The following paper provides a how to approach for economic justification of robotic and automation systems. The step-by-step approach describes both the direct and the indirect benefits of automating a process through the use of programmable machines. Together, we will identify and quantify indirect savings areas such as inventory reduction, reduced number of human touches, efficiency improvements, reduced operator training costs and others. The methods and calculations are shown for instructional purposes. After we generate the numbers, we guide you through organizing and interpreting your data for your use to calculate your return on investment.

Flexible automation technology holds great promise for the improvement of manufacturing processes in the United States. The use of robots and programmable machines is growing at rates approaching 30% per year. The traditional markets and uses of this type of automation, generally including automotive parts and body shop operations and robotic welding, remain strong and are likely to increase their consumption of robots. The newer applications and markets, however, are where a good bit of excitement resides and where often, an improvement is needed in the understanding of the rewards offered by flexible automation.

Common areas being considered for flexible automation today not only include the dull, dirty and dangerous jobs but also the areas and processes that are too clean, too small, too fast, too demanding or too distant for human intervention. Locating and developing possible cost saving flexible automation applications in your process will likely require time and some serious thought. Ultimately, an automation champion or two will surface in a progressive manufacturing facility and understanding how to buy automation will be a key factor for success for these individuals.

There is normally a unique set of circumstances that generate interest in purchasing a flexible automation solution within a given prospective user. While several key process elements may be carried over (or "transported") from one application to another, each consumer of this type of equipment has a unique need. These circumstances require special attention and expertise and often lead to an extensive exchange of ideas and process knowledge between the consumer and the automation supplier. Faced with what are likely a new application and possibly a first time user of this type of equipment, the automation supplier has a certain set of challenges in front of him. Among these challenges are how to show or teach justification methods that allow for or take in all the promise the flexible solution provides.

The ability to prove convincingly that a robot or automation system is a good investment, and prioritizing its capital needs within the constraints of the user’s financial planning, requires a close and careful look at the indirect benefits of flexible automation as well as the direct labor savings calculation.

Some accounting approaches used in the newer automation application areas limit the use of these indirect benefits in return on investment (ROI) calculations. The use of flexible automation may be new to the consumer and therefore the justification thoughts to be considered for a fair and honest appraisal of the investment may also be new.

The general rule of thumb for the value analysis used with flexible automation is that if a historical record of the costs of the various topics involved does not exist, then a reasoned guess provided by a seasoned individual involved with the process is the best place to start for gathering information for the first purchase. As the installations grow in quantity and the user gains more intimate knowledge of the benefits to flexible automation in his unique setting, these early "guesses" become more and more accurate.