<p style="text-align:justify"><span style="font-size:14px"><strong><a href="https://edupmquestionhelp.s3.ap-south-1.amazonaws.com/hint/uploads/images/16300552371630055237.mp4">Click here to visualize the topic better</a></strong></span></p>

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	<p><span style="font-size:14px">In many areas like chemical manufacturing and food-pharma where human intervention is not allowed, adding robots helps to save capital and in a way safeguard manpower from hazardous activities. In layman terms,ROI = Gains from Investment - Cost of Investment.</span></p>
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	<p><span style="font-size:14px">The gains from investment are the reduced labour costs and additional earnings achieved&nbsp;due to an increase in&nbsp;productivity after the installation of a robotic cell.&nbsp;The cost of investment includes the one-time capital cost of purchasing and installing the robot, as well as the operating cost of the robotic system.</span></p>
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	<p><span style="font-size:14px">The operational cost of the manual process is calculated by considering the following factors: number of workers per shift, number of shifts per day, total operators and annual compensation of the operators which gives us the total labour cost.</span></p>
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	<p><span style="font-size:14px">The cost of investment comprises the following factors: total proposed robotic system price, number of robots in the system, number of robot operators per shift, number of shifts per day, total operators, the annual compensation of the operators and estimated electrical cost of the system which gives us the system cost.&nbsp;</span></p>
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<p style="text-align:justify"><span style="font-size:14px">Taking a real-world robotic automation example that assumes the robot will work three&nbsp; shifts a day, five days a week, 50 weeks a year and neglecting electricity for ease of calculation:</span></p>

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	<p><span style="font-size:14px">Current labor costs: three operators per shift x 2 shifts = 6 operators x USD100,000/operator = USD 600,000/year</span></p>
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	<p><span style="font-size:14px">Total system cost: USD 255,000 (robot cost of&nbsp; USD 85,000 x 3)</span></p>
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	<p><span style="font-size:14px">Labor with robotic system: Estimate 25 percent of current labor costs, i.e., USD 600,000 x 25%&nbsp; = USD 150,000/year</span></p>
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	<p><span style="font-size:14px">Labor savings: Current labor costs (USD 600,000) - labor for robotic system (USD 150,000) = USD 450,000</span></p>
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	<p><span style="font-size:14px"><strong>ROI:</strong> USD 195,000 in the first year (USD 450,000 - USD 255,000)</span></p>
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<p style="text-align:justify"><span style="font-size:14px">Example in INR (comparatively lesser&nbsp;labour costs and more number of labor per task):</span></p>

<p style="text-align:justify"><span style="font-size:14px">Current labor costs: Four operators per shift x 3 shifts = 12 operators x Rs.2,40,000/operator = Rs.28,80,000/year</span></p>

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	<p><span style="font-size:14px">Total system cost: Rs.18,00,000 (robot cost of Rs.6,00,000 x 3)</span></p>
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	<p><span style="font-size:14px">Labor with robotic system: Estimate 25 percent of current labor costs, i.e., Rs.28,80,000 x 25%&nbsp; = Rs.7,20,000/year</span></p>
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	<p><span style="font-size:14px">Labor savings: Current labor costs (Rs.28,80,000) - labor for robotic system (Rs.7,20,000) = Rs.21,60,000</span></p>
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	<p><span style="font-size:14px"><strong>ROI:</strong> Rs.3,60,000 in the first year (Rs.21,60,000 - Rs.18,00,000)</span></p>
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<p style="text-align:justify"><span style="font-size:14px">Hence, the cost of the robot system is paid for in just over a year. Those numbers look pretty good. In fact, the robot will last for many years (approximately 5-7 years). Therefore, once the initial robot cost is covered within the first year of installation, the payback dramatically increases. A good rule of thumb is to target no more than a two-year ROI, which will still drive five years of solid returns in a typical robot application. </span></p>

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