Beyond ROI: Determining the True Cost of Robotics
November 18, 2019      
Nigel Smith, TM Robotics

From heavy-duty six-axis robot arms to SME-friendly collaborative models, robot pricing can vary as widely as the specifications on each machine. Determining the total cost and return on investment (ROI) of a robot isn’t as straightforward as it once was. With more people wondering how much robots cost – Google Trends shows that searches for the phrase, ‘How much does a robot cost?’ has doubled since 2009 – it’s imperative that potential customers of robots know about all of the costs involved.

The cost of deploying robotics can go far beyond the robot’s price tag. As well as installation costs, factories may need to build segregated work areas, or additional backup power units before a robot can be deployed. That’s not to mention peripheral technology, such as sensors, variable robot grippers, and any necessary mounting apparatus. When you factor in the robot’s engineering and maintenance costs as well, budgeting isn’t always as easy as requesting a quote.

A report by the Boston Consulting Group suggests that in order to arrive at a solid cost estimate for robotics, customers should multiply the machine’s price tag by a minimum of three. Let’s say a six-axis robot costs $65,000 – customers should therefore budget $195,000 for the investment. That said, should the robot require a more extensive equipment overhaul, such as the addition of auxiliary machinery or conveyors, a multiplication of four or five times the cost of the robot may be required.

Next, you need to consider variable costs, which include labor, energy, materials, ongoing maintenance and production supplies required to deploy a robot successfully. Due to the varying nature of manufacturing facilities, these costs can fluctuate dramatically, depending on the industry sector and size of the operation. Plus, these costs are not always linear. Maintenance costs, for example, can change significantly during the machinery lifecycle.

Robot usage costs

Manufacturers can only calculate the ROI of an investment after establishing the robot’s total purchasing cost. Even then, manufacturers must consider several other elements, starting with robot use.

Consider the following example: A food manufacturer plans to use two SCARA robots to automate pick-and-place processes. The robots will run for three shifts a day, six days a week, 48 weeks of the year. The equivalent labor usually requires two operators per shift, equating to six operators to complete the same throughput over a working week.

Using the lower average salary of a U.S. production operator as an example — $25,000 per year – removing these roles would reduce labor costs by $150,000 per year. However, even with the deployment of a robot, human labor is not entirely eliminated. A good rule of thumb for labor estimations alongside a robotic system is 25% of current costs, reducing the total labor budget to an impressive $37,500 per year.

Minus this figure from the total robot purchasing cost we determined earlier, and manufacturers have an estimated ROI for the first year. Choosing a reputable supplier and robot manufacturer will also ensure the longevity of the machine, allowing users to reap these ROI rewards for years to come.

There are some flaws in this method of ROI calculation. Unless a long-winded procurement and production analysis is completed, many of these figures remain estimates. What’s more, this process does not consider problems that could occur, such as equipment breakdown, or unplanned downtime. For a true reflection of ROI, manufacturers should conduct a thorough cost analysis, based on the operations of their facility, as well as a risk assessment.

In addition to hidden costs, there are also some hidden benefits from robotics that aren’t considered in the basic ROI calculation. For example, eliminating or reducing human errors in the manufacturing process can reduce scrap material, minimize reworks and improve the consistency of products. Each of these factors represent an increase to a manufacturer’s profit, which is separate to the overarching ROI of the robot.

Growing demand

With search queries of robot pricing increasing, this demonstrates a growing demand for productivity gains through robotic deployment. According to the Annual Manufacturing Report 2019, more than three-quarters of manufacturers said they are ready to invest in new technologies to boost productivity. There’s no doubt that robots will be among these investments.

As manufacturers consider investing in robotic technology to improve productivity, it’s vital that they have a clear grasp of ROI in order to validate their purchasing decisions.

About the author: Nigel Smith is the managing director of industrial robot supplier TM Robotics.