{"id":29325,"date":"2023-12-05T07:00:22","date_gmt":"2023-12-05T13:00:22","guid":{"rendered":"https:\/\/www.cisco-eagle.com\/blog\/?p=29325"},"modified":"2025-08-11T15:46:52","modified_gmt":"2025-08-11T20:46:52","slug":"roi-for-warehouse-and-manufacturing-automation-a-panel-discussion","status":"publish","type":"post","link":"https:\/\/www.cisco-eagle.com\/blog\/2023\/12\/05\/roi-for-warehouse-and-manufacturing-automation-a-panel-discussion\/","title":{"rendered":"ROI for Warehouse and Manufacturing Automation: A Panel Discussion"},"content":{"rendered":"<p><img decoding=\"async\" style=\"width: 100%; max-width: 700px; height: auto; margin-bottom: 12 px;\" src=\"https:\/\/images.cisco-eagle.com\/blog\/wp-content\/uploads\/2023\/11\/WERC-2023-2.jpg\" alt=\"WERC North Texas 2023 Automation Panel Discussion\" \/><\/p>\n<blockquote><p><em><strong>Above:<\/strong> James Murphy moderates a panel discussion on automation return-on-investment\u00a0<\/em><\/p><\/blockquote>\n<p>Cisco-Eagle&#8217;s Bryan Gauger joined Mitch Smith of Hytrol and Nils Hart of Muratec for a Warehousing Education and Research Council panel on automation projects return-on-investment. The discussion revolved around ROI factors ranging from labor to safety. Because labor and money are both tight, justifying capital expenditures is more important than ever. Here are the panel&#8217;s thoughts on critical ROI issues:<\/p>\n<p><!--more--><\/p>\n<h3>ROI definitions and meanings: it&#8217;s different for industrial applications<\/h3>\n<p><iframe loading=\"lazy\" src=\"https:\/\/www.cisco-eagle.com\/video\/frame.aspx?id=947\" width=\"640\" height=\"360\" frameborder=\"0\" scrolling=\"no\"><\/iframe><\/p>\n<p>The financial definition of ROI is fairly simple. As Hart said during the panel: &#8220;In a simplistic form, it&#8217;s just looking at the profitability of an investment.&#8221; The problem for automation is that ROI evaluation must include several factors that are more difficult to define in a purely financial sense.<\/p>\n<p><img decoding=\"async\" style=\"width: 100%; max-width: 641px; height: auto; margin-bottom: 12 px;\" src=\"https:\/\/static.cisco-eagle.com\/images\/site\/CaseStudies\/AmericanGreetingsSystem.JPG\" alt=\"Automated conveyor system\" \/><\/p>\n<h4>What to consider when defining ROI for your project:<\/h4>\n<ul>\n<li><strong>Complex applications:<\/strong> Larger integrated systems that completely redesign an entire work process can be difficult to evaluate because all preconceptions and points of comparison are being removed. This means you&#8217;re working in theoretical assumptions.<\/li>\n<li><strong>What to consider at a high level:<\/strong> Despite the complexity, you must still trust the data and look at total cost of ownership plus the total value of benefits.<\/li>\n<\/ul>\n<blockquote><p><em>&#8220;A simple way of looking at ROI is your net gain as your return on investment,&#8221; said Smith. &#8220;That&#8217;s the easy way. Unfortunately that&#8217;s not good enough for what we do in material handling. There are also things we need to do: compare multiple opportunities and design. We need to know the internal rate of return. You start with the simple way to define it &#8211; and move forward from there.&#8221;\u00a0<\/em><\/p><\/blockquote>\n<hr \/>\n<h3>The total cost of ownership<\/h3>\n<p><iframe loading=\"lazy\" src=\"https:\/\/www.cisco-eagle.com\/video\/frame.aspx?id=948\" width=\"640\" height=\"360\" frameborder=\"0\" scrolling=\"no\"><span data-mce-type=\"bookmark\" style=\"display: inline-block; width: 0px; overflow: hidden; line-height: 0;\" class=\"mce_SELRES_start\">\ufeff<\/span><\/iframe><\/p>\n<p>The total cost of ownership rests on two fundamental questions: (1) what is the total cost of ownership, and (2) how do we define that? The panel discussed methods for defining the total cost, because, as Smith said, &#8220;accounting wants numbers.&#8221; To be valid, your numbers should include the total costs evaluated as thoroughly as possible. &#8220;Many times, accounting will only accept head count adjustments.&#8221; Trying to define other factors, like efficiency, drifts into theoretical gains that are harder to slot into a formula.<\/p>\n<h4>What is the total cost of ownership?<\/h4>\n<ol>\n<li><strong>Cost of initial investments:<\/strong> the cost of equipment and implementation, such as installing <a href=\"https:\/\/www.cisco-eagle.com\/vector\/170\/conveyor-systems\">a conveyor system<\/a> or an <a href=\"https:\/\/www.cisco-eagle.com\/vector\/172\/asrs-systems\">AS\/RS system<\/a>. You must also include installation and implementation costs relating to software and hardware.<\/li>\n<li><strong>Maintenance costs<\/strong>\u00a0include repairs, redundancy, replacements and ongoing mechanical support.<\/li>\n<li><strong>Operating costs.<\/strong> While most automation reduces labor and headcount, it usually doesn&#8217;t eliminate it. You must factor the costs of people, energy, time and space into operating costs.<\/li>\n<\/ol>\n<blockquote><p><em><strong>Read more: <\/strong><a href=\"https:\/\/www.cisco-eagle.com\/category\/8235\/conveyor-system-implementation-factors\">Considerations When Adding a Conveyor System<\/a> and <a href=\"https:\/\/www.cisco-eagle.com\/blog\/2019\/10\/10\/how-to-calculate-automation-roi\/\">How to Calculate Automation ROI<\/a><\/em><\/p><\/blockquote>\n<hr \/>\n<h3>Automation, labor and ongoing demographic challenges<\/h3>\n<p><iframe loading=\"lazy\" src=\"https:\/\/www.cisco-eagle.com\/video\/frame.aspx?id=949\" width=\"640\" height=\"360\" frameborder=\"0\" scrolling=\"no\"><span data-mce-type=\"bookmark\" style=\"display: inline-block; width: 0px; overflow: hidden; line-height: 0;\" class=\"mce_SELRES_start\">\ufeff<\/span><span data-mce-type=\"bookmark\" style=\"display: inline-block; width: 0px; overflow: hidden; line-height: 0;\" class=\"mce_SELRES_start\">\ufeff<\/span><\/iframe><\/p>\n<p>&#8220;Everyone in this room has faced the challenge of labor the last couple of years,&#8221; said Gauger. Labor is one of our biggest challenges, as here in the state of Texas we have 89 workers for every hundred job openings. We can&#8217;t draw much labor from surrounding states because the surrounding states are even worse off.&#8221; Gauger went on to mention Texas&#8217;s ongoing growth, with many new warehouses and factories being built in the state as labor tightens.<\/p>\n<p>&#8220;I meet customers who have people hand palletizing &#8211; who can&#8217;t hire any more than they have. They&#8217;re going to have to automate and put in things like <a href=\"https:\/\/www.cisco-eagle.com\/category\/7948\/palletizing-systems\">robotic palletizers<\/a> or <a href=\"https:\/\/www.cisco-eagle.com\/vector\/446\/agvs-automated-guided-vehicles\">AGVs.<\/a>&#8221;<\/p>\n<p><img decoding=\"async\" style=\"width: 100%; max-width: 641px; height: auto; margin-bottom: 12 px;\" src=\"https:\/\/static.cisco-eagle.com\/images\/category\/Muratec\/agv-illustration.jpg\" alt=\"automated guided vehicles\" \/><\/p>\n<p>&#8220;You can go to HR and find the burden cost of any individual or group,&#8221; said Hart. &#8220;You can add the costs of whatever the automation is replacing a forklift and its leasing costs.&#8221; Hart added that good ROI calculations must include the maintenance costs or savings of either the existing manual model, or any proposed automated replacement. &#8220;Throw those metrics together and you sometimes find your ROI can be just a matter of a few years.&#8221;<\/p>\n<h4>A focus on demographics<\/h4>\n<p>Smith focused on demographics during the discussion. &#8220;You hear a lot about demographics,&#8221; he said. &#8220;The baby boomers are leaving the marketplace\u2014those people born from 1946 to 1964 who are aging out of the workforce. That&#8217;s 132 million total people. The United States has only 330 million people, so who&#8217;s going to backfill those positions? Automation and operations people have to find ways to supplement that shortfall.&#8221;<\/p>\n<blockquote><p><a href=\"https:\/\/www.cisco-eagle.com\/video\/category.aspx?id=78\"><em>See more videos from the ROI panel discussion<\/em><\/a><\/p><\/blockquote>\n<h4>More on ROI and justifying your project<\/h4>\n<ul>\n<li><a href=\"https:\/\/www.cisco-eagle.com\/blog\/2022\/01\/04\/new-rules-for-industrial-automation-roi\/\">New Rules for Industrial Automation ROI<\/a><\/li>\n<li><a href=\"https:\/\/www.cisco-eagle.com\/blog\/2022\/09\/13\/how-material-handling-and-automation-increases-labor-flexibility\/\">How Material Handling and Automation Increases Labor Flexibility<\/a><\/li>\n<li><a href=\"https:\/\/www.cisco-eagle.com\/blog\/2022\/03\/17\/are-agvs-right-for-you\/\">Are AGVs Right for You?<\/a><\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>Above: James Murphy moderates a panel discussion on automation return-on-investment\u00a0 Cisco-Eagle&#8217;s Bryan Gauger joined Mitch Smith of Hytrol and Nils Hart of Muratec for a Warehousing Education and Research Council panel on automation projects return-on-investment. The discussion revolved around ROI factors ranging from labor to safety. Because labor and money are both tight, justifying capital [&hellip;]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[7],"tags":[723,897],"series":[],"class_list":["post-29325","post","type-post","status-publish","format-standard","hentry","category-automation","tag-roi","tag-video"],"acf":[],"aioseo_notices":[],"publishpress_future_action":{"enabled":false,"date":"2027-04-19 03:17:36","action":"change-status","newStatus":"draft","terms":[],"taxonomy":"category","extraData":[]},"publishpress_future_workflow_manual_trigger":{"enabledWorkflows":[]},"_links":{"self":[{"href":"https:\/\/www.cisco-eagle.com\/blog\/wp-json\/wp\/v2\/posts\/29325","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.cisco-eagle.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.cisco-eagle.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.cisco-eagle.com\/blog\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.cisco-eagle.com\/blog\/wp-json\/wp\/v2\/comments?post=29325"}],"version-history":[{"count":26,"href":"https:\/\/www.cisco-eagle.com\/blog\/wp-json\/wp\/v2\/posts\/29325\/revisions"}],"predecessor-version":[{"id":32674,"href":"https:\/\/www.cisco-eagle.com\/blog\/wp-json\/wp\/v2\/posts\/29325\/revisions\/32674"}],"wp:attachment":[{"href":"https:\/\/www.cisco-eagle.com\/blog\/wp-json\/wp\/v2\/media?parent=29325"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.cisco-eagle.com\/blog\/wp-json\/wp\/v2\/categories?post=29325"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.cisco-eagle.com\/blog\/wp-json\/wp\/v2\/tags?post=29325"},{"taxonomy":"series","embeddable":true,"href":"https:\/\/www.cisco-eagle.com\/blog\/wp-json\/wp\/v2\/series?post=29325"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}