Figure Out Your Automatic Guided Vehicle ROI
By MHI Industry Group, AGVS (Automatic Guided Vehicle Systems)
There are many ways to calculate ROI for the use of Automatic Guided Vehicles (AGV). Some are very simple and can give a rough idea of the ROI of a project, but the simpler the calculation, the more variance you may have because it does not take into account other direct and indirect costs (soft benefits). Direct costs are the typical costs you have to sell your boss on: hourly wages, overtime, equipment, etc. Indirect costs are those intangibles that can be hard to put numbers to, like increased safety, reduced workforce costs and product damage, and more! We’ve actually taken a deep dive into these different benefit types in our webinar “Hard and Soft Benefits of Owning an AGV”, which you can view on our website.
Different companies use different costs for determining return on investment, so the things we can list on the spot as direct and indirect costs/benefits aren’t all encompassing. However, you can make a simple ROI calculation by taking the annual wages per employee times the number of positions divided by the price of the AGV system. In a formula that looks like
Wages x Positions / price of AGV system
If you want a little better calculation, take the annual burdened cost of an employee (including benefits) and add overtime costs per person times the number of positions to get the total yearly position costs. After that, take the cost of buying new manual forklifts/equipment, and then add this to total yearly position costs. Then take the cost of the AGV system and divide by that number. You may be able to disregard the maintenance of the AGV, as it may be similar to the maintenance of most other equipment.
…Have we confused you yet? Here is the same information in a mathematical formula:
((Burdened Wages + Overtime) x Positions) + (Forklift cost) = Year 1 Cost
Cost of AGV system / Year 1 Cost = Years to Break Even
Finding the break-even point is part of the story, but potential buyers should also look at the impact over time, since most Automatic Guided Vehicle System will last 10-15 years. This impact over time (at least 5 years out, preferably 10) will show long-term savings, which in turn can show the value/justification for an AGV solution. For this, use the Year 1 Cost, and then use the total yearly position costs for years 2-10. See below an example long-term savings (numbers are just for example):
As you can see, there are actually quite a few factors into figuring out the ROI of investing in a AGV, but members of the AGVS Industry Group are experts at creating these calculations, to whichever level of detail works for your company. If you have questions about the benefits of integrating AGVs into your supply chain or how to justify the upfront cost to your boss, let us know and we’ll be happy to help. Visit mhi.org/agvs to learn more.