Three ways a payback calculation lies to you, and how to make it tell the truth
Every automation quote comes with a payback number, and most of them are honest arithmetic on dishonest inputs. Here are the three places the number goes wrong, in order of how much money each one costs, with the fix for each.
The short answer
A payback number is a fraction: what the project costs over what it saves each year. Nobody gets the division wrong. The lies are in the numerator and the denominator, and there are three favorites. The cell is sized on the average rate and the savings assume it keeps up at peak. The labor saved includes hours that do not become money. And the project cost stops at the robot while the operating cost is left for the second year to discover. Fix those three and the number is worth reading.
Lie one: the rate
The cell is sized against the monthly report, where the line averages 50 cases an hour. The savings assume the stacker's whole day is freed. But the line hits 90 an hour at four in the afternoon, the cell falls behind, and a person steps in to hand stack the overflow. You now have a robot and a person doing the job the robot was bought to do, and the payback that assumed a full position freed is paying back half of one. The fix costs nothing: stand at the station with a stopwatch on your busiest hour and give the seller that number.
Lie two: the labor
The denominator says three material handlers spend 2.5 hours a day each walking totes, so a mobile robot saves 7.5 hours a day. True. But hours saved only become money if they turn into work the plant needs done. If the three people simply have a less hurried afternoon, the robot saved nothing you can bank. The honest version asks what the people will do with the time and counts only what converts, and it says out loud when the real argument is safety or turnover rather than hours.
The other half of this lie is the labor that was never there. Welding automation rarely pays back on wages because you could not hire the welder in the first place. Its return is the orders you turned down, which is a real number sitting in your quote log, and a different arithmetic from headcount.
Lie three: the cost
The quote says 65,000 dollars. The robot is 65,000 dollars. The gripper, the fixtures, the door opener, the guarding, the dust extraction, the risk assessment, the commissioning and the training are in a separate conversation, and the software plan, consumables and service contract are in no conversation at all. On this site the application guides publish an equipment range and an integration range side by side for exactly this reason, and the worked examples put an operating cost line in every calculation, because a sanding robot eats abrasive like Pac-Man and a scrubber comes with a software plan whether or not anyone mentioned it.
How to make it tell the truth
Write the fraction yourself before anyone sends you one. Numerator: equipment, integration, and a year of operating cost. Denominator: labor that actually converts at your real loaded rate, hours you can actually sell at your real margin, and scrap or rework you have actually measured. Then do it twice, once at your peak rate and once at the rate where the cell starts to fall behind, and see which side of that line you live on.
A note on prophecy
Scotty, on the Enterprise, famously padded his repair estimates so he could look like a miracle worker when he beat them. Payback numbers are the opposite tradition: shaved to look good at the sale and discovered to be optimistic at month fourteen. Neither habit helps you. A payback number is arithmetic on assumptions, not a prophecy, and the assumptions are yours to check.
If you want your own numbers run through this frame, give them to Joe, the concierge on this site. He states every assumption, shows the version where the answer is no, and will not quote you a payback he cannot show the inputs for.
Related on this site
- Size for peak, not average
- Payback when the labor was never there
- I never thought we could afford a palletizer. Here is how the analysis plays out
- How to read an automation quote
- I never thought we could afford mobile robots. Then we counted the walking
Payback lies at the inputs, not the division. Use peak rate, count only labor that converts, and put the operating costs on the same page as the robot.
Put it to the test on your own job
Tell Joe what you are running and he will apply this to your numbers, including telling you when a robot is the wrong answer.
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