Labor and Risk Avoidance: How to Justify the ROI in Your Production Process
By Fritz Buglewicz




In this series, we moved through the steps CapStone typically follows in any plant evaluation: Evaluate, Automate and Validate. In this post, we will explore the last step: Demonstrate.



If you have agreed that (1) “staying in the game” after evaluating your business model is the right decision, (2) automation has to be a part of the path forward, and (3) validating a bullet-proof automated process, the natural result of automation, then it begs the question, “How is all this justified from a return on investment (ROI) perspective, and how can it be demonstrated?”



The ROI resides in two large pools of labor and risk avoidance. First, labor. If direct production labor can be reduced by more than 50% utilizing automated material movement and robotics, as proved in multiple locations already, what does your analysis tell you? Compounded with increased capacity or, more importantly, reduced production time, how much better does an already good business case look? Current facilities that have adopted the technology are seeing payback in 12 to 18 months on labor reduction alone.



Next, risk avoidance, and that is the point of this post. If you could demonstrate a bullet-proof process, where no human hands touch completed pieces, trays and pallets, what does that really mean to your end customers and the United States Postal Service (USPS)?

“How is all this justified from a return on investment (ROI) perspective? The ROI resides in two large pools of labor and risk avoidance."


End customers will have greater confidence in the process and soon come to expect it, even demand it. The tools available to your sales staff to demonstrate an automated process, where a complete audit trail exists, can be innumerable. Imagine the tour of your production floor alone, compared to the rest of the players in your vertical. The answer is there is no comparison, and through reduced costs generated by automation, your price and or margins are better too. That added capacity gained now comes in very handy with no increased costs when customers are coming to you as the “gold standard.”

 

Next, imagine a process where multiple jobs can be co-mingled or co-palletized to take advantage of postage discount lifts without adding manual labor or complexity. The software available is already proven and out there for you. What is not readily apparent is the connective processes on the shop floor to take full advantage of those postage discounts, until now. Automated tray-based production is the key. The automation via material movement and robotics eliminates the labor and includes the scanning and tracking required. No longer handcuffed to job/customer-based or batch processing, the single unit tray-based workflow required in a true manufacturing process is attainable, with the Intelligent Mail barcode (IMB) tracking every piece, tray and pallet.



Next, the white elephant and 800-pound gorilla in the room, the USPS. Let’s face it, full implementation of full-service IMB is inevitable and so is seamless acceptance. The USPS may delay and take longer to get it right, but it is coming. The question I pose to many players I run into is, “What happens in a seamless world when funds are removed from a CAPS account because of a processing/production error?” Interestingly, many times the answer is, “We don’t make errors, or we have really good processes so we are not worried about it.” My answer to that is, “Can you prove it? How do you know if a tray is misplaced by a minimum-wage worker at the end of the production line? How can you really prove every tray label and pallet label is correct before it leaves the facility when there are no more Merlins or postal personnel in your shop as a last line-of-defense to correct problems? Are you willing to gamble your company or customer’s account balance?”



The answer is you can’t because too many hands have hit every piece, tray and pallet and the mail is already at a USPS Distribution Center before it’s scanned the first time and assessed additional postage weeks later. Now, I’ll concede that you may not make errors, but the proof you have in your current state of operations is not going to be enough on any type of appeal for a refund on a CAPS account. What if the USPS makes a mistake? How will you defend yourself? I speak from experience that an appeal is winnable, but it takes time and solid proof. The ability to produce an audit trail report with time/date stamps at each stage of production where pieces, trays and pallets are all automatically handled gives you more than a fighting chance; it gives you the tools to take a giant leap forward, without the risk. That’s not a gamble, that’s a sure bet.