Investing in Automated Equipment: A Strategic Move for Manufacturers

Manufacturers are increasingly investing in automated equipment, such as robots, to enhance production efficiency and quality. According to the International Federation of Robotics, U.S.-based manufacturers invested in 44,303 robotic units in 2023, a 12% increase from 2022. Additionally, a 2022 study by Veo Robotics, Inc. found that over 55% of U.S. manufacturers have ten or more robots in their facilities.

If you are considering further investments in automated equipment, it is essential to carefully evaluate the advantages and disadvantages, as automation can be more expensive and time-consuming than anticipated.

The Benefits of Automation

- Addressing Skilled Labor Shortages: With skilled workers in high demand and often hard to find, especially in remote areas, automated equipment can help meet production demands.

- Enhanced Efficiency and Quality: Properly programmed and integrated robots can perform tasks faster, with fewer errors and less waste than humans, making them ideal for large production runs and repetitive, dangerous, or labor-intensive tasks.

- Brand Differentiation: Investing in automation can enhance your brand image as an innovator and high-quality producer, attracting positive attention through press releases and social media.

- Improved Employee Morale: Automation can free workers from repetitive tasks, allowing them to focus on high-tech custom work and programming robots. It can also reduce work-related stress, accidents, and health issues by assigning dangerous tasks to robots.

The Challenges of Automation

- High Initial Costs: The biggest downside to automation is the initial investment. Many companies opt to finance or lease equipment to spread costs over several years. However, with high-interest rates, financing costs have increased.

- Interest Deduction Limits: Be aware of the tax implications of interest expenses. Generally, business interest deductions are limited to 30% of adjusted taxable income, with exemptions for businesses with average gross receipts below a threshold, which is $30 million for 2024.

- Training and Operational Costs: Consider the costs of training employees to operate, program, and repair the equipment, along with additional insurance, utility, and repair expenses. Production lines may need adjustments to avoid bottlenecks caused by changes in throughput, cycle times, and setup times due to automation.

- Maintenance and Cybersecurity: Machines require a formal maintenance program to address wear and breakdowns. Leasing equipment from companies that offer maintenance services might be a practical solution. Additionally, evaluate cybersecurity risks to ensure your automated systems are protected from hacking or malware.

Consult with an Advisor

Proper planning is crucial whether you are adding your first robot or expanding your existing automated operations. Contact us to help determine the costs and assess whether the investment in automation is a strategic move for your manufacturing company.