Justification For Flexible Assembly Automation

Many companies seem unsure how to approach the justification of assembly automation. For most products, direct labor is less than 10% of product cost and management views this number as too small to justify the time and capital expense associated with automation. Even improvements in quality are often not enough to justify automation. However, when automation is analyzed as a means to improve plant capacity, the analysis is much more favorable. Often 30 to 40% of a product's cost is associated with manufacturing overhead. Increasing plant capacity can decrease the per-unit cost of manufacturing overhead. An example of this type of analysis is given. A case study where unit costs were reduced 40% is presented. Flexible automation is contrasted with fixed automation and the concept of adding capacity in small increments as volume grows is introduced.