When is the right time to automate? One of my clients asked us to look at automation for their receiving dock. They were short on labor and saw a machine that could reduce the transportation time on their dock. We have a terrific integration partner for these types of requests so we had them take a look. The integration partner quickly saw that this was not a good opportunity for automation. Now if we had just looked at the raw numbers and the current labor challenges, we could have justified the capital expense. Unfortunately, I find equipment makers that are all too happy to take this narrow approach. But when you look at flexibility, variation of inbound shipments, physical constraints of the area, and maintenance skill sets this was not a good opportunity for automation. The return on investment for automation requires more than a few simple factors. So, what is the best way to think about the right time to automate?
First, I’d like to recommend that you listen to our March CI Mastermind Live session (click here) where James Ricci joined us to discuss DeRisking your Automation Deployments. Much of what James discussed relates to my thoughts on what makes a good automation opportunity. Here are points that I’d like you to consider:
- demand stability of the process and product line
- duration of return on the investment
- flexibility, both physical and process
- availability of knowledge and experience with the technology
I encourage you to email me with other areas of consideration. For the purpose of this article, this is a solid start. I’d also like to add that these are general enough that they could apply to a physical automation technology like robotics or a software technology like a new warehouse management system.
Demand stability of the process and product line:
Automation locks in processes. For a continuous improvement person, that makes me both happy and nervous. Happy because it is so hard to get people to do things the same way every time. Nervous because a modern business needs to quickly pivot and change processes to meet the demands of the marketplace.
I have worked with companies that have a 20 year contract with the U.S. government. With this kind of assurance they can build entire facilities with expensive automation. I have worked with companies where a typical customer project is no more than a few months and one project looks completely different than the next project. Any investment that they make in technology may be unnecessary for the next project. I hate seeing physical tools or software tools sitting idle. Humans are highly adaptable. Automation is not. If the processes and products are not stable, stick with humans.
Duration of the return on investment:
I worked with a company that purchased a highly automated production line to serve one client and one product. It was expensive. The business ran for about two years and then shut down. The equipment is idle now. They made their money back in the first year and the second year was all upside cash. It was probably a solid investment, but the key was that they knew they could return their money in a short time.
In my first example the ROI on the receiving dock was measured in multiple years. What if the size of the product changed in those years? What if the company needed to expand a different product line and the physical automation equipment was in the way? Automation becomes a monument against change. They are hard to move (physically or virtually) and this impacts flexibility. In this specific case, there is not enough assurance in the stability of future business to make that kind of capital purchase. Now this does not mean that a multi-year payback is always a bad idea. Again, clients with multi-year contracts should be looking at automation as a way to deliver higher value over time. The counter to this is that longer time duration allows for greater uncertainty and this must be factored in on any automation purchase.
Flexibility, both physical and process:
I am a big fan of workflow tools, especially if I can buy them as a subscription that can be turned on and off. They help my clients hold to the standard processes we create. There are two drawbacks. First, you often have to change your process to fit “off the shelf” software packages. For example, I recently looked at a really slick meeting management tool. Poorly run meetings (probably a topic for another article) are a significant inefficiency in large organizations. I liked the tool but only about a quarter of the meetings we run would fit the agenda structure of the tool. If I decide to use this with a client, I have to fit the software developers process and possibly lose some of the dynamism that separates a great meeting from a mediocre one. It is not ideal.
Low code modular software is allowing for faster development and greater flexibility than ever before. New robotic systems are lower in cost and more flexible. Still, these systems create a new level of rigidity inside the organization that may create new inefficiency and may even run up against the company culture. This will extend the timeline on the return on investment as the organization tries to integrate and adapt to new ways of working. I have countless examples of new software deployments taking years longer than expected and new robotics systems sitting idle while the companies figure out how to adapt their old flexible processes into these new rigid ones.
Availability of knowledge and experience with the technology:
I will state over and over again, until you are sick of hearing it, automation does not eliminate humans. People are needed to load the machine, check the data, maintain the system, troubleshoot the complicated interactions between physical mechanisms and the controlling software. Managing these automated systems is a skill. The skill is developed through both formal education and years of experience. For these reasons, managing automated systems requires highly compensated people that are scarce in the labor market. If you are an operation that is accustomed to working on paper, MSExcel files, or humans turning wrenches you need to be wary of that first automation deployment.
None of these factors should scare you away from automation. Companies must continue to find efficiencies to stay competitive. There are many common considerations when deploying new automation. Once you have gone through deployments of new software or hardware you start to learn how to make the next deployment better. Your staff develops the troubleshooting skills that now become a new asset in helping to find and deploy the next cool, new technology. Just do not underestimate the knowledge and experience required. There is a human investment needed with every automation investment.
Automation is not new. From the time of automated looms we have been finding new ways to harness energy and human ingenuity to remove the tedious work of making things and serving other humans. With this we have made possible an unimaginable number of human material comforts. Comforts once only available to the upper echelon of society are now available to massive numbers of people. It’s a beautiful thing for sure. At the micro level of our individual companies, we need to be careful about when and where we apply automation. You have to start somewhere, but be sure to think broadly about the return on investment and skills in-house before you begin.