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Gregory Shultz

Greg Shultz is the Principal Engineer for CenArk Controls, an automation integration company located in Central Arkansas. With over thirty (30) years of experience in the development and integration of manufacturing improves, Mr. Shultz has established himself as a recognized authority in the field ...

Category of Expertise:

Business & Finance

Company:

CENARK CONTROLS, LLC

User Type:

Expert

Published:

04/05/2019 03:13pm
DO NOT AUTOMATE

Apparently, my last blog struck a few nerves. I have received many questions and comments regarding Mistake 4 “Automation for Automation sake.” Here are a few examples*:

· “Why would you tell people to not automate? Automation increases revenue and keeps businesses competitive. To tell people different is wrong!” John, wholesale distributor.



· “I was going to contact you about helping with our automation, but now you say don’t automate? Do you want my business or not?” Marco, Manufacturing Engineer for an international firm.





· “Automation of any kind is good! We cannot compete with China!” Beverly, Engineering Manager for Industrial Valve solutions.



· And many more.

I appreciate feedback, even feedback that disagrees. It teaches us lessons and the lesson that I learn was I was not clear enough in my explanation. Below if the reprint of the section in the original blog.

“Every business decision must be justifiable. The justification may be in the form of improved quality, production capabilities, safety improvements or cost reversals. Any system upgraded without a full understanding of the true cost of ownership can be detrimental to any business.

This may sound like a contradiction to the previous topic, but in fact it is the same situation restated. At CenArk Controls, we receive request weekly to review business applications with the Client ready to purchase an expense automation system. The Client may have seen the proposed technology at a trade show or read about it in trade journals. It is not uncommon for us to arrive at the Client’s facility where they have a purchase order in hand. However, upon a full review of their situation we often discover that the solution is not what they had anticipated.

The Client may have expected the need of additional equipment to meet capacity, when in fact upgrades to the current equipment produced the required results at a much more reasonable cost while eliminating the need for additional training. The Client may have asked for a material handling system to be upgraded to sophisticated robotics or servo control, when their staff is only familiar with pneumatic systems. The Client may have a customer requiring real time data collection and expect to have to replace most if not all their production line. Simple sensors could be integrated into the existing line providing the required data collection without the need of process replacement. *

The solution is to verify the true requirement and develop a cost-effective, long-term solution. I am a proponent of automation but am also the first to admit that the act of automating for the sake of automating is unjustifiable and wasteful.”

It seemed clear enough to me, but then I realized that I have been in the automation “forest” for a very long time and may not have been clear enough. With your permission, please let me explain.

THE TRUTH


Every business exists to create profits. Regardless of it being a “profit based” or “non-profit based” business, you must sell you products and services for more than you pay for them and their manufacture. Any other option is bankruptcy. This is not a position of greed, in fact it is the opposite. Without your business there will be less tax revenue, fewer jobs, less resources and less stability in your area. Whether we are the business owner or employee, it is our obligation to insure these things are fulfilled and the best way to do so is keep your business profitable. So how does this tie into my comments about automation for automation sake? Simply put, do it logically and don’t assume you know the answer from your balance sheet. Here is how to automate correctly.

IDENFITY THE TRUE PAIN POINTS:

Assuming the issues you see daily are the true drain to your resources.


We are constantly asked to review projects where the Client believes there is a productivity issue. They are either unable to meet quality requirements, cannot meet demand or believe that there is too much labor cost associated with the process. Many times, they are correct. We would review their situation as immediately see their concern. Other times we would see the truth.

Overhead expenses are a hidden cost that is assumed to be difficult to control. Internal department cost, such as tool rooms, machine shops, energy, maintenance and labor are hidden in the monthly overhead of most businesses. However, these are the cost that should be taken into consideration first. Here is an example:

1. Client asked us to review a pick and place station to increase the speed of a packaging line. The product was simple to handle, and the unit would have cost $7,500 to install. This would have increased the lines speed by twelve units per hour for an annual increase of $24,000 in revenue. However, while watching the process it was noticed that an operator was sitting beside the conveyor line, dropping the product’s assembly instructions into the packaging. There was one operator per shift for three shifts performing this operation at an annual cost (including benefits) of $89,352.00. The cost to automate this motion was $6,750. The pay off for automating the instruction insertion was four weeks with an increase in profit of $85,000 annually where the pick and place had a payoff of four months with an annual increase in profit of $24,000. Which would you do first?



2. Client asked us to review their energy consumption. The client’s facility is a molding facility using multiple high-pressure molding machines, water temperature controllers and material dryer. They had purchased and installed a capacitor bank into their facility to control in the inrush of current needed by their equipment thinking it would reduce their electrical cost. It wasn’t working. Upon reviewing their facility, it was noted that they only ran two shifts yet left the equipment on to avoid down time at the next shift startup (material dryers need at least four hours to get to temperature). The capacitor bank could only control sudden fluctuations of energy use, but with the equipment constantly being in the ready state, even on weekends when no one was in the facility, the energy use was averaging on $20,000 per month. The solution was not the capacitor bank but the installation of low cost programable logic controllers (PLR) on all their equipment that would turn the systems on and off to meet their schedule. Total cost of installation was $22,500 with a annual decrease in utility usage of $84,232. The capacitor bank added no value to this application.



MISTAKE 3:

Assuming automation is too expensive.


The idea of automation is intimidating to many. We often hear, “If I am struggling with cash flow now, how can I afford to automate my facility?”, or “We cannot maintain a complicated system.”

These are common misconceptions. We only endorse the integration of automation for the following reasons.

· Quality.

· Productivity.

Poor quality or having an undocumented process is the fastest way to destroy a product line. In this case, businesses are forced to automation key aspects of their process or risk the loss of market share and revenue. Poor quality results in poor sales.

“Quality is always cheaper.”

W. Edward Deming

A process that is unable to meet demand will lose sales. Long tooling changes cause downtime and lost productivity. A business having these issues may be able to continue unchanged, however the continued burden of labor and overhead reduce their margins until the product becomes unprofitable. The result will be an end game to the product line.

In either of these scenarios, the lack of thoughtful automation integration is more expensive than any other alternative. In effect they cannot afford to not automate.

MISTAKE 4:

Automating for the sake of automation.


Every business decision must be justifiable. The justification may be in the form of improved quality, production capabilities, safety improvements or cost reversals. Any system upgraded without a full understanding of the true cost of ownership can be detrimental to any business.

This may sound like a contradiction to the previous topic, but in fact it is the same situation restated. At CenArk Controls, we receive request weekly to review business applications with the Client ready to purchase an expense automation system. The Client may have seen the proposed technology at a trade show or read about it in trade journals. It is not uncommon for us to arrive at the Client’s facility where they have a purchase order in hand. However, upon a full review of their situation we often discover that the solution is not what they had anticipated.

The Client may have expected the need of additional equipment to meet capacity, when in fact upgrades to the current equipment produced the required results at a much more reasonable cost while eliminating the need for additional training. The Client may have asked for a material handling system to be upgraded to sophisticated robotics or servo control, when their staff is only familiar with pneumatic systems. The Client may have a customer requiring real time data collection and expect to have to replace most if not all their production line. Simple sensors could be integrated into the existing line providing the required data collection without the need of process replacement. *

The solution is to verify the true requirement and develop a cost-effective, long-term solution. I am a proponent of automation but am also the first to admit that the act of automating for the sake of automating is unjustifiable and wasteful.

MISTAKE 5:

Assuming internal resources are a more cost-effective solution.


America is a Do It Yourself (DIY) culture. It is a natural assumption that if it can be done it can be done cheaper in house. Business owners think, “We already have technicians and maintenance personnel, so we can do it ourselves.” This is probably true. I am a strong believer in listening to the input of the people who work directly on the line. They know the processes; the equipment and they know the weaknesses of the current systems. However, other aspects of internal projects must be considered time, cost and bandwidth.

Any new development will take longer than expected. New applications will have a learning curve. This could include mastery of the technology to be utilized, system controls, programming, installation, processes timing and many more factors that affect the successful integration of automated systems, regardless of their size. These delays create a hidden cost to the project.

Every employee in a business has a cost associated with their actions. These are sometimes hidden in overhead and overlooked, however the cost is still there affecting your bottom line. Having skilled labor tied up on an automation project for an extended period of time typically cost more than having the system developed by an experienced third party.

These resources will also be busy with the new project and unavailable to fulfill the role that they were intended. Is the new project worth a loss in the support of current production? Numerous businesses have tried this model. Some were successful, while most either delayed the implementation of the process improvements, missing anticipated benefits, or abandoned. There are thousands of unfinished projects stored away in warehouses all over America.

This is not limited to small businesses. Many multi-billion-dollar companies have tried to start internal automation teams at production facilities and failed due to the constant production demands.

An open and honest review of the project must be made prior to dedicating any internal resources to a process improvement project.

Conclusion

We have covered a lot in this blog; from acknowledging that traditional cost control methods as being less effective that in the past to the true need for automation and when automation should be implemented.

Each of these mistakes are easily made if not already instilled in current business models, however if a situation arises within a business a careful analysis should be made to determine the true issue. Each mistake should be avoided.

Good questions to start when reviewing a business improvement.

· Is it a product, people or process issue?

· Are there current or upcoming production issues that will challenge the current process on output and quality?

· What will be the long-term result of not improving the key aspects of the process?

· Am I wanting to automate for the sake of automation or is there a true need?

· Can I afford to not improve my processes? What will be the result if I don’t?

· If the development was internal, would the project be completed on time, in budget without affecting current production needs?

· Who can help me determine the true solution?



*Each quote provided was reproduced with the written consent of the sender.



For additional information or to review a free no obligation review of your process improvements, please contact CenArk Controls:



Office: 501-314-0840 Fax: 501-859-8381 Email: service@cenarkcontrols.com Web: cenarkcontrols.com


Greg Shultz is the Principal Engineer with CenArk Controls, LLC. He has over thirty years of hands on experience in the design and implementation of automatic and semi-automatic systems in the US, Mexico, Europe and Asia. He can be contacted by calling the CenArk offices at 501-314-0840 (US) or via email at: gregshultz@cenarkcontrols.com.

*For more information on these events, please visit the Case Studies section of our webpage for more details.

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