Automation improves performance. Proving it is possible. We partner with our customers to help them assess ROI for their business.
Many industry players today are trying to tap into the value of more sophisticated automation for processing secondary devices.
The demand for automation surfaces across multiple internal stakeholders:
- Executive leaders seek to save on operational costs and increase margins.
- Operational leaders seek to improve scale and efficiency over current operations.
- The downstream sales team benefits from data uniformity and consistency achieved through automated processing.
- And each can benefit from increased velocity and a shortened cash-to-cash cycle.
Build vs. Buy
One of the missteps I frequently see customers take, however, is going it alone. They build internally by cobbling together a series of robots and automated tools to create an internal processing capability.
Struggles emerge, though, when the company finds that they do not have the right technology know-how in-house to sustain and improve their solution. They have to perform their own maintenance. The engineering support they need is more expensive than they anticipated. Adoption is slow. The solution never really matures. Eventually, it becomes obsolete and is then abandoned, delaying or even missing the impact the automation could have provided the company.
Calculating your ROI from automation is clearer when using a proven solution from a partner, with maintenance and onsite support to keep operations up and running. Such a partner can bring specialized expertise, evaluate your current operations, and share industry-leading practices to facilitate better scale and efficiency. Choosing the right partner allows companies to focus on the parts of the business they do best.
ROI Calculation considerations
Cost per unit (CPU) is generally the most important stat to evaluate the ROI of automation, adding up things such as people costs, software, and warehousing. However, a simple calculation misses the business complexity and added value that automation brings. The financial ROI is table stakes, but it is equally important to evaluate the positive impact on business strategy. Let’s dive into some additional components that can increase ROI and accelerate value for stakeholders across the company.
Financial Considerations
- OPEX vs. CAPEX: Automation as an operating expense stabilizes the variable spend and is managed as part of the day-to-day operations with greater flexibility and predictability.
- Talent is expensive because it is not predictable. Reliance on less labor contributes to lower training and labor acquisition costs especially through turnover or talent shortages.
- Minimize overtime and rework with known CPU. With automation, the CPU can actually go down with higher volumes.
- Improved diagnostic and functional testing allows for better segmentation of devices, determining where they go next and accelerating movement out of the warehouse.
- A smaller warehouse footprint can be used to process more volume.
Business strategy considerations
- Companies can shift their operations focus to improvements in other process areas (e.g., receiving, picking, packing, shipping, and QA). By optimizing all processes adjacent to automation, returns can be minimized.
- Better data management means you can ensure higher-quality data and visibility. You can improve margins through improved data uniformity and accuracy. Real-time data analysis is possible instead of waiting for data to be compiled and distributed.
- Automated and standardized grading becomes possible. In today’s environment, a grading discount is pervasive. Businesses buy from each other, and often have to re-triage devices to verify what’s “in the box” and often do a full re-grading effort. With standardized grading, companies don't have to do that. The price is the price and something closer to market value can be achieved because you're selling the customer what they actually bought. This minimizes Return Material Authorization and speeds up the process of acquiring new buyers.
- Automation offers intriguing possibilities for improving circularity capabilities. This is good for business, as an increasing number of customers are evaluating companies based on their environmental impact. In addition, automation can improve data capture, such as CO2 avoidance capture. Companies can become more of a trusted supplier in the industry because they have better data about their circularity impact.
Calculating ROI is situational for each customer. The choice becomes clearer when customers evaluate the build vs. buy and see the long-term investment and value. The case for automation must align with a customer's financial and business strategy.
If you are considering automation and not sure what’s best for you, I’m happy to discuss your situation and share learnings from other Apkudo customers using automation to improve business performance. Email me directly: randy.teele@apkudo.com.
