Calculating ROI to Justify Automation

Calculating ROI to Justify Automation

The cannabis supply chain is quickly maturing and adopting ERP software systems, SOPs and structure systems focused on growth and acquisition. At the same time, the need to justify each and every dollar spent has become even more critical in the quest to preserve a sustainable business model.

When you need to determine the ROI for an automation investment , the first step is to document the current process/workflow for the task you want to make more efficient. You’ll need to document the current time and labor for each task – from setup, to use, to completion.

The second step is to evaluate automation that can cut down on both the time and effort to collect data. Just as in step one, map out how the time and labor for setup, use, and completion of tasks.

Once you have your data metrics and your fully loaded labor costs, you can assess the savings that can be realized from moving from your current process to an automated one. Remember to use the fully loaded labor cost, which is more than just the hourly rate. It includes healthcare costs, training costs, tax withholdings, and all expenses directly related to employees.

The ROI resulting from this exercise provides hard numbers you can use in your decision making. Keep in mind, however, that there are also intangibles, such as the time savings automation allows you to commit to other tasks and/or allow for a labor pool reduction. Another key value add is that once automation is in place, it will continue to operate even if personnel changes are implemented, creating a future-proof solution.