In Part 1, I explained some of the indicators of a need to implement automation in your process, and some of the challenges you needed to anticipate and control during the implementation.
Let Me Tell You a Story
This is the story of a manufacturer with two endings – one happy, one sad. The company printed and labeled widgets at a rate of 100,000 per day with 15 employees on task in an environment that created an overhead of $22,000 per laborer. The supervising print manager, unable to keep up with that large a shift, threatened to quit, forcing the owner to offer him an extra week’s vacation immediately, and each year thereafter, to stay on the job.
A year ago, the CEO/owner received an email from his engineering manager. The PPMOVT sales rep was nagging him to consider a really expensive ink jet machine. The cost was $350,000 and ran at an operating speed of 150,000 widgets per day. In his opinion, the expense and production was far more than their company needed, but he wanted to keep the owner informed of what was available.
The owner summoned his engineering manager to his office. “How many people would it take to run this machine? What would the operating costs per widget be?” The manager had done his homework. “The ink cost per piece would be less than it’s costing now, and one unskilled person could operate the machine. But how could we afford such a big investment?”“We can’t afford to not buy it. Our total ROI would be less than 14 months!” (This didn’t even include the cost of the disgruntled print manager, who earned $56,000 per year.)
The Happy Ending:
The owner purchased and installed the new equipment, and was able to reduce the price of his widget by two cents apiece. Sales increased and their biggest customer dropped his Chinese supplier to give them the work.Over the next 12 months, profits increased by $300,000 and they hired 14 people to fill additional jobs created in the customer service department. Now that’s what I call ROI. They lived happily ever after.
The Sad Ending:
We have all personally known companies that have gone out of business because they never picked up on opportunities like this; companies that wouldn’t make the hard but necessary decisions to support growth.The alternate ending to this story? The CEO allowed himself to be convinced that the more powerful ink jet’s expense was not worth the risk, and some of their long-time employees would be out of work, too old to find new employment. They subsequently lost orders to other manufacturers who invested in new automation, which resulted in poor old ‘Jane,’ the operator who complained her replacement would be a machine, losing her job, along with the 250 other employees who went on unemployment.Then the snack bar around the corner from the formerly thriving manufacturer closed, leaving Jim the proprietor without an income and his Chef looking for a new job.Several other former vendors went out of business as well because they no longer received orders from their preferred customer. THE MANUFACTURER HAD GONE OUT OF BUSINESS.
Join the conversation! How have you handled growth and change in your workplace? Are you involved in the tough growth decisions?
Engineered Printing Solutions custom solutions sometimes involve designing and engineering automation capabilities. When appropriate, we recommend an upgrade from your existing equipment. Why would you do that? After analyzing your current process, we sit down with you and discuss where you can save time and money by investing wisely in a custom automated system.
A successful business makes wise investments that increase in value over time. We all know time is money, but we forget that the time needed to gain a return on our investment is crucial in making decisions. A 10% return on an initial investment within one week would be classified as a huge windfall. A 10% return in 10 years, even in today’s soft market, would be a wasted effort.
So when is the right time to consider automation?
- It’s time to consider automation when you find your business losing time in setup, prep and assembly, especially when there aren’t enough hands to go around. It’s time when you want to grow your business but your staff can’t keep up with the orders you have.
- It’s time if the form of automation has a reasonable ROI (return on investment) based upon industry norms. Automating can be as simple as moving a box that stores work-in-process to a more convenient location, making the job easier and quicker, saving time and therefore money. Your investment in this sample is 10 minutes of time to come up with an idea and 15 minutes implementing the idea (25 minutes total investment) which subsequently saved 5 minutes per day. ROI = 5 working days = excellent investment, when the industry standard on ROI is 16 months!
- It’s time when the cost of labor is holding back your growth. If your company is in the business of manufacturing, in most cases your single biggest expense is labor. This is where automation can become an emotionally charged issue among employees. How many times have you heard people complain that the boss is going to replace them with a machine. Perhaps technically true; however, the bigger picture is that you must yield a few jobs to chores a machine can’t do in order to grow the company. It also provides an opportunity to retrain or release those employees who had limited or no growth potential. In order for a business to survive and thrive automation is one of the simplest tools to implement.
- It’s time when you want to expand your business with cash and labor invested wisely, with one eye on your ROI and the other looking toward potential growth. If you had some money available and could get a 10% ROI in a month, would you do it? Would you do it if it was relatively risk free? I’ll bet you’re smiling now!
In our next post I’ll tell the story of one CEO’s “no-brainer” decision in a tale with two endings: one happy, one sad. Until then, consider some of our custom automation solutions:
Look at some of the videos. Can you imagine a similar step in your process?
Join the Conversation! How have you handled growth and change in your workplace? Are you involved in the tough growth decisions?
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