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Both tube and final frame welding is a manual process. You currently do all welding on first shift with the team of 6 operators who work in an assembly line process. You can easily add staff as there are several welding operations in the area which you could recruit from, but the expected lead time to get a new employee is 2 weeks. There is ample welding equipment available on site and space to handle staff to support double the workload however a change to the process would require an 8 hour set up.
Alternatively, a new welding robot is available on the market an can weld 1000 tubes per week. It would need to be operated by one person/machine. The cost of this robot is $100K. You have been asked to evaluate if it would be prudent to invest in this.
Labor costs are reasonable at $20/hour with a 20% fringe burden. Also note your company works on a 1 July - 30 June fiscal year vs a calendar year for financial reporting and budgeting purposes.
Which alternative would be beneficial?
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