Articles

How should you justify investments in packaging automation?

By Aren Buresh
Posted In : Automation, packaging automation, Labor, cost

Building a business case for implementing automation on your packaging line is no easy task. The project is a large investment, and like any other business investment, it needs to be justified.  

In many cases, this justification includes a strong financial return on investment. While that’s important to calculate, the increasingly strategic nature of automation warrants a broader approach than simple financial analysis. 

When evaluations are heavily focused on just the investment itself, the overall impact can be under-valued. Narrowly scoping investment benefits can underestimate the business case. Value should be construed more broadly than cost reduction alone, and can surface in many forms including: 

  • Increased revenue, growth, quality, customer service, and production flexibility 
  • Reduced time to market, improved working capital, and lower taxes 
  • Decreased compliance risk 

We’ll evaluate a few areas beyond ROI for deeper consideration when justifying your automation project. 

Labor Availability 

This complex issue is often at the heart of any automation project justification, and worth considering from different perspectives.  

In the food industry, a 2018 Manufacturers Alliance Association Trends Survey estimates recent turnover between 30-32%, however turnover rates in some regions can approach 90%. At the production level this is a common source of anxiety and cost, not to mention the outsized FDA compliance risk associated with human error.  

Automation has a broadly positive impact on process consistency, quality and yield versus manual or semi-manual efforts.  

Commercial or Custom Solutions? 

One aspect of automation that can be misconstrued is the impact of Commercial-off-the-Shelf (COTS) versus “custom” solutions, which can have important maintenance and support cost consequences.  

Complex automation is more accurately described as “configurable COTS,” as these solutions are often tailored to a specific production environment. However, hardware components in COTS-based solutions that can be sourced from a wide range of suppliers ensures access to competitive replacement pricing.  

Custom solutions often incorporate more proprietary technologies, with limiting sourcing options and higher cost. COTS-based component designs typically embrace industry-standards and communication protocols which lower integration costs, while widely available sourcing ensures competitive pricing.  

Marketing and Brand Benefits 

The marketing value of packaging is undeniable. Appealing packaging plays a psychological role in the decision-making process, presenting the ultimate opportunity to communicate the brand’s message visually. That is key since it’s estimated that as much as 60-70 percent of buying decisions are made in the store.  

Suffice to say that new packaging investments that create or enhance value-add marketing opportunities should be part of the ROI calculation. 

Impact on Sustainability 

New food packaging automation solutions that enable innovative approaches to the burgeoning focus on sustainability can impact both the revenue and cost factors of your justification equation.  

For example, active and intelligent packaging technologies promise to prolong shelf life while improving product quality and consumer safety (waste reduction). There are new technologies that address passive food packaging characteristics, e.g., mechanical strength, barrier performance, and thermal stability – all of which also reduce waste.  

Case in point is PaperSeal, a joint effort from Harpak-ULMA, G.Mondini and Graphic Packaging InternationalThis method replaces rigid 30 mil plastic trays with strong, highly brandable paper trays that employ a 3mil sealable plastic liner that results in zero seal scrap. The company estimates it will eliminate almost 90% of traditional single use plastic in its PaperSeal tray products. 

The Value of a Smart Connected Packaging Platform 

If you’re considering a smart, connected packaging platform, don’t overlook the business impact of the platform’s more advanced capabilities.  

For example, such systems help mitigate investment risk as they typically are more easily reconfigured should the intended product line go away. Also, they can be redeployed and supported worldwide with less modification as they characteristically comply with international electrical and safety standards.  

Concepts such as integrated safety don’t just make a packaging line simpler and safer, they also deliver more uptime and a measurable improvement in Overall Equipment Effectiveness (OEE). Also, safety and insurance experts can help document savings from lost work avoidance or lower insurance premiums.  

Lastly, a well-designed packaging automation platform can efficiently scale throughput up or down with reduced attention from plant personnel. For some processors, seasonal order spikes alone may justify an automation investment that is otherwise under-utilized the rest of the year. 

A Note of Caution 

Given the potential breadth of factors that influence an automation investment, it’s very possible to fall into the trap of over-specifying, over-complicating requirements, or simply overspending.  

Step one should include fielding a project team with deep understanding of your organization’s processes and manufacturing systems. They can help balance the optimal level of complexity that meets both current and potential future needs.  

The cost of future system’s changes or redeployments can be minimized by avoiding overly narrow requirements or specifications in the design phase that hinder your ability to adapt an automation solution as needs change.  

Ask Yourself Important Questions Upfront 

Now is the time to quantify estimates of future market expectations, and drive consensus on projected product growth, as well as minimum and maximum production volumes. Consider the positive or negative financial impact of market labor availability, turnover, and training.  

In this fast growing and competitive market, how well do you understand customer expectations and their impact on solution design and cost?  

Are growing social pressures related to sustainability and waste important to corporate goals or branding?  

A project team that identifies and incorporates all such relevant stakeholder priorities helps ensure a broad base of support at the funding approval stage. 

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