isn’t about replacing humans; it’s about redefining their roles and creating new opportunities for growth.

• The Need for Skilled Labor: While automation may eliminate some repetitive tasks, it simultaneously creates a demand for skilled labor to design, implement, maintain, operate, and optimize these systems. This shift requires upskilling and reskilling programs to ensure that the workforce can adapt to the changing landscape. For manufacturers, you can choose to train internally, or instead create a long-term partnership with an automation integrator such as DEVELOP, who will then act as your service provider.

• Upskilling and Higher-Value Job Roles: Automation opens up opportunities for workers to transition into higher-value roles that involve problem-solving, critical thinking, and decision-making. By taking over mundane tasks, automation allows employees to focus on tasks that require uniquely human skills, leading to a more engaged and fulfilled workforce.

• The ROI of a Skilled Workforce: Investing in employee training and development is a crucial part of realizing the full ROI of automation. A well-trained workforce can maximize the benefits of automation by identifying new opportunities for implementation, troubleshooting issues, and continuously improving processes.

The evolution of the workforce in the age of automation isn’t about job loss but rather job transformation. By adopting this change and investing in your employees, you can create a more skilled, adaptable, and valuable workforce to drive your manufacturing business forward.

Related Reading: How to Maximize Automation ROI: A Manufacturer’s Guide

Risk Avoidance: The Insurance Policy of Automation

The manufacturing sector is fraught with risks, from workplace accidents to supply chain disruptions. Automation, in many ways, acts as an insurance policy, reducing these risks and safeguarding your operations.

By understanding automation’s role in risk avoidance, you’ll get a deeper appreciation for its value as a protective measure for your manufacturing business. This is about building a more secure and resilient future for your company.

Safety First

Prioritizing safety is a key component of realizing the full ROI of automation. Workplace injuries are a stark reality in manufacturing, with over 100,000 non-fatal incidents reported annually. These incidents not only pose a risk to employees but also carry a significant financial burden for employers. On average, a single workplace injury can cost a company over $100,000, including direct costs like workers’ compensation claims (averaging $41,350) and indirect costs like lost production and administrative expenses (averaging $80,000).

Automation offers a powerful solution to enhance workplace safety and reduce these costly risks. By reducing Human-Machine Interaction, automation minimizes the potential for accidents and injuries in several ways:

• Hazardous Task Automation: Robots and automated systems can be deployed to handle dangerous tasks that pose risks to human workers, such as heavy lifting, repetitive motions, or exposure to hazardous chemicals.

• Improved Precision: Automation eliminates human error, reducing the likelihood of accidents caused by fatigue, distraction, or misjudgment.

• Enhanced Monitoring: Automated systems can continuously monitor equipment and processes, identifying potential hazards and taking corrective action before they escalate into accidents.

• Predictable Maintenance, Data-Driven Efficiency: Automation transforms unpredictable downtime into scheduled maintenance windows, optimizing production schedules. Real-time data tracking and analytics (e.g., through platforms like Microsoft PowerBI) provide comprehensive insights, ensuring proactive maintenance and minimizing disruptions. You get control over what was previously unpredictable.

The long-term cost savings associated with improved safety are substantial. By reducing the frequency and severity of workplace injuries, manufacturers can lower their workers’ compensation insurance premiums and avoid the costly disruptions caused by accidents. 

Investing in automation isn’t simply a matter of improving efficiency — it’s a strategic decision that prioritizes the well-being of your workforce and protects your company from the financial repercussions of workplace accidents.

Related Reading: Robotics Safety and Innovation in the Workplace

Competitiveness and Resilience

For manufacturers, staying ahead requires more than just cutting costs. It demands agility, adaptability, and the ability to tackle unforeseen challenges. Automation is now a critical tool for manufacturers hoping to maintain their competitive edge and build resilience against disruptions.

• The Necessity of Automation: According to a recent survey, 74% of manufacturers believe that automation is essential for remaining competitive. This sentiment reflects the growing realization that automation is no longer just a nice-to-have; it’s a strategic imperative for survival and growth.

• Weathering Labor Shortages: The manufacturing industry is facing a looming labor shortage, with projections indicating a potential deficit of 8 million workers by 2030. Automation can help avoid this operational threat by taking over repetitive or physically demanding tasks, allowing companies to maintain production levels even with a reduced workforce.

• Managing Supply Chain Disruptions: We’ve all seen first-hand how global events have a ripple-effect of their own, and we’ve seen the many vulnerabilities of global supply chains. Automation can enhance supply chain resilience by enabling faster response times, flexible production schedules, and the ability to quickly adapt to changing market demands.

• The ROI of Resilience: While the immediate ROI of automation might be measured in terms of cost savings and increased output, its long-term value lies in its ability to safeguard your business against unforeseen events. By building a more resilient and adaptable manufacturing operation, you’re not just investing in today’s success — you’re securing your future in a volatile and uncertain world.

Related Reading: How Automation Can Help Overcome Labor Shortages in Manufacturing

Addressing the Obstacles: Overcoming the Automation Hurdle

While the benefits of automation are clear, manufacturers often face obstacles when considering its implementation. The perceived high initial investment, the complexity of integration, and concerns about disrupting existing workflows can deter even the most forward-thinking companies.

Let’s confront these challenges head-on, providing practical strategies and insights to help you overcome the automation hurdle. We’ll dispel common myths about automation and offer guidance on managing the integration process smoothly.

The Initial Investment Myth

One of the most common misconceptions about automation is that it requires a massive upfront investment, a barrier cited by 24% of companies as a major obstacle, hindering potential automation savings. However, this is often a myth that can be dispelled with careful planning and strategic decision-making. Let’s break that down a bit.

Targeted Automation Assessments

An experienced automation integrator like DEVELOP LLC can conduct a comprehensive assessment of your manufacturing operations to identify the areas where automation will yield the most significant and immediate ROI. This assessment takes into account various factors:

• Production Bottlenecks: Identifying and addressing bottlenecks in your production line is key to maximizing efficiency and reducing costs. Automation can streamline these critical areas, leading to a faster return on investment.

• Labor Costs: Analyzing labor-intensive tasks and evaluating the potential for automation can reveal significant cost-saving opportunities. Automating repetitive or hazardous tasks can reduce labor expenses while improving workplace safety.

• Waste Reduction Potential: Identifying areas where waste is prevalent — excess materials, defective products, or inefficient processes — can show opportunities for automation to minimize waste and optimize resource utilization.

• Strategic Investment for Quick Returns: By identifying high-impact areas for automation, we prioritize investments that deliver the fastest ROI. We also offer guidance on financing options, including connecting you with lenders specializing in automation equipment, to help you make strategic decisions that fit your budget and accelerate your return on investment.

The initial investment in automation is not a roadblock but a strategic decision that can reveal a wealth of long-term opportunities and benefits. By choosing the right automation partner, you can see the process, identify the most cost-effective opportunities, and begin the automation journey that will transform your manufacturing business.

Related Reading: How You Should (and Shouldn’t) Calculate Your Return on Investment with Your Integrator

Quantifying Your Automation ROI: Tools to Guide Your Investment

While the intangible benefits of automation are undeniable, understanding the tangible financial impact is crucial for making informed investment decisions. To help you accurately assess and predict the ROI of your automation projects, we’ve developed two powerful tools.

1. ROI Calculator: Our free downloadable ROI calculator allows you to model the potential financial gains of your automation project. By inputting key variables like labor costs, production output, and equipment costs, you can estimate how quickly your investment will pay for itself and the long-term savings you can expect. This tool is essential for justifying the initial investment and demonstrating the long-term value of automation to stakeholders.

2. Reverse ROI Calculator: If you have a specific time-frame in mind for achieving ROI, our reverse ROI calculator can help you determine the investment required to reach your goal. By inputting your desired ROI timeframe and other relevant data, you can calculate the maximum budget for your automation project to ensure it aligns with your financial objectives.

These tools help you to make data-driven decisions and confidently invest in automation solutions that will deliver tangible results for your manufacturing business.

Try out our ROI calculators today and discover the hidden potential of automation!

The Time for Automation Is Now

The ROI of automation goes far beyond the initial investment. It’s a unique value proposition covering tangible and intangible benefits, from reduced waste and increased productivity to enhanced safety and competitive advantage.

Are you ready to uncover the hidden ROI of automation for your manufacturing business? Take the first step towards transforming your operations by completing our free Automation Assessment Questionnaire. This simple tool will provide immediate insights into the potential impact of automation on your specific needs and goals.

If the assessment results reveal promising opportunities, we’ll invite you to schedule a free 30-minute consultation with our automation experts. Together, we can look deeper into your unique challenges and explore how automation can address them.

Based on your specific requirements and the insights gained from our consultation, we can then schedule either a virtual or on-site assessment to thoroughly analyze your production processes and identify the most impactful automation solutions. This personalized approach ensures that your automation investment delivers the maximum ROI tailored to your specific needs.

Don’t let outdated notions about cost or complexity hold you back. The future of manufacturing is automated, and the time to act is now. 

About the Authors:

Matt Moseman leads as President of DEVELOP, with a strong foundation from the Milwaukee School of Engineering, where he earned both a Bachelor’s and a Master’s in New Product Management. Moseman’s career highlights include his pivotal role in founding NodeUDesign, innovating in automation hardware, and driving DEVELOP LLC to the forefront of industrial robotics with a focus on enhancing productivity and efficiency.

Sean McKittrick, as Project Program Coordinator at DEVELOP LLC, brings a multifaceted background from Knox College. McKittrick’s first year at DEVELOP LLC has been marked by significant team growth and zero turnover, showcasing his ability to build a collaborative and effective work environment. His experience spans quality management in healthcare software to managing production for a million pounds of material monthly, highlighting his diverse expertise in project coordination and manufacturing excellence.