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How to Financially Justify Your AGV Purchase

Automated Guided Vehicles (AGVs) are becoming increasingly popular in warehouses and manufacturing facilities due to their many benefits. Are you considering the purchase of an AGV system? If so, this article is for you because procuring an AGV system is a substantial investment, and, of course, cost justification is always a crucial topic when considering a significant outlay. 


The financial justification for AGVs is often an open-and-shut case. Yet it is usually not as simple as increasing the throughput of the transportation of goods within a facility. Of course, it is true that AGVs can work around the clock and can function unattended. (Though keep in mind you need to consider charging time.)


Since AGVs can perform their duties autonomously, at first glance, one might be tempted to think in terms of reducing your employee headcount to justify an AGV purchase. However, Pete Jadwinski, VP of Sales at America in Motion, says that his customers are not asking for "Full Time Equivalent" or FTE calculations - or even discussing decreasing headcount. 


It’s Not About Speed When It Comes to Automated Guided Vehicles


Jadwinski emphasized that human beings are faster than automated systems. "They just are - there's no getting around it,". Therefore, if you were hoping to justify the purchase of an AGV system based on machines transporting goods more rapidly than humans, you're almost certainly going to be disappointed. 


Instead, the financial justification for AGV purchases most often comes from other factors like saving human lives, protecting against product and warehouse damage, guarding against theft, and providing documentation and traceability that is difficult or unreliable if provided by human resources.


Providing Documentation


Many companies ship products and somewhere during the course of their transportation the goods become damaged. How and when did it happen? The answers to those questions are crucial in assigning responsibility and liability. With most manual methods, it's difficult or impossible to determine. 


AGV systems can often provide the solution to this problem.


For example, AIM has provided AGV systems that will drop a pallet onto a conveyor system and spin it - in the process, wrapping it tightly in shrink wrap. The system weighs the pallet. If the pallet is supposed to contain 10 parts or assemblies, each of which weighs 20 pounds, and the pallet weighs 180 pounds - you know you've got a problem. 


Granted, these kinds of checks are only appropriate for certain kinds of products. If you're shipping toothpicks, the weighing mechanism's accuracy is likely insufficient to tell if you're missing even 100 toothpicks. 


In some cases, this kind of proof is worth its weight in gold. 


Pharmaceutical Applications – Traceability


Makers of medicines and life-saving treatments and devices must be able to trace back every step of the manufacturing process. If there’s a problem with a batch, you need to be able to show a well-documented pathway of steps. A reliable paper trail that is not subject to human forgetfulness or frailty is simply all-important. 


“On February 2, 2023, at 12:35 pm, AGV 345 picked up batch CDE from machine XYZ, took it through three airtight doors, and put it into rack 9876 for storage. It weighed X amount. Two weeks later, the same batch was picked up from storage, and it weighed within one gram of what it did before, so there was no loss in product during that time.”


It’s all about documentation. 


Margins of Difference


Sometimes, it’s a question of being a creative problem solver. Jadwinski recounted an anecdote about one customer for whom he did a computer-aided design (CAD) assisted analysis of their application. The study of the customers’ needs showed that 6.1 Automated Guided Vehicles were needed to transport the required amount of products on a monthly basis. If the customer were to buy only 6 vehicles, the system would be at 103% of capacity. The customer was reluctant to buy a 7th vehicle when the margin of difference was so small. 


Jadwinski suggested an inventive solution. The seventh vehicle could be a combination forklift and floor sweeper/scrubber. When the seventh unit wasn’t needed, it would clean the floors, thereby improving the safety and cleanliness of the workplace. And, if one unit went down for any reason, the spare unit could be called into action.  Automated trash hoppers are also an option, the AGV system can take out the trash when there is nothing else to do.


Protecting Human Life


Sometimes, when the environment is hazardous, the justification for an AGV system is to save people’s lives. Jadwinski relates an example he’s seen of an application for an Automated Guided Vehicle system involving the manufacture of large concrete slabs. 


As the concrete slabs dry, they emit large amounts of carbon dioxide. In fact, the CO2 emissions are so large that the concentration of gas is life-threatening. People working in this environment have to wear what amounts to scuba gear. If their mask slips or their equipment malfunctions - they die. 


Having an AGV system that can automatically pick up such large concrete slabs and transport them to a shipping area is easily justified when the work is so dangerous. 


There are many instances of working conditions so hazardous that if an automation system can remove people from harm’s way, it immediately warrants the outlay. Examples include dealing with explosives or munitions. Working with volatile or explosive chemicals like rocket or jet fuel are further cases in point. 


Sometimes safety is a small part of the financial justification. And other times, it’s the only reason needed. 


Avoiding Damage to Warehouse Plant and Equipment


Human forklift drivers often cut corners - literally. Such a mistake in judgment can crumple warehouse support columns and cause the forklift and its load to tip over. The resulting damage can be catastrophic. Entire shelving units can be brought down. Even worse, one shelving unit can hit the next, and a domino effect can result. 


Driving too fast is another common human error - and again, when cornering, the result can be a toppling of the forklift and its load, with spectacularly bad effects. 


Yet another problem occurs when inexperienced forklift operators attempt to pick up a load heavier than the machine is designed to handle. Or lifting a load higher than it should be, resulting in the forklift falling over.


YouTube has many videos of epic damage to warehouses and products captured by someone using their cell phone. 


All of these problems can be averted with Automated Guided Vehicles. AGVs simply do not make any of these mistakes. 


An intelligent calculation of the return on investment (ROI) for an AGV system takes the avoidance of this kind of damage into account. 


Preventing Fraud and Theft


Jadwinski relates a story about a beer distributor that was experiencing regular damage to their shipments. The distributorship suspected the “damage” might actually be due to theft.

Twenty palettes would be loaded onto a truck. After ten stops, everything was going well. But on the very last stop, somehow, supposedly, the pallet tipped over, all the bottles broke, and the driver had to “clean up the mess.” 


Variations of this story were happening with some regularity. 


The beer distributor implemented an AGV system that automatically loaded pallets onto the truck and took pictures at the end of the loading process. The drivers had to sign an affidavit that they had inspected the shipment and affirmed the stability of the packed-up load. 


The “damage” to the shipments dropped precipitously. 


It was the automated nature of the loading and picture taking - since it was clearly impartial and unbiased - that ended up being the crucial factor.


A Unique Leasing Program Offered by America in Motion


A typical lease offered by many AGV system providers has the customer sign the documents and then requires payment to start immediately. Since the delivery time for AGV systems can be as much as a year, this means the customer is paying monthly for a system they don’t have - for as much as twelve months. It’s burdensome. 


AIM understands this obstacle to implementing an AGV system and offers a deferred payment option. The customer has no payments until after the system goes live. Not until the benefits of the system are being realized does the customer make cash outlays. 


This unique payment program lowers the entry threshold and helps in justifying the purchase of a system. 

How Much Does an AGV System Cost?

Interested in learning more about how much an AGV system might cost you and what the ROI is? Check out our new ‘Build and Price’ tool that allows you to build a custom AGV fleet price estimate within minutes.


Article By: Mark Fairchild

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