Payback and Lifetime of a palletizing plant

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Payback and Lifetime of a palletizing plant

When evaluating the investment for a new palletizing plant, there are two parameters that are normally considered: the Payback (time to recover the investment made) and the expected life cycle of the plant (how many years we will be using it with routine maintenance).

For Payback, there are many aspects to consider. Indeed, there is not only the reduction of costs related to the workforce, especially for companies that work on multiple shifts, but a series of quantitative and qualitative parameters that contribute to improving the quality of the work performed and, ultimately, the image of the company that has invested in this solution.

Of the several formulas we can consider for an initial calculation of Payback, perhaps the simplest is this one:

P= I/(L-E)

Where P is the Payback period in years, I is the initial cost of the palletizing plant, L is the total annual cost of the labor that will be replaced by the plant, and E represents the total annual cost of maintenance needed by our plant.

Let's assume, for example, that a Europack palletizer would cost 100,000 €, a figure that would include the purchase price, the technical setups dedicated to the customer's needs (gripping head, pallet transport systems, pallet magazine, etc.), installation, operators' training, possible purchase financing, and depreciation of the asset.

Suppose that the purchase of this plant allows the purchasing company, which works two 8-h shifts for 220 days per year, to reposition two operators previously employed in the manual palletization activity to other tasks for each 8-h shift.

Labor cost: consider, as an example, 30,000€/year for each operator, so 120,000€/year for four operators on two shifts. Clearly, this figure may vary depending on the industry or geographic area, thus increasing or decreasing the final Payback

Energy and technical maintenance cost: currently in Italy the average kWh cost is 0,5€. Our models from 400 cycles/hour and up consume 3 kWh, so on two shifts we will calculate 48 kWh @ 0,5€ for each working day (48 x 0,5 = 24€ x 220 = 5.280€/year) + Technical maintenance: 5.000€/year= 10.280€/year.

And so:

100.000/(120.000-10.280)=0,92 years

Variables due to the annual cost of operator personnel, initial transportation costs, and the local cost of energy can change this figure, as we said. It will be a simple matter to substitute actual numbers from your industry and geographic area for our examples

The accuracy of the Payback calculation, apart from depending on including all cost and saving elements related to the project, also depends on how much reliability we can expect from our robotic application (the Technical Risk). If the automation needed frequent maintenance or corrections and adjustments in order to operate optimally, the necessary downtime would affect the Payback by increasing the time required.

Once the Payback period is over, only the energy and maintenance costs of the purchased plant will remain (depreciation was included in the initial investment) and the plant will contribute to gross profits. At that point, the user who invested in the palletizing plant can decide whether to improve its contribution margin or reduce the selling price of its products.

Lifetime of the equipment: we started building our robots in 1998, and the following years have allowed constant evolution and refinement of the product, increasing its efficiency and durability. We have many customers who have been using our robots for more than 15 years, with several million cycles under their belts for following our recommendations for routine maintenance. This reliability is undoubtedly a determining factor in making the most of the plant's uptime after the initial Payback period. Europack robots will accompany your production and growth for many years. Our service department will always be ready to help you for routine maintenance, scheduled over the years, or for any kind of service and upgrade.

Contact us to find out how soon you can return on investing in a palletising plant!