How to calculate the return on investment for robotisation and Industry 4.0, or what is ROI?

Today, as companies look for ways to become more efficient and competitive in the marketplace, industrial automation and robotisation are becoming key tools in achieving these goals. But how to assess the profitability of such an investment? The answer lies in the concept of ROI (Return on Investment).

How to calculate ROI for automation and robotisation?

To accurately understand the profitability of investing in automation and robotisation, it is worth considering the following factors:

• Implementation costs: In this regard, we take into account the purchase and installation of machinery, training of employees and adjustment of infrastructure.
• Operating costs: These are costs related to maintenance, repairs, energy and consumables.
• Productivity gain: Automation often leads to increased production efficiency, which directly affects revenue.
• Reduction of labor costs: Ability to replace human labor with machines translates into wage savings.
• Product quality: Better quality means fewer complaints and higher customer satisfaction.
• Payback time: A key indicator that determines when an investment begins to make a profit.
• Scale of production: Increasing capacity can significantly affect ROI.
• Risk: Any potential risks, such as failures or changing market demands, which could affect the profitability of the investment.

Example of ROI calculation

Imagine a company that has decided to invest in an APAGroup palletiser for €100,000. Annual operating costs are €20,000, and projected savings from reduced labor costs are €30,000. In addition, automation brings €50,000 in additional revenue through a 20% increase in productivity.

To calculate ROI:

Annual benefits = Salary savings (€30,000) + Additional income (€50,000) – Annual operating costs (€20,000)

ROI = Annual benefits / Investment cost

ROI = €60,000 / €100,000 = 0.6 or 60%

In this case, the company receives a 60% return on investment, suggesting that the investment will pay for itself after about 1.67 years.

Summary

ROI analysis is essential to assess the profitability of investments in automation and robotisation. While the above example is simplistic, in reality the analysis can be much more complex, taking into account additional risk factors, variable costs or unforeseen market changes. Therefore, it is important to carefully analyse all aspects of the investment before making a decision.