Summary
A $110,000 (all-in) machine tending system financed with 20% down at 7% generates approximately $20,900 of positive cash flow annually based on a fully burdened labor rate of $26.78/hr ($21.42/hr +25% burden) and 75% labor savings. The initial $22,000 investment is recovered in about 13 months, and the system generates more than $82,000 in cumulative profit over five years BEFORE accounting for increased machine utilization, overtime reduction, lights-out production, or avoided hiring costs; more on that later.
Here's the Math
Assumptions
-
System cost: $110,000 (all-in)
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Down payment: 20% ($22,000)
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Financed amount: $88,000
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Interest rate: 7.0%
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Term: 60 months
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Annual labor savings: $41,769
Key Metrics
- Down payment: $22,000
- Annual labor savings: $41,769
- Annual debt service: $20,904
- Annual positive cash flow: $20,865
- Payback period: ~12.7 months
- 5-year cumulative profit: $82,3255-year
- ROI on invested cash: 374%
75% Labor Saving
We don't assume (or promise) you will save 100% on labor or promote 'lights out' production. That's not completely realistic. Here's why; a producton CNC machine still needs inserts changed, at-the-machine QC, topping off cutting fluids and daily maintenance like emptying chip hoppers and lubricant monitoring. An automated machine tending cell needs to be re-loaded with raw material and finished parts removed to the next process or shipped.
Financing
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Monthly payment: ~$1,742
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Annual debt service: ~$20,904
Annual Cash Flow
| Item | Amount |
|---|
| Labor savings | $41,769 |
| Annual loan payments | ($20,904) |
| Net annual cash flow | $20,865 |
5-Year Cash Flow
| Year | Labor Savings | Loan Payments | Net Cash Flow |
|---|
| 0 | — | — | ($22,000) |
| 1 | $41,769 | ($20,904) | $20,865 |
| 2 | $41,769 | ($20,904) | $20,865 |
| 3 | $41,769 | ($20,904) | $20,865 |
| 4 | $41,769 | ($20,904) | $20,865 |
| 5 | $41,769 | ($20,904) | $20,865 |
Cumulative Cash Flow
| Year | Cumulative Cash Flow |
|---|
| Initial Investment | ($22,000) |
| End of Year 1 | ($1,135) |
| End of Year 2 | $19,730 |
| End of Year 3 | $40,595 |
| End of Year 4 | $61,460 |
| End of Year 5 | $82,325 |
Likely Benefit vs. What's Possible
We have shown above the likely benefits of automated machine tending. Now, here's what's possible.
Summary
When the inherent benefits of automated machine tending are included, the $110,000 machine tending system investment can generate approximately $48,000 in annual positive cash flow after financing. The initial $22,000 down payment is recovered in roughly 5–6 months, and the project can produce approximately $220,000 in cumulative profit over five years.
Revised Key Metrics
- Annual positive cash flow: $48,365
- Payback period: ~5.5 months
- 5-year cumulative profit: $219,825
- ROI on $22,000 down payment: ~999%
| Inherent Benefit | Conservative Annual Value |
|---|
| Increased machine utilization | $10,000 |
| Overtime reduction | $5,000 |
| Possible Lights-out production | $7,500 |
| Avoided hiring / recruiting cost | $5,000 |
| Total supplemental value | $27,500/year |
Revised Annual Cash Flow
| Item | Amount |
|---|
| Labor savings | $41,769 |
| Supplemental benefits | $27,500 |
| Total annual benefit | $69,269 |
| Annual loan payments | ($20,904) |
| Net annual cash flow | $48,365 |
Revised 5-Year Cash Flow
| Year | Total Benefit | Loan Payments | Net Cash Flow |
|---|
| 0 | — | — | ($22,000) |
| 1 | $69,269 | ($20,904) | $48,365 |
| 2 | $69,269 | ($20,904) | $48,365 |
| 3 | $69,269 | ($20,904) | $48,365 |
| 4 | $69,269 | ($20,904) | $48,365 |
| 5 | $69,269 | ($20,904) | $48,365 |
Revised Cumulative Cash Flow
| Year | Cumulative Cash Flow |
|---|
| Initial investment | ($22,000) |
| End of Year 1 | $26,365 |
| End of Year 2 | $74,730 |
| End of Year 3 | $123,095 |
| End of Year 4 | $171,460 |
| End of Year 5 | $219,825 |
