How to Compete with Offshore Low Labor Costs: Employ Highly Skilled Labor at 30 Cents per Hour

By Ron Potter, Director of Robotic Technologies, Factory Automation Systems, Inc.
(as presented at the Robots 2004 Conference, June 9 and 10, 2004)
(Posted 07/19/2004)

How would you like to hire an extremely skilled laborer for 30 cents per hour? A laborer that works 24 hours a day, 7 days a week, 52 weeks a year? Good news—you can! It’s called an industrial robot and it’s been around for decades working in a vast number of industries and applications. But one thing that’s often overlooked is the real cost of employing a robot versus using manual labor. This is in lieu of the fact that we know robots work faster, longer, produce higher quality and productivity, and don’t mind working in harsh environments.

So, let’s look at the operating costs for industrial robots. According to the latest information from the US Department of Energy, the national average cost per kWh for industrial usage is 4.99 cents per kilowatt-hour, or about 5 cents per kilowatt-hour.

The average power consumption per robot varies from 1 kilovolt-amp (KVA) for a small industrial robot to 5 KVA for a medium size robot (100 kg payload) to 10 KVA for some of the largest size robots (500 plus kg payload). Note: The power consumption for robots can be obtained from product literature. These numbers come from typical FANUC and Motoman models.

So, for example, the power consumption for an ‘‘average’‘ robot is about 5 KVA. Applying a power factor of 85% to convert KVA to KW results in approximately 6 KW as an average robot’s power usage. At 5 cents cost per KWh and 6 KW usage, the cost per hour for electrical energy to operate an average robot is 30 cents.

A robot must have a ‘‘hand’‘ or gripper added to it to be comparable to a human laborer. This gripper allows it to pick up parts or tools to do work. These grippers are normally pneumatically operated and require very little air consumption. According to the US Department of Energy, the national average cost for compressed air is 2 cents per hour for 1 CFM of compressed air. So, the result is the cost of compressed air to operate a robot’s gripper is negligible. For example, a 2-inch bore by 2-inch stroke gripper cylinder cycling 4 times per minute uses 25 cubic inches of compressed air per minute, or about 0.014 CFM. At 2 cents per hour per CFM, this is less than a penny per hour cost.

So, the total direct operating cost of an average robot is 30 cents per hour!

For a one shift day, this cost is $2.40
For a two shift day, this cost is $4.80
For a three shift day, this cost is $7.20
The total operating cost per year working one shift, 5 days per week, 52 weeks per year is $624.00
The total operating cost per year working two shifts, 5 days per week, 52 weeks per year is $1,248.00
The total operating cost per year working three shifts, 5 days per week, 52 weeks per year is $1,872.00
In the past decade, great strides have been made by robot manufacturers to improve the reliability and uptime of today’s industrial robots. Now the average mean-time-between-failure (MTBF) for an industrial robot is 60,000 plus hours! This means that, as a user, you need not plan on hidden costs for robot repair or downtime.

Another important factor to consider is that the average cost of maintenance per year on a robot is less than $500. This is mainly a scheduled periodic check of lubrication points on the robot manipulator.

So, the result is you have an extremely skilled and highly productive worker who costs you 30 cents per hour, who works 24 hours per day, 7 days per week, 365 days per year with a normal useful life of 10-15 years.

Most robot automation projects have a payback of 2 years or less. After that initial investment, you gain all of the benefits of a 30-cent per hour worker.

Let’s compare these costs to the costs associated with an ‘‘average’‘ manual laborer. Only as an example, let’s use a cost of $15 per hour for a burdened rate for a human laborer. In many cases, this is a very low rate. Even at this rate, a robot at 30 cents per hour costs 50 TIMES LESS than a manual laborer!

This does not even take into account the cost of ‘‘maintenance’‘ of manual workers. Just a few of these manual maintenance items include lost production due to lunch and breaks, the cost of lunch room and supplies, protective clothing and safety devices, parking lots, insurance, workers compensation, retirement and 401K contributions, lost time due to injuries, vacations, training and retraining, and the cost of Inconsistent and unpredictable production. All of these items have a direct cost in maintaining a manual labor force.

There are also many risks and obstacles to consider in offshore manufacturing. These include transportation costs, transportation problems, delivery time and schedules, quality problems, International concerns, especially terrorism, losing real-time control of manufacturing and the ability to make quick changes to product or process, and, most important, losing the closeness to the market and end-users. Try to put a value on these items and look at risk reduction as a part of your overall manufacturing strategy.

In summary, a manufacturing strategy using highly skilled laborers at a cost of 30 cents per hour can be a strong competitive advantage to offshore manufacturing of products. Take advantage of this competitive edge and utilize this reliable and flexible technology that costs about the same as offshore labor rates without all of the disadvantages and 50 times less than traditional US labor rates. Help keep your homegrown manufacturing as the national treasure that it is.