The impact of automation has transformed a wide range of manufacturing processes, including customer relationship management, marketing, regulatory compliance and cyber security, to name a few. While it is true that automation can save time, money and headaches, automation tools are more accessible than ever before truth be told, yet some companies have been slow to adopt the technology.
Automating production is all the rage these days. Because it can help a manufacturer save a lot of money, NJCSI is here to shine the spotlight on the topic.
Thirty years ago, labor in Chinese factories was virtually free, with the attitude of focusing all energy on not wasting materials and only buying machines for jobs that operators couldn’t do. Today, with wages going up 15-20% a year, the situation has changed. Labor is now cheaper in Mexico, Romania, Vietnam, and India than in China.
Manufacturing managers are looking for opportunities to replace labor by equipment. The main constraint is the lack of cash to buy that equipment, otherwise automation would be a much stronger phenomenon. A machine can replace 11 operators. Furthermore, over the expected machine lifetime of 10 years, the cost difference is notable.
The fully-loaded cost of employing people doesn’t just include their wages. There are a few ‘hidden costs’ that many managers overlook. Replacing an operator consists of finding and hiring a replacement and training the new hire. That means lost production, and lower quality during the transition. Many companies have studied this and concluded the cost is about 25% of the annual salary; all these costs add up.
In highly-manual operations, as well as in the absence of proper training and mistake proofing, many quality issues are caused by operators. Metal parts get scratched because they are not sufficiently “packaged” when transported from one process to the next, the upper of a shoe is not properly sewn and breaks easily, etc. As a result, an average of 30% of people are busy re-working in some factories. It sounds quite high, but it is not readily apparent. Only when you start to count who does what, does the problem become obvious.
Other costs of poor quality include customer claims, scrapped material, expedited shipments and an unnecessarily high number of inspectors.
What about the alternative; a well-setup and well-maintained piece of automated equipment, which detects its own issues and stops immediately when needed? It can be expected to deliver much more consistent quality.
Given the cost and quality benefits of a well-oiled automated production system, some customers are looking specifically for manufacturers that have automated their processes. If that’s your case, you can target bigger companies that have something interesting and potentially unique to say, who enjoy shorter sales cycles. Hopefully you can say goodbye to “spray and pray” marketing channels such as Alibaba and trade shows.
Calculations of return on investment are often very clear. Automation has yet to be fully utilised across all sectors of the economy, but its disruptive impact is already being felt in expense management. It’s easy to identify opportunities for automation once you know what to look for. Contact us for those such opportunities and keep reading our blog for useful information.