There’s No More “I” in ROI
This was a statement I made in a recent presentation at a JDA user conference in front of about 2,600 people. It’s also what I tell our prospective Locus Robotics customers.
So why in the world would the CEO of Locus Robotics make such a crazy statement?
First, let’s look at the definition of ROI.
Return on Investment (ROI) is a performance measure. It’s used often by warehouse operators to evaluate the efficiency of an investment in capital equipment or a new initiative. ROI measures the amount of return on an investment, relative to the investment’s cost. To calculate ROI, the benefit of the investment is divided by the cost of the investment. The result is expressed as a percentage or a ratio.
The simple return on investment formula is:
ROI = (Gain from Investment – Cost of Investment) / Cost of Investment
As an example, in the above formula, “Gain from Investment” refers to the economic benefit obtained by the operator by launching a new initiative or deploying a new piece of capital equipment
Why is there no ROI with Locus?
Innovative operators are now deploying a brand new financial strategy to lower overall operating expenses without making an upfront capital investment. What Locus offers is not an ROI. Instead we offer the ability to very quickly reduce your operating expense associated with picking by 25-40%. These savings are generated due to a 2X-3X increase in picking productivity using our robots. We find that most of our customers see these bottom-line operating savings within 30 days after deployment.
Certainly, there are cost savings and other economic benefits. But, there’s no ROI because there’s virtually no “I” (investment) with Locus. Because LocusBots are available in a “Robots as a Service” model (RaaS), there are no hefty, up-front capital costs. Instead, there’s a monthly fee for the bots which includes complete, bumper-to-bumper support and maintenance.
To be fair, there’s a small set-up fee as well as an integration expense to get LocusEmpower deployed. But this overall initial cost is very small compared to the operating savings and can be blended into the overall monthly cost.
But wait, there’s more!
In addition to the operating savings with virtually no capital investment, there are other benefits associated with the RaaS model in e-commerce facilities, including:
- Secure Approvals Faster
Most large capital projects for e-commerce fulfillment centers take months and months (and even more months!) to get the necessary executive level approvals to move forward. As the initial capital & deployment expense is nearly non-existent with the RaaS model, we find it can dramatically shorten the internal approval cycles. This leads to a faster realization of operating savings.
- Receive New Releases & Updates
Under the RaaS model all software and system updates are included. At Locus, we have a robust product roadmap of exciting enhancements to improve performance, enhance usability and add new functionality. The servers running the system software are also kept current with all maintenance updates to ensure the highest levels of security and performance.
- Scale and Expand Easily
With the robots-as-a-service model it’s very easy to add additional bots to address year over year growth … and to help meet the labor requirements for seasonal peaks. With the LocusEmpower system, adding new bots to the fulfillment center can be done within minutes of bots arriving on site.
- Focus on Managing Your Business
Time, money and energy spent hiring staff to manage and maintain the automation infrastructure is time not spent on growing the business. By moving automation to a service-based model, e-commerce organizations can focus their time and resources where they belong … on customers!
If you’re considering deploying an automation solution, please don’t look for the ROI! Instead, look for all the bottom-line operating savings and all the associated benefits with a Robots-as-a-Service model!
Please feel free to contact me directly – I’m happy to share more about how we do it.