How To Calculate Automation CapEx ROI

When making your CapEx plans it is always useful to know the ROI of any proposed expenditure.  However, this can sometimes be difficult to calculate as there are often several different factors that need to be taken into account to ensure that you have a realistic figure to work with.

Firstly there are the tangible aspects that need to be calculated such as:

  • What is the current production efficiency and what percentage increase in production output am I likely to achieve by installing an automated system?
  • How long does existing machinery remain idle whilst staff stop for breaks? How much extra production throughput will there be if the machinery doesn’t have to stop?
  • How many extra shifts could be accomplished with an automated system? What is the value of this extra production?
  • Given the benefits the system will bring, what is the payback period of this investment likely to be?

Then there are the many intangible aspects that also need to be taken into account.  These include:

  • What is the value of having less health & safety issues by using an automated system?
  • Will automation allow me to reduce my production costs and thus secure more market share? What is the value of this extra market share likely to be?
  • Might my competition automate ahead of me instead, and what impact is this likely to have on our market? What value of market share may I potentially lose to competition if I don’t automate?
  • Are staff struggling/getting bored of the manual labour aspect of their job? Is staff turnover going to be an issue and what is the cost of this likely to be? Is it becoming more difficult to recruit staff for manual job roles?

More information on how to define the value of intangible benefits is available here

Having calculated the value of both the tangible and intangible benefits for the project, you will have a better understanding of the implications for the company of automating vs not automating the process.  Using this process to evaluate all of the CapEx projects you are considering will give you comparable figures you can use when comparing potential projects as you will have a standardised set of data from which to compare the merits of the different projects.  This will enable you to make an informed decision as to the order in which to prioritise your projects based on their ROI value to the company.

To help with calculating the ROI of any proposed automation CapEx plans we have created a couple of useful downloadable calculators:

These calculators will enable you to quickly calculate both the tangible and intangible benefits of any proposed CapEx projects.

If you are looking to introduce any automated palletising systems into your process then you may find our project builder tool very useful for getting a quick budget quote on an automated palletising system.

If you have any questions or difficulties filling it the calculators then feel free to
If you have any questions or difficulties filling it the calculators then feel free to
contact us on 01223 499488 or and we’ll be happy to help.


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