Robotics is gaining acceptance in the middle market as a way to improve efficiency and provide relief in a tight labor market. For many, automated systems will account for 25% of capital spending over the next five years, according to a 2022 McKinsey Global Industrial Robotics Survey. Automation will represent 30% or more of their capital spending for logistics and fulfillment players in the next five years— the highest share among industrial segments surveyed.
The survey noted the top applications for robotics in industrial companies are palletization and packaging, material handling and ground movement, and goods receiving, unloading, and storage.
Industrial robotics ROI
Despite significant capital commitments, McKinsey notes that many companies struggle with a robotics knowledge gap and return on investment (ROI) challenges. According to a study by Boston Consulting Group, industrial companies that invest in robots typically achieve an ROI of 10-15% within the first year, and even up to 20-25% within 3-5 years. And yet another study by the Robotics Industries Association found that the median ROI for robots in the US is 1.3 years.
Packaging is one of the top areas that companies are turning towards robotics to improve efficiency and costs. When asked about some of the common misconceptions encountered when a new customer comes to Arnold Packaging, Mick Arnold, president of Arnold Packaging, told Hartman Executive Advisors, “Few understand and appreciate how technical packaging can be and, all of the factors we consider when assessing new or existing packaging. We use the Pillars of Profit to break down and analyze six key factors contributing to effective packaging.”
Industrial robotic investments help improve order accuracy and solve common challenges like pick and pack errors. Tedious jobs typically carried out by humans can instead be done by autonomous mobile robots (AMRs), eliminating non-productive walking time, which makes up 60% of manual picking time, according to Gartner.
Gartner further notes that picking robots can also speed up processes during busy periods, such as peak season. This is because they can quickly retrieve products and bring them to picking stations, and extra robots can be added when demand picks up and removed once things quiet down. The practice of utilizing robots during busy periods such as peak season reduces the need to hire and train temporary workers.
Evolving customer requests, such as those involving costs, have also helped encourage the need for robotics. “We are pressing customers to take a holistic look at their packaging using the Pillars. Provided the customer is NOT experiencing damage, the type of request usually revolves around cost-related urgency. The biggest challenges in the most recent years are freight (excessive cost increases in the market), materials (rampant inflation), and productivity imbalance (rising labor costs),” commented Arnold.
Identifying opportunities in your enterprise
Although robots hold great potential, it’s important to have a plan and business case before implementing them. According to the 2023 MHI Annual Industry Report, “the number one barrier to robotics adoption is the lack of a clear business case.” The following steps can help organizations evaluate options and choose the right robotic solution for their operation:
- Define your objectives.
- Determine your key decision drivers – costs? Lead time? Throughput?
- Evaluate solutions and vendors.
- Create a multi-year map including both short and long-range goals.
As organizations pursue robotics investments, Mick Arnold tells Hartman Executive Advisors the biggest mistake is focusing on just one element. “Packaging material costs are a tiny percentage of the total cost when you figure in freight and labor. The easy move, especially for a buyer, is to just beat up on price,” Arnold said. “The holistic approach would have one considering package size, weight, palletization, etc. Then, consider the labor committed to producing packages vs. the number produced (productivity). While considering those, you would also assess material reduction opportunities, customer experience, and sustainability. Again, this all assumes there is no problem with damage. If the product isn’t getting from A to B safely, that comes above all else,” continued Arnold.
Benefiting from industrial robotics investments
While the advantages of robotics are numerous, organizations often face challenges in comprehending the market and deciding where and how to initiate their robotics journey. Hartman Executive Advisors provides unbiased IT leadership and advisory services to evaluate your operations and determine how IT can better support your business goals. Contact us to learn more about how we can help.