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Specializing in the design and build of custom automation systems for the discrete manufacturing industry for 22+ years.

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Cost of Automation vs. Manual Labor

POSTED 08/20/2021

Automation versus manual labor case study

In this case study, the customer's current process utilized 3 operators a day x 3 8-hour shifts a day, at a $17.55 hourly rate. The average number of employee turnovers a year was 9, costing roughly $2,500 to re-hire an hourly worker. We calculated the absenteeism to average 9 times a year; average absenteeism costs $3,600/year/hourly worker. We also considered quality costs due to human error which include rework and customer recall. Rework, costing ~$10/part, averages 1000 parts per year and customer recall costs $25,000 on average. 

Our proposed solution utilizes 1 operator x 1 shift a day. This shows an annual labor savings of $280,800. The mitigation of labor risk that comes with implementing an automated system produces annual ergonomics savings of roughly $49,410. Lastly, due to improved repeatability and consistency, the automated system creates ~$10,000 in annual quality savings. Based on a proposed project cost of $500,000, it will take 1.47 years to see a Return on Investment. This is just one example of cost justification for an automated system - it is important to keep the long term efficiency and cost improvements in mind when looking to invest in automating your facility.