Seeking robotic payback.

Inside This Story:

* Detailed within are the areas metalcasting facilities need to examine when calculating payback after implementing robotics.

* A generic payback calculation only will tell part of the story. For a more precise calculation, metalcasting facilities must know their true costs and look for "hidden areas" of savings.

There is a perpetual struggle within metalcasting facilities between those who run the day-to-day operations of the plant and those who hold the checkbooks. While one group champions efforts to bring the latest technology into the facility to boost productivity and improve quality, another serves as the checks and balances for the firm. Both sides want improved productivity and quality, but someone has to ask the all important question: how much will it cost?

When implementing robotics, the stakes are high. The overall investment is costly, but the potential benefits are virtually endless. While one group is looking at the potential payoffs, another wants to know about the payback--the time needed for a firm to recoup its expenses.

The most generic way to calculate payback is to compare the costs associated with purchasing the robot over the number of years you, plan to run it with the costs associated with having an operator perform the work during the same time frame. Although this formula may provide an estimate, the process is not black and white. There are a number of variables that will affect the amount of time it will take a metalcasting facility to fully recoup its expenses--and many of them are overlooked.

This article examines the factors that affect payback after implementing robotics and highlights some areas that often are overlooked.

Reduction in Manpower

Payback is based on annual savings. To achieve payback, firms must determine all of the areas of their business that will see a savings and add them together. That will determine how much payback will be realized and how soon it will come.

The most obvious factor in determining payback comes from a reduction in manpower. If a robot is performing a task, human involvement is either drastically reduced or eliminated altogether. If there are fewer production workers, there are fewer salaries and benefits to pay. If there are fewer salaries to pay, there is more money available to recoup the capital expenditure.

There are two areas of cost savings that must be taken into account here--direct and indirect labor costs. When combined, these costs make up a large portion of the payback calculation. The direct labor costs are obvious and are driven by how much will be saved as a result of eliminating salaries. Included with that is a list of other cost-saving areas.

"First and foremost in calculating payback is a reduction of direct manpower," said Jim Logan, a metalcasting program manager at Fanuc Robotics. "But it is critical to use fully burdened rates that include all benefits paid by the employer."

While a typical salary may be only $30,000-$40,000/yr., firms also must factor in medical benefits and possibly bonuses that are paid by the employer. Adding all of that together can significantly raise the "true cost" of an employee.

The indirect labor savings can add up just as quickly. These include a reduction of health costs associated with accidents, repetitive motion injuries and exposure to hazardous materials. Metalcasting facilities also must supply their employees with proper personal protective equipment. Although the cost of gloves, coats and face shields may not be that high, the expenses for several operators over a seven-year period (the typical depreciation time of a robot) can add up.

"One aspect that is playing an important role in achieving payback is environmental, health and safety items," said John Kuhn, foundry automation specialist at Rimrock Corp. "If you reduce labor, you don't have the workman's compensation issues that can be associated with that. If you reduce back injuries, eye injuries, abrasions, etc., that can add up to be quite a big number over time."

Quality Improvements

When firms investigate robotics, they look at quality improvements as a way to improve business, but not necessarily as a way to save money, which in turn factors into the payback calculation. This is an important aspect of the formula that often is overlooked.

"The biggest area people always look at is in labor savings," Kuhn said. "But there are several others that need to be looked at--one of the biggest being quality improvements. If you make the operation more consistent, that's how you achieve better quality and reduced costs."

The reduced costs can come in a number of different forms, each of which helps determine the payback. For example, if a casting facility has a 10% scrap rate on a manual operation, that means for every 1,000 castings made, 100 are scrapped. A firm must then pick up the melt, metal, core, etc. costs to remake 100 castings.

"When you don't scrap a casting, you save a lot more than just the value of the casting because you don't have to do it over again," Kuhn said. "You save the operators' time (and possibly overtime) and wear on their personal protective equipment. There also is the metal cost, both of the scrapped casting and the new, casting. The quality area has the potential for quite a bit of savings."

Going hand-in-hand with the quality improvements is a reduction in raw material costs, which also play a significant role in payback. This may include reductions in metal, electricity, I natural gas and sand.

"A reduction of in-process scrap material costs must be factored t into the payback," Logan said. "If you reduce the scrap rate, you have a lower scrap material cost and lower scrap reclamation costs. The scrapped casting can be recycled, but there is a cost to do it."

The payback calculation also should include expenses needed to run the robots.

"Reductions in scrap and faster cycle rates may result in savings in compressed air in the cell and a reduction in amount of natural gas used," Logan said. "It also can lead to a reduction in the amount of raw materials. In sand casting for example, you are not wasting sand cores that are damaged in the process so you would have less sand being wasted."

Potential cost savings also can be realized by automating secondary operations in other processes. For example, Logan said that in diecasting, automating the die spray operation can reduce the amount of die lube used. "Thanks to consistency of a robot, it may be able to use less lube than the manual operator was using," he said. "As a result of reducing the amount of die lube, metalcasting facilities also are reducing sewage costs."

Further, the consistency associated with robotics provides another area for potential cost savings that often is over looked in the payback calculation.

"Cycle time gain is a hidden area in payback," Kuhn said. "In the case of high-pressure diecasting, you can see a cycle of 60 sec. reduced to 58 sec. When you look at that over a period of time it adds up. That's one that people don't look at too much, but it can be one of the biggest factors. When you have a manual operation, you have people involved that are slowing down the cycle. Even if it is just a few times an hour, it adds up over time."

In addition to slowing down the cycle time, operators have a tendency to be harder on equipment, such as with saw blades and burring tools. Those consumables are added expenses that a metalcasting facility can factor into the payback.

"Often, people don't tend to use the tools correctly," Logan said. "Robots are more consistent in the way they use tools. There is less of a chance to apply too much pressure or bog down the operation, so you go through less of these consumable items."

The area where this will be most noticeable is the cleaning and finishing room because there are a number of things that operators cannot consistently do, such as grinding a casting. More consistency leads to less downtime and inventory.

"If the robot is processing the part when it is made, you can work more at the pace of the machines and don't have to have inventory waiting on people," Logan said. "There also is a reduction in product changeover and set up time. Robots may automatically change their end of arm tool and be ready to make the next part. Changing over using flexible automation is going to be quicker and will increase throughput."

Practical Application

As a guideline to help determine the expected payback after implementing a robotic cell, a hypothetical situation was developed using an aluminum metalcasting facility with 200 employees. Industry averages were used to determine savings as a result of quality improvements, environmental, health and safety issues, and the cost of annual maintenance for the cell.

The metalcasting facility installed a $300,000 robotic cell for band sawing and deburring aluminum intake manifolds with an annual volume of 100,000.

Before adding the robotic cell, the metalcasting facility had three operators who made $30,000/yr. working one eight-hour shift, 240 days/ yr. The costs associated with paying salaries, benefits and personal protective equipment (hardhats, ear plugs, glasses, gloves, etc.) were $119,866. After implementing the robotic cell, only one operator was needed, bringing the costs down to $39,955 (an annual savings of $79,910).

As a result of quality improvements with the robotic cell, the metalcasting facility could potentially see $30,000/ yr. in melt and metal savings. Because of the robotic cell's consistency, burring tools and saw blades would last longer, which could lead to an expected savings of $26,000/yr.

Additionally, another $50,000/yr. could be saved as a result of reduced workers' compensation issues that are typical in a metalcasting facility with 200 employees.

Cycle time gains also had a significant impact on savings. According to the calculation, if the metalcasting facility shaved just four seconds off its processing time, it could save $444/yr. in labor costs and increase income by $192,444.

Final calculations show the metalcasting facility would be able to achieve its payback in 0.9 yrs. and see an internal rate of return of 287%.

What to Look For

Typically, the goal is to achieve payback in one year, but how soon the payback actually occurs is dependant on a number of factors. There are several things metalcasting facilities can do to speed up the payback or ensure they hit the one-year mark.

"A number of items are critical," Logan said. "The most important is the creation of a long-term automaton plan by plant management. If you don't have a plan, you are going to wander all over the place. Identify areas where the plant is facing the biggest production challenges because one of those areas may be potential ones to automate."

Logan also noted that it is ideal to have a realistic expectation of the robotic application. This includes targets for payback, cycle rate, scrap rate, production throughput and cell uptime.

The reason the plan is so important is because it provides guidance to where robotics will be most beneficial. And many times, it leads to the area of the facility where the payback will be the greatest.

To determine what operations have the potential to deliver the quickest payback, look to what has already been done.

"Select applications and processes that already have been successfully automated in the industry," Logan said. "The return on investment is going to be shorter because your plant is not a guinea pig. The second thing that I would look at is applications that have been successfully automated at your plant. You are going to have an even shorter return on investment because the plant has already upped the learning curve. There is a significant learning curve the first time out. Once you are familiar with how to automate, each time it is easier."

For More Information

"Opening Up to Robotic Change," K. Bauer, MODERN CASTING, June 2004, p. 23-26.