Harness Automation for Competitive Manufacturing Cost Structures

by Emily Newton

Manufacturing cost structures represent the direct and indirect expenses required for a company to produce a product. Direct cost structures include raw materials, equipment purchases and employee wages. However, there are also indirect cost structures. Although people cannot trace those back to finished products, they categorize them as necessary to keep operations running. Building rentals and administrative needs some examples.

Strategic investments in automation allow manufacturers to cut costs and become more competitive. However, you must first know how automation can overcome identified challenges.

Reduce Labor Needs

Automation can minimize the number of people needed to achieve specific manufacturing output levels. That’s particularly beneficial since most manufacturers face ongoing labor shortages. Many industry veterans are close to retirement age, and replacing the talent can take a while. Additionally, some people from younger generations do not initially consider manufacturing a viable option.

However, automation can tackle labor shortages and employee-related costs. Some manufacturers in the tube and pipe industry use modular solutions that incorporate robotic work cells for various tasks.

Companies may have their equipment set up so one person oversees multiple cells. Plus, some industry experts have seen a low-volume-high-mix trend whereby manufacturers create a larger product variety but smaller batches. Modular robotic cells bring impressive flexibility to automated manufacturing, supporting quick changeovers and allowing more diversification.

Many employees worry automation will take their jobs. However, the more realistic outcome is that advanced machines allow them to retrain and do more interesting, less repetitive tasks. People can enjoy their work more and have a lower risk of bodily strains that can occur during manufacturing.

Minimize Downtime

Manufacturing downtime can create unforeseen extra costs, such as emergency callout fees or expenses associated with urgent equipment rentals. Assembly lines experiencing persistent stoppages lead to decreased employee productivity. Automation can target the causes of downtime, resulting in more output and better utilization of operational resources.

In one case, a consumer and industrial closures maker dealt with up to 10% downtime and had a labor-intensive manual process. It involved constructing cases, placing bags of closures into them, and inspecting and moving each. The circumstances were complicated because the producer ships its products in several different case styles.

The company saw several improvements after investing in several robots and changing processes. Downtime declined to 2.5% after six months. Monthly output also rose by 25%, and decision-makers plan to double the plant’s capacity soon.

Cutting downtime addresses equipment-related costs. Additionally, the output boost equips the company to compensate for other expenses that are less alterable.

Executives should take time to determine the cause of downtime and track associated metrics. They can then explore the most appropriate and effective ways to apply automation for increased uptime and output.

Manage Waste

Automation investments often help companies minimize wasted time or products that can lead to uncompetitive costs. Sometimes, simple changes bring substantial benefits. For example, people could save two-thirds on energy usage by only running air compressors during work hours. Workers commonly keep them idling constantly, meaning the equipment wastes power even when not in use. Installing a sensor to automatically activate or turn them off based on the time of day is an excellent first step.

Even when decision-makers recognize automation’s benefits, some don’t have the financial resources upfront to enter lease agreements or purchase the machinery. Fortunately, there’s a growing rental market for robots. Many logistics companies rely on it to decrease costs during their busiest seasons. Such arrangements generally reduce installation expenses and require the provider to cover maintenance needs.

Leaders at metal container manufacturer Behrens faced the common scenario of needing more workers despite hiring more rapidly than ever. In December 2021, decision-makers planned to add four cobots to production lines. Each machine puts holes into metal containers, creating the point where a handle is attached. Automating machines to support the existing workflow can address wasted time caused by inefficient or error-prone processes.

When Behrens invested in the four cobots, it also brought a new robot. Learning to program, maintain and troubleshoot that machine required sending four operators for a week of training, which cost several thousand dollars per person.

In contrast, when a problem arose with one of the cobot arms, the provider sent another by overnight shipping and had a technician available to install it on the day the piece arrived. The rental agreement between Behrens and the provider covered all the associated expenses.

The Behrens example shows people have more than one way to manage the waste associated with equipment faults. Sending technicians for specialized training took time and money, but it provided knowledge they could use for the long term. That means the company probably won’t need to budget for emergency callout fees from off-site specialists. Alternatively, choosing a rental agreement covering maintenance expenses eliminated the waiting time for ordering new parts from distant vendors.

Understand When to Upgrade Equipment

Manufacturers aiming to keep their cost structures competitive often grapple with whether repairing or replacing their equipment makes more financial sense. A practical way to begin addressing that question is to compare what’s available on the market to what the company has now.

Leaders should consider how much time an older machine might add to a workflow. It’s also valuable to assess whether purchasing a newer model of automated equipment could help a company keep up with industry trends.

Such was the case with a manufacturer specializing in plastic injection molding for the medical industry. A typical production run for the company consisted of 30 shots containing 15 individual components.

The business had relied on two coordinate measuring machines for the past decade, but executives realized it was time to budget for newer models. The chosen solutions had automated and data-capturing features that accelerated processes, provided richer insights and improved quality control.

Budgeting for a newer piece of automated equipment may be challenging for decision-makers to justify initially. However, they often realize it’s the best option for allowing them to manage costs over time. They can also increase competitiveness if the updated piece of automated equipment speeds up cycle times or provides other desirable changes in metrics.

Automation: Necessary for Modern Manufacturers

Retaining marketplace prominence while remaining at or under budget isn’t easy. However, these examples show how automation can bring numerous benefits to support cost structures and allow you to reduce excess.