Economic Justification

Abstract

The methods utilized for industrial economic analysis are numerous, and range from very simple to very complex systems. It is generally the responsibility of the manufacturing engineer or applications engineer to develop basic investment cost and cost savings data. Generally, the engineer will also perform a simple payback analysis for projects being considered. In come cases, a complex payback analysis or return on investment analysis may be performed. For projects with high cost, the basic data may be further assessed by a cost engineering or accounting department using more complex calculations such as life cycle cost analysis. Generally, this type of analysis is performed by computer, with the most important aspect of obtaining accurate results being the basic cost-benefit data inputed by the applications engineer. This chapter will provide a basis for developing this basic cost data for robot installations, and will discuss simple payback, complex payback, cash flow analysis, return on investment, benefit/cost and break-even calculations. Robot Installation Cost Whether the analysis to be performed is a simple payback calculation or a life cycle cost analysis, the engineer should estimate all costs involved in the robot installation. It is possible that hidden costs such as maintenance training, upstream and downstream equipment modifications may influence the decision to precede with a robot installation. In addition to the cost of the robot, following cost considerations may be pertinent to a robot installation: 1. Accessories Cost. This includes optional equipment costs, special tools, test equipment, manipulators, etc. 2. Maintenance Cost. Periodic maintenance is required to keep a robot system in top working condition. A rule of thumb is an annual cost of 10% of the acquisition cost for maintenance of a two shift robot system.