After the installation of this system, the customer had increased employee flexibility, handled a larger order volume in a smaller facility, as well as increased their shipping trailer capacity. All of these benefits equated to cost savings that weren't initially expected.
When considering why some manufacturing and distribution companies have implemented automated material handling systems, you will often first hear of financial statements including a solid Return of Investment (ROI), prompt Payback Period, or Strong Internal Rate of Return (IRR). Companies are often looking for pre-defined ROI periods, and from these financial calculations, company executives make their decisions. While it cannot be debated that the financial justification for an automation project is very important, financial evaluation alone should not be the only criteria when considering whether to automate.
Study the top-performing companies across all manufacturing and distribution providers and a simple truth will emerge: the ability to produce consistently high-quality products and accurate orders, at the exact time the customer requires them, and for a globally competitive cost, and your company will exceed revenue and profit goals that were once thought unobtainable. While strong financial performance of a company is the ultimate goal, achieving and sustaining this goal is not always through a quick financial payback but a strategic mission that involves a deeper consideration of all benefits. A few of these benefits of automation that do not always make it into the justification discussions include:
- Improved Quality and Order Accuracy – Producing high-quality products and accurate orders is a significant key for customer satisfaction that will eventually result in additional business. Proving to your customers that you can handle more without creating a sense of hysteria and chaos, you will earn not only more business from new customers, but also additional business from existing customers.
- Reduced Time to Order Completion – End users of almost every industry today desire to have fewer products on hand within their facility. Automotive companies are moving to Just-In-Time delivery. Food and beverage supply companies are demanding store-ready pallets, and just about everyone is requesting less overall product. This initiative drives a faster time for order completion. Automation systems often times allow their owners the opportunity for moving product faster, with less waste, and greater accuracy.
- Customer Buy-In – Your top customers will enhance your efforts of automation. Through automation of your operation, customers will see your company as sustainable, cutting edge, innovative, and over time more dependable.
- Increased Flexibility – The companies with the best automated processes will be better positioned to respond to the ever changing demands of their customers. Today more than ever, our customers’ products and demands are more frequently changing. An automated, flexible process that is more able to adjust to a dynamic product mix and product make-up “on the fly” will outgrow their competition.
- Improved Employee Satisfaction –The employees within your organization want to do a good job. The goal of automation should be one that replaces human efforts in areas where employees perform dangerous and repetitive jobs. Improving workplace safety is often difficult to incorporate into the initial project justification calculations, but safety should be the top priority of your organization and should not be forgotten.
- Increase Operating Hours – With an automation system there is a lesser need to shut down your operation, and the goal of a new automation system should be to work as long of hours as possible in order to obtain the maximum return.
- Labor Flexibility – Through automation you will not only employ less labor, but the labor that is employed will be more easily flexed for the business time of need. Over the years, I have seen some of our most efficient customers employ temporary labor during the peak week of the month, peak day of the week, or even the peak hours of the day.
- Improved System Level Information – Through an efficient Warehouse Control System (WCS) or Manufacturing Information System (MIS), managing your business correctly becomes much more achievable. Having timely access to your current order completion status will allow you to better plan the next cycle, task, or process. These services include better reporting capabilities for facility management.
- Lowest cost – Along with the high quality, customers are demanding low cost. Automation is a great way to achieve both low operational costs and high quality. While the initial investment of an automated system can be challenging to justify, the ability to expand your product offering for a fraction of your competitor’s costs will separate your company from the others.
- Doing More With Less – An automated system will allow your company to produce and deliver more goods with less physical space required. With automation in place, there will be fewer requirements for inventories in process and longer term inventories, allowing more room for adding customers, products, or services (all elements that bring in revenue).
So next time your company considers automation, please think outside of the box when listing the benefits. When the justification begins with studying the financial conditions of the project and you hear the words ROI, Payback, or IRR, ask the room to consider some of the benefits above and together identify the true benefits to your company. The benefits might be much more substantial than originally considered.