Unlocking Hidden Savings: The True Value of Labor Efficiency in Automation
In the pursuit of operational efficiency, the allure of automation as a solution to cut costs and bolster productivity is undeniable. However, the journey to quantify the return on investment (ROI) of automation initiatives often bypasses a pivotal factor: the real labor cost per operation, such as per pick in a warehouse scenario. This oversight can obscure the genuine value and effectiveness of automation endeavors, suggesting a nuanced perspective is necessary to grasp the full spectrum of benefits and challenges automation presents.
The Overlooked Metric: Labor Cost per Pick
Conventionally, ROI estimations for automation ventures primarily spotlight the reduction of Full-Time Equivalents (FTEs). Although decreasing headcount might lead to immediate cost savings, this angle overlooks a broader prospect: boosting the productivity of the remaining workforce. The metric of labor cost per pick, crucial for gauging operational efficiency, often goes unnoticed, potentially leaving significant savings unexplored.
Taking Company A as a case in point, their pre-automation manual picking operation clocked in at 75 lines per hour per picker. Post-automation, they managed not only to amalgamate their picking and packing operations but also significantly uplifted their productivity rate to 200 lines per hour, all the while maintaining the same workforce size. This surge in efficiency dramatically cut their labor cost per line, translating into substantial annual savings and showcasing the economic upside of weaving automation into their operational fabric.
Pelican Robotics: A Balanced View on Enhancing Productivity
At Pelican Robotics, the importance of delving deeper into the labor efficiency metric is well recognized. Our automation solutions aim not just to supplant manual tasks but to fundamentally redefine them, boosting each operator's productivity. By centering on the cost per pick, we assist businesses in discovering the full scope of savings automation can unlock, going beyond the mere reduction of FTEs.
However, while automation presents a compelling avenue for efficiency and savings, acknowledging the complexity of achieving and measuring these benefits is crucial. Critics point out that the direct link between reduced labor costs and heightened profitability isn't straightforward, affected by variables like order size diversity, picking task complexity, and the adaptability of automation solutions.
A Comprehensive Approach to ROI
To truly capitalize on the benefits of automation, companies must adopt a more nuanced approach to calculating ROI. This includes considering:
- Enhanced Labor Efficiency: Evaluating how automation can increase the output of each employee, thereby reducing the cost per pick.
- Scalability and Flexibility: Understanding how improved labor efficiency can support business growth and adapt to fluctuating demands without corresponding increases in labor costs.
- Strategic Human Resource Allocation: Leveraging automation to free up human resources for more complex, value-added tasks, thereby enhancing overall operational capability.
A Strategic Path to Growth
By integrating the efficiency of the workforce and the labor cost per pick into their ROI calculations, companies can gain a more comprehensive understanding of the true value of automation. Pelican Robotics is at the forefront of this shift, offering solutions that not only promise savings but also deliver strategic advantages with easy to deploy solutions for future growth and competitiveness.
In the evolving landscape of automation, the key to unlocking hidden savings and achieving sustainable growth lies in recognizing and optimizing the true labor costs. Let Pelican Robotics guide you in uncovering these opportunities and transforming your operations for the better.
Financial Assistance and ROI Analysis Through MEPs
Acknowledging the daunting initial capital investment for small and medium-sized enterprises (SMEs) contemplating automation, Manufacturing Extension Partnerships (MEPs) emerge as a crucial ally. These partnerships not only offer guidance on funding options but also play an instrumental role in delineating the economic gains of automation through thorough ROI analyses, including potential cost savings and payback periods.
Manufacturing Extension Partnerships (MEPs) are pivotal in showcasing the financial benefits of automation by conducting thorough Return on Investment (ROI) analyses. These assessments not only spotlight possible cost reductions but also offer insights into the investment payback time, aiding small and medium-sized enterprises (SMEs) in making well-informed choices for their automation initiatives.
Operated by the National Institute of Standards and Technology (NIST), the MEP program functions as a cooperative effort between public and private sectors, extending its reach across all 50 states and Puerto Rico. Its primary aim is to bolster the productivity and technological prowess of the American manufacturing sector, with a special focus on assisting SMEs. This is achieved through a nationwide network of reliable advisors and specialists who deliver essential support to manufacturers, encompassing process enhancement, workforce training, and the integration of new technologies.
With its widespread impact, the MEP National Network has marked considerable successes, including engagements with over 36,000 manufacturers that have contributed to $16.2 billion in sales, achieved $2.9 billion in cost reductions, spurred $4.8 billion in fresh investments, and played a key role in the creation or preservation of more than 107,100 jobs. The network's funding model, which splits costs between federal funding and contributions from state/local governments, private sectors, and client fees, is designed to ensure that MEP services are accessible, especially to smaller manufacturers that might otherwise struggle to afford such assistance. The effectiveness of the MEP program stems from its collaborative model, which fosters partnerships at multiple governmental levels to provide all-encompassing support to the manufacturing industry.
National Institute of Standards and Technology. (n.d.). "For the past 30 years, the MEP National NetworkTM has equipped small and medium-sized manufacturers with the resources needed to grow and thrive. Our industry experts work side-by-side with manufacturers to reduce costs, improve efficiencies, develop the next generation workforce, create new products, find new markets and much more. Together, they strengthen communities and U.S. manufacturing." Manufacturing Extension Partnership (MEP). Retrieved March 4, 2024, from https://www.nist.gov/mep
For additional information about the Manufacturing Extension Partnership and its offerings, the NIST MEP website offers a wealth of resources and details about the program's significant contributions to the growth and prosperity of small and medium-sized manufacturers over the past three decades, emphasizing the collaborative efforts to lower expenses, enhance operational efficiency, foster workforce development, and explore new market opportunities, thereby reinforcing community and national manufacturing strengths.
National Institute of Standards and Technology. (n.d.). Manufacturing Extension Partnership (MEP). NIST. Retrieved March 4, 2024, from https://www.nist.gov/mep
