May 27, 2026
Manufacturing leaders are under pressure to improve throughput, manage labor shortages, reduce downtime, and remain competitive in a changing operating environment. As automation conversations accelerate across the industry, many companies are taking a closer look at how automation may affect operations before committing capital to a major investment. That evaluation process often begins with an automation ROI analysis. To help clients, prospects, and others, Wilson Lewis has summarized the key details below.
An automation ROI analysis helps manufacturers determine whether an automation investment is worth the cost before moving forward with a project. The analysis starts with the total investment itself. Equipment is only part of the number. Software, integration, installation, training, maintenance, and infrastructure upgrades can all affect the final cost.
From there, manufacturers estimate what the automation may improve across the operation. Common areas include labor costs, throughput, downtime, scrap, rework, and production capacity. A basic ROI calculation compares total investment cost to expected annual savings:
Automation ROI Payback Period = Total Investment Cost / Net Annual Savings
Many manufacturers target a payback period of two to five years. But expectations may vary depending on the reason for the investment. A full plant modernization effort is going to be a different payback period than automating one process or product line, for example. It is important to note that not every process is a strong automation candidate. Repeatable and high-volume processes often produce better returns than workflows that change frequently or involve customization.
There are a few major categories that should be involved in any automation ROI analysis, including:
Efficiency and Productivity — Operational performance is often one of the largest parts of the automation ROI analysis. Manufacturers first evaluate if the proposed automation can reduce bottlenecks, shorten cycle times, and improve throughput across the facility.
Other KPIs reviewed early in the process include scrap and downtime. Material costs are only going up, and industry reports estimate that unplanned downtime may cost up to 11% of annual revenue. ROI discussions also look at whether projected productivity gains are enough to offset costs. Some estimates say productivity improvements can be up to 30-50% with automation. Actual results vary, depending on other factors. These figures would need to be pressure-tested for each plant before expecting specific returns. However, the cost of inaction should also be considered.
Safety — This is another area manufacturers look at during an automation ROI analysis. Welding, material handling, packaging, and loading operations are common examples because they often involve repetitive motion, heavy lifting, hazardous materials, or dangerous equipment.
Part of the analysis is measuring whether automation could help reduce workplace incidents and the operational disruption that follows. Industry benchmarks show that there are about 2.7 safety incidents per 100 full-time manufacturing workers, and the average workplace injury costs roughly $48,000. Production delays can push costs even higher.
Safety improvements can also affect the workforce itself. In many facilities, reducing exposure to higher-risk tasks may help improve morale, lower stress, and make physically demanding jobs easier to retain and staff over time.
Workforce — The workforce is becoming a bigger part of automation ROI analysis. More than 12 million people work in the manufacturing sector, but many manufacturers still struggle to fill skilled positions and manage rising overtime costs.
Industry reports estimate that nearly 1.9 million manufacturing jobs could go unfilled over the next decade if labor shortages continue. The National Association of Manufacturers (NAM) recently reported that attracting and retaining workers is one of the industry’s biggest challenges. Because of this, manufacturers may evaluate whether automation can help reduce overtime, support production schedules, and lessen dependence on hard-to-fill positions. In some facilities, automation is also being evaluated as a way to maintain more consistent output when staffing shortages disrupt production.
Risks — Manufacturers also evaluate hidden costs and implementation risks that may affect the total return. For example, there are often additional costs beyond equipment purchase price. When looking at high-tech automation solutions, updates will be needed for existing infrastructure and software. Plant workers will need training on new machines or processes. There may be new maintenance schedules to consider along with the temporary disruption to production as new automated processes roll out. This can all increase project cost or delay savings.
For these reasons, many manufacturers start with a pilot project or phased implementation. This can help plant leadership identify any change management issues and better estimate long-term costs before committing additional capital.
Tax Considerations
Tax strategy can affect the total cost of the investment. For example, Section 179 expensing and new bonus depreciation rules may allow manufacturers to accelerate deductions on qualifying equipment purchases instead of recovering those costs over a longer depreciation schedule. R&D credits or deductions may also be available, depending on the nature of the work. Many manufacturers model multiple scenarios with advisors before approving a project. This leads to a better understanding of projected costs, cash flow, and long-term impact.
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Investing in automation is a major strategic decision. An ROI analysis can help show upfront costs against long-term gains, which is essential for success in today’s manufacturing environment. If you have questions about the information outlined above or need assistance with another tax or accounting issue, Wilson Lewis can help. For additional information call 770-476-1004 or click here to contact us. We look forward to speaking with you soon.