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4 Ways to Save Money with Automated Manufacturing Systems

April 24, 2024

 by Renaud Anjoran

manufacturing automation system

In the factory environment, efficiency and scalability are key drivers to success. Manufacturers across all industry sectors rapidly recognize the necessity to innovate and adapt. The evolution towards automated manufacturing systems is a strategic move to stay competitive and sustainable in a dynamic global market. Intelligent machines and flexible manufacturing systems are becoming the cornerstone of production lines, enabling companies to boost operational processes with minimal human intervention.

The transition to automation is driven by the need to enhance production capacity, maintain quality, and reduce operational costs. From significant labor expense savings to reduced management overhead, the benefits of implementing automated production systems are multifaceted. 

The 4 Ways Automated Manufacturing Systems Can Save Money

  1. Save on production operators’ wages

    According to Statista, manufacturing labor costs in 2020 were estimated to be US$6.50 per hour in China. This is compared to an estimated US$4.82 per hour in Mexico and US$2.99 per hour in Vietnam. With hourly wages rising in China, companies are looking to reshore their factories, especially in locations like Mexico, Vietnam, Romania, and India, where labor is more cost-effective.

    The annual cost of employing 11 operators—accounting for salary, social insurance, and other benefits—is RMB 500,500 (3,500 RMB x 11 x 13 months), with a 12% annual increase in labor costs. Over a 10-year period, the total cost of manual labor surpasses RMB 6,000,000, making the RMB 3,000,000 investment in machinery significantly more economical in the long run.

    Beyond the direct savings on labor costs, automating production processes enhances overall operational efficiency. It can eliminate the need for certain logistics roles and streamline data management by integrating new equipment with ERP systems, thereby reducing the necessity for manual data entry. These improvements reduce labor needs and significantly enhance the company's EBITDA by lowering operational costs and improving profitability margins. The strategic reduction in overhead and operational expenses through automation directly contributes to a stronger financial performance, underscoring the vital role of automated manufacturing systems in the modern manufacturing landscape.

  2. Save on management overhead

    The fully loaded cost of employing people is not only their wages. Here are a few ‘hidden costs’ that many managers overlook.

    Replacing an operator consists of finding and hiring a replacement and training this new hire while production time is lost and quality is compromised. Many companies have studied this and concluded the cost is about 25% of the annual salary.

    To get back to our example, let’s say that 7 of the 11 operators have to be replaced every year (this is typical in China). The related cost is 25% x (7 x 13 x 3,500) = RMB 79,625 per year.

    Another expense is supervising those people on a day-to-day basis. Let’s say a group leader is paid RMB 6,000 / a month to manage these 11 workers. A supervisor paid RMB 12,000 a month and spent 20% of his time managing this group.

  3. Reduce the cost of poor-quality

    In highly manual operations and the absence of proper training and mistake-proofing, operators cause many quality issues. Here are a few examples:

    - The two halves of a remote control’s casing are assembled, but a gap subsists between them.
    - The wrong wires are soldered in an electrical product.
    - Metal parts get scratched because they are not sufficiently “packaged” when transported from one process to the next.
    - The upper part of a shoe is not sewn correctly and breaks easily.

    As a result, an average of 30% of people is busy re-working in some factories. It sounds relatively high, but it is not readily apparent. Only when you start to count who does what does the problem become evident.

    Other costs of poor quality include customer claims, scrapped material, expedited shipments, and an unnecessarily high number of inspectors.

    With well-setup and well-maintained automated manufacturing system technologies, issues are detected more efficiently and instantly addressed. This can deliver much more consistent quality.

  4. More targeted sales & marketing efforts

    Given the cost and quality benefits of a well-oiled automated manufacturing system, some customers look specifically for manufacturers that have automated their processes.

    If that’s your case, you can target more prominent companies, have something exciting and potentially unique to say, and enjoy shorter sales cycles. Hopefully, you can say goodbye to “spray and pray” marketing channels such as Alibaba and trade shows.

    All in all, robots and other automated equipment hold significant promises. Calculations of return on investment are often apparent, with payback periods sometimes under three years.


The Strategic Advantage of Automation Manufacturing Systems

The shift towards automated manufacturing systems encapsulates a strategic evolution in the industrial sector, driven by the imperative to enhance efficiency, scalability, and cost-effectiveness. This transition responds to evolving market demands and a forward-looking approach to redefining operational excellence. With automation, manufacturers unlock substantial savings, improve quality control, and streamline their sales and marketing strategies, paving the way for a more sustainable and competitive future. Ultimately, embracing automation is a testament to a company's commitment to innovation and vision for a more efficient, resilient manufacturing landscape.


 

Topics: Cost Reduction, Automation

Renaud Anjoran

Renaud Anjoran

15 years experience in China.
Partner, China Manufacturing Consultants.
Worked with hundreds of factories in China.
Certifications: ASQ CQE & CRE; ISO 9001 & 14001 lead auditor.
Author of well-read blog, Quality Inspection Tips.

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