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Understanding the Cash Flow Effect of Robots

Investing in robotics can come with a lot of questions. Is my capital expense going to meet the demand I’ll face in the future? Are the maintenance and engineering costs going to be too high to support consistent production and uptime? Are robots adaptable enough to respond to the mix of products, parts and processes I use to address both my current and future needs?

Generally, robotics are a highly cash-flow positive expenditure in the context of large, mass-manufacturing companies. In more specialized or less varied processes, they can make a significant cash-flow contribution as well as reduce significant bottlenecks that may be putting stress on scarce skilled labor or holding back entire productions. But what about more general or high-demand processes that are still subject to varied product mixes? How can you manage costs if the task a robot is doing isn’t as repeatable? Read more below to find out.

The Effect of Industrial Robots on Manufacturing

It’s estimated that the initial cost of an industrial robot, including systems engineering, is on average $250,000. Maintenance costs are below $10,000 per year, while the overall savings on unit labor cost can be estimated at 40-60% depending on how involved robots are in the entire production process of a finished good. At every step of the process, one must also consider the savings that come with reducing peripheral labor costs like insurance, health and safety risks or the need for specialized equipment required to assist skilled labor with hazardous or tedious and injurious work.

It’s further estimated that the full payback of a robot in a variety of labor markets can be between 2 and 10 years, no matter the labor market involved (including areas like Southeast Asia). The service life of a robot can reach up to 25 years in some cases, but ultimately many of the costs associated with robots can come down to systems integration and programming, which can take up as much as 60 to 80% of the total cost of installation.

Robots have the largest cash-flow benefit where they can be most used with the least changeover. It comes as no surprise that automotive and electronics production are the biggest adopters of this technology. Source: St Louis Federal Reserve.

At the same time, robot productivity, uptime, constancy and 24-hour production capacity mean that robots can offer a 30-40% productivity improvement compared to processes that rely exclusively on skilled labor. Taking all these numbers together, assuming a robot can displace 2 worker’s fully-loaded labor cost at $15/hour for 3 shifts with 350 working days per year (a not-unusual schedule for the few firms which work at scale in mass manufacturing), the payback period is 1 year when put against the median single-robot integration cost. After that, as long as nothing changes, the equivalent of 90%+ of that initial expense goes into Free Cash Flow. 

As long as demand is sufficient, workers can then complement areas where robotics isn’t suited and jobs are more attractive. This kind of payback, however, isn’t possible for the 80-90% of firms who don’t work at this highest end of manufacturing. And, of course, even in those great big companies (the Ford’s and GM’s of the world, for instance), not every process is suited to current robotics capabilities, even if the product or component being processed is still repeated at a high volume. 

Making Industrial Robot Cash-Flow Even Better

Ultimately, it really is the biggest (and most repeatable) manufacturing operations that can get the absolute greatest benefits from robotics. While they have already taken significant advantage of that, there is little sign that the upside potential here will disappear anytime soon. For smaller or more high-mix manufacturers, however, reducing the overall costs of integration while eliminate the need to “re-integrate” a robot for every part are essential to truly rocketing forward the net cash-flow benefits of robotics.

In these environments, the core cost-centers related to robots come down to three factors: the cost of hardware, the costs of elaborate, production-wide systems integration and the cost of manual programming and program validation for each and every part. Each of these representative parts compose roughly one-third of the upfront costs of a traditional robot. Gaming these costs with the right technology, however, could reduce both the upfront and ongoing costs of robots and subsequently improve cash-flow for more firms.

The three opportunities to do this go as follows:

Reducing the cost of hardware: Cobots or smaller, more specialized robots can cut these costs by half or more, but these are numbers that can move at an unpredictable pace since robots must themselves be manufactured “in real life”, as it were. Still beneficial, however, is the fact that industrial robot costs dropped by 22% between 2014 and 2017, and were expected to drop another 24% by 2025. A signal that this is actually happening? Non-automotive orders exceeded automotive orders for robots for the first time in Q4 2020.  

Systems Integration: Mass manufacturers often have long, substantially integrated materials handling processes from the beginning to the end of their entire factory or facility. This means that any robot integration for a specific process can ultimately require modifications or updated planning for the remainder of a facility. High-mix or contract manufacturers can actually see a significantly reduced cost here where manual or non-continous, autonomous materials handling can be used, meaning that integration can simply result in a couple weeks of low-intensity engineering time, where balanced with other projects. This equates to an insignificant up-front cost, while mass manufacturers may also see some of the same benefits if they evolve towards a mass customization approach.

Robot Programming: Eliminating the cost of robot programming could benefit mass manufacturers for sure, but they could also make robots finally profitable for a variety of high-mix operations. Why is this the case? Mass manufacturers process one part up to 100,000 times (or more) per year, while high-mix firms might process 10, 100, 1000 parts or more for a varying number of times per year, and in these cases they still need a manually generated program and precise jigging for each part. This means that, for instance, 10 part programs would increase the total up-front robot integration cost four times over. By automating the programming process, many more manufacturers can see much higher cash-flow benefits from robotics. 

In this example, a robot’s cumulative cash-flow benefit is shown. Where payback can be kept to a year or less, the benefits of a robot can only be positive for decades to come. Source: RIA.

So, now that the biggest opportunities can be addressed, what kind of technology can actually make this possible?

How Autonomous Robots Overcome The “Incremental Programming” Challenge

Autonomous robots are robots that effectively “program themselves”. These are already well-known solutions in the autonomous mobile robots and materials handling space, but industrial manufacturers most urgently need autonomous robots for value-added processes to increase the productivity of these firms and actually enable them to employ more people at a higher rate of profitability

What are the next steps here? Well, Omnirobotic has developed AutonomyOS ™, a revolutionary approach that uses 3D Perception with AI-based Task Planning and Motion Planning, allowing manufacturing engineers and integrators to configure autonomous robotic systems for value-added processes that reduce labor shortages, increase productivity, save energy, waste and rework and allow manufacturers to achieve more consistency and flexibility in production than ever before.

How is this possible? Using 3D vision, parts are interpreted in their real environment as they are. That data then allows for a 3D reconstruction in a Digital Twin environment, where AI-based processing power is used to generate the best possible robot motion and tool paths for the process at hand. 

From there, that virtual outcome can be translated into real-world benefits using major existing industrial robot brands like FANUC, ABB, Universal Robots and more. The technology currently supports spray processes like painting, powder coating and sandblasting. With more processes on the way, this autonomous robotics technology can finally allow every type of manufacturer to take advantage of the cash-flow benefits of robotics without the added integration costs that come with every part changeover – an absolute win for the next generation of industrial manufacturing leaders.

With AutonomyOS™ and AutonomyStudio™, it’s never been easier to deploy an autonomous robotic system.

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