The Real Price of Automation

Replacing costly labor with more efficient machines seems like the perfect formula for success. But there are hidden costs to automation that make it a much riskier investment.

Welcome to Spacely Sprockets. OK, maybe the sign above the door says “Forest City Gear,” but this Roscoe, IL, shop probably is as close as any to the futuristic cartoon workplace where George Jetson makes his living punching buttons. Both are state-of-the-art, highly automated plants where computer-controlled machines crank out products by the hundreds. Only a handful of human workers populate either firm’s factory floor, yet both have become major suppliers in their respective worlds. True, Spacely Sprockets has the advantage of 21st Century technology, but Forest City Gear isn’t far behind.

Figure 1: With state-of-the-art machines crowding the shop floor, Forest City Gear needs only a few operators to produce $6.4 million worth of custom gears a year.

“We have probably the most modern gear-cutting facility of any gear shop in the entire world,” says Forest City Gear’s president, Fred Young. “The average age of our gear equipment is less than 4 years old.” Using gear machines that can load themselves and shut themselves off when they run out of raw stock, Forest City Gear’s 37 non-union employees produce $6.4 million worth of custom gears a year. And this lean crew works only one shift a day (Figure 1).

Young’s commitment to state-of-the-art machining is based on his faith in modern technology. “I think it’s a given,” he says, “that newer equipment is more efficient, has better technological capabilities, is faster, and produces higher levels of quality.”

Though Young may be an extreme example, he represents the growing number of shop owners and managers who are feeling the pressure to become leaner and more efficient. Their customers are implementing just-in-time (JIT) production methods and as a result, they are demanding more frequent deliveries of smaller lots. Speed has become the order of the day, and the manual machining methods of the past are not up to the task. A line of machinists, each performing a single operation at his machine, can’t produce parts fast enough. And dedicated machines, tools, and tooling can’t switch from the production of a few parts one day to a few different parts the next without time-consuming, labor-intensive setups and changeovers.

Conventional wisdom says that human intervention in the manufacturing process must be kept to a minimum if a shop is to reduce labor costs and setup times while it boosts its output. Shop owners and managers are responding by replacing machinists with fast CNCs and servos, and using electronic rather than human memories to keep track of the tools and toolpaths needed for a variety of parts. They believe they are making progress when downtime for part changeovers can be measured in machine-minutes rather than man-hours, and interruptions in the workflow last only as long as it takes computer-guided retrievers and loaders to set tools in the spindle and shuttle workpieces around the shop floor.

But some would argue that an investment in expensive, high-speed machines doesn’t guarantee a more productive operation. Few shop owners find that they can simply replace machinists with machines, increase their rate of production, and automatically show a profit. The most successful shops take it slowly, buying computer-driven machines or automated tool- or workhandling devices only after they have thoroughly evaluated their current operations and dispassionately divined the upgrade’s true costs and benefits.

There are those who have studied the balance sheet and decided that a heavy investment in automation will not give them a sufficient return. Instead, they have found that they can best meet their customers’ needs by selectively automating certain operations and reorganizing their shops for a more efficient workflow. Dowty Aerospace Los Angeles, Duarte, CA, for instance, has grouped its CNC and manual machines into cells and multimachine workstations to produce hydraulic units for aircraft thrust reversers. The operation depends on a central computer system to keep track of its jobs and tools, but it is a human operator that ultimately loads the machines with programs, tools, and workpieces.

The machine, yes the machine, never wastes anybody’s time, never watches the foreman, never talks back.

— Carl Sandburg
The People, Yes

And at rifle-scope manufacturer Leupold and Stevens, Beaverton, OR, Bill Owen, the company’s vice president of manufacturing, has found that, by dividing parts between the company’s new CNC machines and its less-automated machines, he can coax peak performance from both. He’s using the versatility of the CNC machines for parts that come in a wide variety of sizes or that require several operations. This has allowed him to pull the company’s older cam-style screw machines out of the general flow of parts through the shop and dedicate them to the production of mount rings in a cell-type arrangement. Because the screw machines are producing only one part, operators spend much less time on setups than they did before. And with the machines grouped together in one area on the shop floor, the distance the parts have to travel to go from raw stock to finished rings has been reduced from 1,500' to about 200'.

Some Shops See the Light

To objectively decide if automating a shop is worth the money, an owner or manager must know what the total bill will come to once he’s fully implemented the system. And he must know if the savings in labor costs will be enough to help him recoup this investment.

In a few widely publicized cases, shops have been able save a bundle by keeping their machines running after the lights have been turned off and everyone has gone home. Machine manufacturers, especially those headquartered in Japan, have cited these examples as proof that today’s equipment is sophisticated enough to eliminate human intervention entirely from the manufacturing process. Japanese manufacturers have even taken American buyers through some of these highly automated plants in Japan to show how a such a facility operates. In the United States, a few companies have achieved the level of automation advocated by the Japanese. Steve Campbell, factory-automation-systems product manager for Mazak Corp., Florence, KY, says he knows of firms that can run for an entire evening or weekend unmanned.

But most buyers of automated equipment have found true “lights-out” manufacturing to be an elusive goal. “Even the Japanese have turned the lights back on,” says manufacturing consultant Keith McKee, director of the Manufacturing Productivity Center, Chicago. McKee toured one Japanese facility noted for its $30 million worth of machines that could run unmanned. Even in this high-tech operation, McKee found that human supervision was necessary. True, he says, there was no one on the shop floor. But McKee spied 10 workers in a room off to the side monitoring the operations.

The companies that come closest to eliminating their labor costs are large firms with capital budgets big enough to afford the necessary equipment. This includes machine accessories and options such as automated workhandling systems, sophisticated chiphandling capabilities, and automated toolhandling systems that feature monitoring capabilities to sense when a tool needs changing. Of the small- and mid-size shops McKee has seen, the most automated is a screw-machine company where the owner and his wife are the only employees. With the equipment this shop has, says McKee, the owner can leave his machines unattended for an hour or so. The consultant visited the firm and talked to the owner in his office. Their conversation was interrupted occasionally by a buzzer that told the owner it was time to change stock, but otherwise the owner could devote his complete attention to his visitor.

Often, it’s a matter of faith that keeps owners and managers from running their shops unattended. Even those who have invested in sophisticated machines and peripheral equipment to do most of the actual loading, controlling, and machining say they want the watchful eye and experienced judgment of a human operator on-site to verify new programs and jobs; inspect parts; and watch for broken tools, misloaded parts, or other problems that can cause costly damage if they are not caught and corrected promptly. Fred Young says a worker almost always oversees operations at Forest City Gear to ensure quality. The machines run without an operator only when an emergency rush job demands a quick turnaround or while operators are on break or at lunch. “We don’t use the machines’ automated capabilities to their fullest extent because we’re very quality conscious, and we want to make sure that if something goes wrong, we don’t scrap out a lot of pieces,” Young explains.

Overestimating Labor Savings

If production can’t be trusted entirely to machines, then potential buyers of automated systems must still budget for labor, even for those additional hours they had planned for “unattended” machining. But this doesn’t mean that automation will have no effect on the employment rolls. Because the automated equipment will allow each operator to control multiple processes and perform multiple tasks, shops can boost production with fewer workers. They won’t have to double their crews to double their output.

However, buyers shouldn’t be overly optimistic about the savings they’ll see using leaner crews. McKee warns that a reduction in a shop’s head count won’t necessarily lead to a drop in labor costs. According to McKee, many a shop owner has bought a CNC machine loaded with automated tool-, chip-, and workhandling options hoping it will do the work of several expensive machinists. “But he figures out before long that he needs somebody to program the controller, and a programmer costs more than an operator. And he needs somebody to keep the mechanical systems running, and that person costs more as well. When everything is added up, the savings aren’t as much as he had hoped.”

In some shops, it’s not expertise but output that boosts pay scales. In these shops, there is a recognition that workers who operate more than one machine are devoting extra time, attention, and energy to the tasks at hand. This additional effort earns them higher wages. Dowty Aerospace, for example, pays its workers a 20% premium for working in a multimachine workstation.

Keith Brumbaugh, a manufacturing consultant and senior program manager for the Chicago Manufacturing Center, Chicago, claims that even if a shop owner does reduce his labor costs significantly by automating his operations, the impact on his bottom line will be minimal. Labor costs represent a relatively small percentage of most companies’ gross income, he says. The liabilities that really eat into profits are the dollars spent for materials and overhead. These costs may actually increase with automation, because the need for materials and utilities will rise incrementally as the production rate increases.

Machines or Machinists

Some buyers of automated equipment may be willing to pay for programmers, maintenance personnel, and multimachine operators as long as they can eliminate the need for actual machinists. The days of highly skilled craftsmen are gone, they believe. Even if they wanted to make chips on manual machines, there’s no one left who can cut metal quickly and precisely by look and feel. With automated machinery programmed to make critical decisions, according to this line of reasoning, the operator’s lack of skill has less of an impact on throughput and quality. Some may even hope to economize at least a little by hiring operators without traditional machining experience.

But shop owners and managers may be fooling themselves if they hope to reap the benefits of automation with a workforce of semi-skilled button-punchers. “Yes, the system’s under the direction of computer control, but you are still talking about machining parts,” says Mazak’s Steve Campbell. “Those operators still have to understand what’s going on out there.”

McKee warns, “Unless shop owners understand that getting somebody to operate, program, and maintain their new equipment is part of the package, they could make an investment that may not pay off.” McKee has seen a number of shops that have bought state-of-the-art equipment that now sits idle. They may claim it’s unused because it doesn’t really work the way it is supposed to, he says. “But when you probe a little further you find out that they really never had anybody that knew how to make it work.”

Bill Owen of Leupold and Stevens says his experience with new CNC machines taught him to allow operators time to become familiar with the equipment. Getting the machines up and running at the company was the easy part. “We just went out and bought them and put them on the floor,” Owen says. “The problem was running them faithfully so we didn’t damage the equipment. At first we had lots of crashes. But we went into intensive training.” Owen says now that CNC machines have become a firmly established part of his company’s operation, new people don’t need to leave the shop floor to learn how to run them. Workers are familiar enough with the equipment to train others on the job. Even so, Owen says Leupold and Stevens budgets 40 hours of classroom training for each person in the company.

Running a multimachine setup requires additional training. A shop with machines arranged in cells must have a budget for the time and training operators will need to keep machines programmed, magazines loaded with the proper tools, and pallets flowing in and out of each workspace. “It takes a little more of a learning curve for operators than there would be to implement stand-alone machining centers,” says Mazak’s Steve Campbell.

Figure 2: Most of the machining at Forest City Gear is handled by sophisticated technology, which frees up the operators’ time to inspect parts and carry out other duties.

If an owner or manager hopes to run his automated machines with a leaner crew, he must be prepared to mold his operators into a multifunctional workforce. In the era of labor-intensive, long-run manufacturing, an operator might have spent most of his career at one machine performing a single operation. But today’s JIT production demands more flexible machines and personnel. The worker at the controls of a CNC machining or turning center must be familiar with every operation the machine can perform. He also must be able to make productive use of the time he will have once he’s freed from constantly tending the job while it’s running. An operator may need extensive cross-training to handle all the tasks he may be called on to perform while a machine is making chips. His duties may include setting up the next part, inspecting the previous part, presetting tools for another job, loading or programming another machine, or performing routine machine maintenance (Figure 2). Some cross-training may be needed just to keep up the morale of workers who find their traditional functions now being performed by machines. In many shops today, workers are being shifted around the shop floor just to keep them fresh and satisfied with their jobs.

Purchasers of new equipment may find their vendors willing to help with training. According to McKee, however, this training may not be sufficient. “If you buy a big machine tool, you normally can send two people to a class for free. But that’s probably not enough for them to come back to the shop and operate the equipment very efficiently.” And the sessions probably won’t teach the operators anything not directly related to the operation of the machine, such as tool presetting or inspection procedures. For this kind of broad training, shops will have to do as Leupold and Stevens does, and budget classroom time for it. Classes or individual training sessions may be available from a local member of the national network of manufacturing resource centers, a community college, or national organizations such as the Society of Manufacturing Engineers and the American Gear Manufacturers Association.

Training new employees for specific jobs will help a shop acquire the skilled workforce it needs, but it won’t alleviate the problem that may have led the shop owner to automate in the first place. When it comes to finding candidates with a basic knowledge of machining’s fundamentals, the labor pool remains disappointingly shallow. Some shops are attacking this problem by allotting a portion of their training budget to local trade schools. “We’re working with an apprentice program that’s administered by nearby Rock Valley College,” says Forest City Gear’s Fred Young. “They work with high schools in the Rockford area. It’s a great benefit to us because we get somebody that has a higher skill and training level. That makes them better able to use our more advanced machinery.”

Peripheral Issues

Having budgeted for adequate personnel and the training of these workers, in addition to the purchase price of the machines themselves, an owner may believe he knows what the tab will actually come to when he automates his shop. However, if he hasn’t budgeted for the peripheral equipment that ensures quick setups and a smooth workflow, he may still underestimate his actual costs.

A shop may not need the kind of sophisticated robotics used in those fully automated Japanese plants, but it may need more than a small toolchanger and manual pallet system to match the speed and flexibility of its CNC machines. A shop owner or manager who creates a bottleneck with equipment that can’t handle the workflow makes it impossible for the system to achieve the level of productivity it must reach to justify an investment in high-powered machine tools.

One way buyers handicap their systems is by equipping their machines’ automatic toolchangers with magazines that are too small, according to Mazak’s Steve Campbell. Flexible, short-run manufacturing with a small workforce requires machines that can go quickly from job to job. Downtime mounts rapidly and profits evaporate if new tools must be loaded every time the parts change. To avoid downtime, the magazine must be large enough to hold all the tools that will be needed for every job passing through that machine. Ideally, the magazine should be large enough to hold duplicates of these tools as well, so that worn or broken tools can be replaced without interrupting the operation. Once loaded into the magazine, these tools may remain there indefinitely so that the machine can be quickly set up to run whatever job comes up. However, this scheme could multiply a shop’s tooling costs if various operations around the shop call for the same tools, because tools loaded in one magazine won’t be available for use on another machine. Tools can be swapped between magazines, but this defeats the purpose of having tools readily available without operator intervention.

Campbell warns potential purchasers not to be shortsighted about their tooling needs. “We recommend that when purchasers are planning for a cell, they plan ahead a little bit and put in a toolchanger large enough to let them respond to changes in the future.”

For extended periods of unattended machining or applications that divide the operator’s attention between a number of machines, a tool-monitoring system is necessary. The required sophistication of the system depends on the amount of protection required. If expensive workpieces are being machined, the monitoring system will have to sense broken or worn tools before they can damage a single part. These units may use a feeler or some type of noncontact means to analyze the tool directly, or they may use vibrations or

the torque of the machine as clues to indicate the state of the tools. When a problem is found, the system can signal for a tool change or shut down the operation. For less expensive workpieces, a simple broken-tool detector may suffice.

Campbell says tool monitoring is an indispensable part of Mazak’s automated machining systems. Mazak’s machines have “force-, horsepower-, and thrust-monitoring capabilities,” he says. “They also have the ability to monitor the number of times the tool is in a cut or the amount of time it’s in a cut. And they have broken-tool detection. All of these are standard features.”

Obviously, changing tools automatically will do little good if the operator still has to interrupt the operation to set the tool once it’s in the spindle. But if a shop is not already using tooling that can be preset off the machine, the automated-equipment buyer will have to spend money to switch to modular tools and toolholders and establish presetting stations in convenient areas around the shop. To streamline tool changes even further, a shop owner or manager might consider spending extra for a system that automatically programs the tool offsets when the tool is loaded. Dave Knapik, manager of NC operations at Dowty Aerospace, says his machines use tool monitors in combination with an electronic tool-tracking system that records the amount of time each tool has been used as well as the tool’s z- and x-axes. The machine reads this information, and the machine’s controller uses it to automatically set the machine offsets and calculate when the tool will need to be changed.

CNC machines and automated work- and toolhandling equipment pay for themselves by producing more without an incremental increase in labor costs. A machine idled by mechanical problems is worse than no machine at all, because it represents an investment that is not currently earning a return. To prevent an ailing machine’s poor performance from eroding profits, shop owners and managers must invest in maintenance. Campbell says users must practice preventive maintenance religiously to avoid unexpected downtime. “Depending on the volume of work and the amount of cutting an operator’s doing, preventive maintenance may have to be a daily thing,” he advises. “The operator might have to spend an hour every day cleaning machines, checking lube levels, and things like that.”

If the machines need more extensive work or repairs, however, a shop’s staff may not have the expertise. Fred Young says, “You can have guys that are capable of working on very old machines, but the newer stuff is so complex—hydraulically, electrically, and in its software programming—that it would be a rarity to have a maintenance guy that would really understand all the different equipment that’s available. Few would be able to repair a machine in a timely fashion and bring its performance back up to new factory standards.”

For most buyers, this means they may have to add a significant line item in their budgets for additional training or personnel. Young says another solution is to upgrade the shop’s equipment on a continual basis. By replacing machines every three or four years, he claims, he’s been able to eliminate the need for a maintenance department. According to Young, he doesn’t need maintenance personnel standing by ready to fix machines at a moment’s notice, because breakdowns are rare in a shop filled with new equipment that’s been chosen for its reliability. And those problems that do arise are generally covered under the machine’s warranty or maintenance agreement. To ensure that all repairs will be made quickly, Young checks to see if there is service available close to his shop before he buys a machine.

But even if maintenance costs can be reduced or eliminated with state-of-the-art equipment, there will be other indirect costs that must be factored in, warns Keith Brumbaugh of the Chicago Manufacturing Center. He says too many purchasers factor in a labor rate that includes direct labor and overhead when calculating how much they will save by automating. “You can’t assume that any of your fixed costs are going to go away,” he says. “Just because your equipment is going to run faster doesn’t mean the lease on your plant is going to be any cheaper.”

To automate production, a shop owner could easily spend $1 million or more on equipment alone. Conventional wisdom says this is a wise investment that can quickly pay for itself in higher productivity, output, and quality. But a buyer who banks on these benefits to pay for his investment finds that he is financially committed to making sure his productivity, output, and quality do improve. Following through on this commitment may mean spending more on labor, training, and peripheral equipment. Buyers who have already anticipated these costs are in a better position to purchase the machines and equipment they really need and can afford.