Use the Right Words to Justify Automation

Sept. 30, 2008
You say your last automation proposal did not make it into next year’s corporate budget? Take a hint from Dr. Douglas C. White, vice president, APC services, in Emerson’s Advanced Applied Technologies Group.

Put it in the right terms, terms that corporate financial wizards can understand.

Dr. White’s Tuesday afternoon session, “How to Economically Justify New Automation Investments,” drew a full crowd.

“You need to help your company understand how good an automation investment represents,” he said. “Every company has more legitimate requests for investment than they can possibly make. Your job is to make sure the financial group understands that your investment brings a better return.”

Of all the financial terms bandied about, he explained, the single most important one is operating free cash flow. “It’s the cash generated by the company,” he said. “It’s not a simple concept, because the additions and subtractions from this bottom-line figure are many and varied.”

But, simple or complex, “you need to show your company that your project adds to the cash generated by the company, the cash generated by the subset called your site and finally, the cash generated by the investment you’re proposing. Accountants don’t conceive of your plant as a place that makes products. They see it as a place that makes cash.”

He demonstrated that automation – the right sort of automation, carefully thought out—increases cash in the following ways:

  • Increase production rate via increased equipment capacity, reduced downtime, reduced batch cycle times, reduced product re-blends and many more
  • Increase effective price by increasing the yield of valuable products and, in some product areas, quality
  • Reduce costs by reducing energy and feedstock consumption, maintenance, off-spec material, abnormal events and staff
  • Reduce capital by reducing feedstock and intermediates inventory, reducing the number of spares needed, and much more.

“If you can demonstrate that your idea will result in more cash, you’ll find yourself in next year’s budget,” Dr. White said. “Even in troubled economic times.”

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