A factory in Kolhapur making machined components has 2 robot cells running... one cell has 1 robot operating 1 machine and other has 1 robot operating 3 machines. Some one gave them a math of offsetting as many operators as possible in lowest possible cost. This is the way most factories are doing ROI math today.

Looking only at this, the ₹25L solution looks like a no-brainer

Simple payback factories use

Lets factor in the production reliability.

Suppose each CNC generates roughly ₹800/hour of contribution when producing and is scheduled for 6,000 hours/year.

If Option A runs at 98% uptime Production loss = 6,000 × 2% × ₹800 = ₹0.96L/year Net benefit = ₹9L − ₹0.96L = ₹8.04L/year

Actual payback: ~30 months

If Option B runs at only 85% uptime (poor integration, 1 machine breakdown disturbs entire cell, etc) Production loss = 6,000 × 15% × ₹800 × 3 machines = ₹21.6L/year Net benefit = ₹27L − ₹21.6L = ₹5.4L/year

Actual payback: ~56 month

Math for Option A looks better now.

Also, if you are new to robots then the downtime losses compound in OpEx even after the payback period because you many need to spend time and money in developing and training your team to maintain these "new" systems.

Another sidekick in this math is that factories tend to focus more on robot utilization. In Ideal world, every asset must work for 24 hours and Zero idle state conditions but looking at robots and machines in same way is more harmful than not.

Factories will not make money by merely keeping robots busy, as is true for operators. You make money by keeping production running.

A robot at 55% utilisation supporting CNCs at 98% uptime can be a much better investment than a robot at 80% utilisation causing CNC uptime to fall to 85%.

This does not mean, multiple machines operated by 1 robot is wrong. If engineered well it is extremely efficient. To do that you may need to study your production planning, machine conditions and changeovers deeply.

Sadly, there is no way to demonstrate this without actually going through the entire process. Simulations may help a bit, but factory owners need to make a judgment in selecting processes, equipment and engineering vendors.

I visited 15 factories last month. Bangalore, Pune, Ahilyanagar, Ch Sambhaji Nagar and Noida. Almost everybody has either installed atleast one robot and are planning to add more.

- Only 1 out of 15 was genuinely happy with their existing robot installation.
- 12 out of 15 said it took more than 4 months+ to produce parts after the project kicked off.
- All 15 still depend on their integrator to do basic robot teaching/adjustment.
- 7 out 15 are struggling with frequent changeovers and idle robot (demand fluctuation)
- 5 out of 15 are still unable to run robot in night shift (not confident)
- 14 out 15 were unhappy with non responsiveness of the robot integrator after installation.

India wants to automate but but the industry needs to move from selling robots + integration to owning uptime + production outcomes.

Man vs Machine

For last 2 decades, we tried very hard to reduce the dependence on skilled workers by reducing the "skill" required to do a job in order to stay cost competitive. We did this with basic and low cost automation, only enough to make process less fatiguing. Impressive, right?

In simple english, we build basic conveyors and special purpose machines so that we could hire a less qualified (learned/trained) person to do the same job and comes with lower compensation or can now run 2-3 machines/tasks with a marginal increase in wages.

So, a lot automotive OEMS and component makers once had assembly workers who were ITI trained starting at lower wages BUT would graduate to draw ₹70k++/month over working of 20+ years. They would then take up supervisory roles and then retire as admin officers. They took pride in working in a factory and trained the new comers. But the "low cost automation" meant most of the factory jobs were being filled with non skilled and often third party contractual roles drawing payout of 15-20k/month. Easily replaceable. Could work multiple shifts. As a result a lot ITI/vocation trained workers entering the workforce were left jobless or were forced to accept similar wages as that of non skilled.

As this was happening, we had a revolution of engineering colleges in our country. Our colleges could produce more engineers every year, who could take up the white collar jobs in manufacturing companies. A lot of supervisory jobs in the factories are now filled by graduate engineers. We added layers of supervisors to inspect, monitor, manage, report, follow-up etc to ensure that non skilled worker produces good parts and on time. Our volumes increased. We seemed to be having a good run, a lot of manufacturing activity in India, upcoming EV ecosystem and a real shot at China+ 1 with a pipeline of engineers and massive low cost labour at our dispense.

Margin Call:

Ok, not as dramatic as the movie, but we are now seeing the diminishing returns of the low cost automation and engineering colleges revolution. When this was happening margins were re-calibrated basis this reduced cost structures. Technology around us grew faster than we anticipated. We became too busy leveraging this low cost arbitrage for producing more almost neglecting the R&D efforts, building IP and making indigenous supply chain. Factories now have more supervisors to manage but not enough workers producing parts.

Net effect:

1. We now have acute shortage of entry level technicians, let alone the good ones.
2. It is now painstakingly difficult for factories to retain the workers, deal with uncertainty and constant training of new staff.
3. Even if factories want to, they cannot afford paying higher wages due to margin pressures.
4. Lower wages pool of workforce is highly competitive now- Delivery, Consumer services, cabs etc
5. Too many engineers who need jobs but cannot and does not want do skilled psychical work
6. Available skilled workforce also cannot keep with the skill and craftsmanship requirements.
7. Low cost arbitrage is a lost race now.

What next?

Good thing(somewhat) is that this situation exists across the value chain. That gives me hope of seeing massive tailwind in both creation and adoption of technology in India's manufacturing. I remember discussing with a Sr exec at Bajaj, how they nudged all their suppliers to automate welding lines to improve quality and lead times. It came with huge capex burden of welding robots but what we have today is world-class supply of mass produced welded products.

As I see it, we will never be able to justify ROI math of the new technology, given how low our cost benchmark is. We need to take a longer term view. If we wait for it to become cheaper we may not reap the benefits and end up in the same soup. The new generation entering the workforce will want to work in factories which are tech adopters. We need efforts from both sides i.e tech providers and factories to take efforts to come closer and bridge this gap.

Factory owners/plant heads must dig deeper to finding cost leakages. You will find some surprisingly high ROI opportunities. Startups could work closely with factories to democratize the tech and making it simple to adopt.

If you have made it till here, Thank you for reading! Happy to hear/read your thoughts. I will end this with few trends that I see could see helping us build more productive factories in India:

1. An IOT based live OEE/Machine health tracking system does not cost a fortune now but gives massive advantage in predicting breakdowns and avoiding down time.
2. We are seeing new engineers building hardware products in India thereby making tech accessible. They also endup attracting talent back to factories.
3. Welding robots have become quite inexpensive, setting them up is a much lower effort than last you you evaluated.
4. Setting up Vision Inspection system for QA cases is now done in few days not months.
5. A lot of startups are working on India specific/ industry specific use cases- Maintenance tech, robots for High Mix production etc
6. Many of them, support robotics-as-a-service where you you save huge CAPEX and get instant value.