What are you looking for?

The ROI of Automation: Understanding the Impact on Your Business

Maximize the ROI of business automation with a clear strategy, the right tools, and continuous improvement.
By
  • Blog
  • >
  • The ROI of Automation: Understanding the Impact on Your Business

It should be no surprise to anyone by now that automation has emerged as a crucial tool for companies striving to stay competitive and efficient. From streamlining mundane tasks to enhancing complex workflows, automation is transforming how businesses operate.

However, the true power of automation lies not just in its ability to handle repetitive tasks but in its potential to orchestrate intricate processes, ensuring every part of the system works harmoniously.

Orchestration, in the context of automation, involves managing and coordinating multiple automated tasks to achieve a seamless workflow. This coordination is particularly vital in complex business scenarios where multiple systems and processes must interact smoothly.

This article delves into the return on investment (ROI) of automation, emphasizing how orchestration is the key to unlocking its full value in complex environments.

The basics of automation

Automation in a business context refers to the use of technology to perform tasks that would otherwise require human intervention. This can range from simple repetitive tasks, such as data entry, to more complex processes, like customer relationship management and supply chain operations.

Automation leverages various technologies, including software applications, artificial intelligence (AI), machine learning (ML), and robotic process automation (RPA), to execute these tasks efficiently and accurately.

Benefits of automation

Automation offers too many benefits to list them all here. However, here are some of the most significant ones in the context of business operations:

  • Increased efficiency and productivity: By automating routine tasks, businesses can free up human resources to focus on higher-value activities, thereby increasing overall productivity. Automated systems can operate 24/7 without fatigue, ensuring consistent performance and faster task completion.
  • Cost savings: Automation reduces the need for manual labor, leading to significant cost savings. It also minimizes errors and rework, further driving down operational costs. According to this study by McKinsey, automation can cut operational costs by up to 30%.
  • Improved accuracy and reduced errors: Automated systems follow predefined rules and workflows, ensuring tasks are performed consistently and accurately. This reduces the likelihood of human errors, which can be costly and time-consuming to correct.
  • Enhanced customer satisfaction: Automation can improve customer experiences by ensuring faster response times, consistent service quality, and personalized interactions. For example, automated customer support systems can handle inquiries quickly and efficiently, leading to higher customer satisfaction rates.

Real-world examples

Automation can be applied to almost any industry and still provide benefits. Here are just 3 examples of very different industries and how they benefit from the use of automation:

  1. Manufacturing: In the manufacturing sector, automation is used to control machinery and production lines, improving efficiency and product quality. Automated systems can monitor equipment performance, predict maintenance needs, and adjust operations in real-time to prevent downtime.
  2. Financial services: Banks and financial institutions use automation for tasks such as loan processing, fraud detection, and customer service. For instance, chatbots can handle customer inquiries, while RPA bots process transactions and update customer records.
  3. Healthcare: Automation in healthcare includes systems for patient scheduling, electronic health records management, and diagnostic procedures. Automated diagnostic tools, powered by AI, can analyze medical images and provide accurate diagnoses, supporting doctors in their decision-making processes.

While automation provides a big number of benefits, as you’re about to see, the true return on the investment needed to implement it comes once you include orchestration into the mix.

Understanding ROI in automation

Automation has become a critical component in modern business strategies, but to justify the investment in automation technologies, you have to understand and measure its (ROI). After all, any massive change, like adopting automation across a company, has a big cost. If that investment doesn’t provide clear benefits, it wouldn’t make sense to move forward with it.

Defining ROI

Return on investment is a performance measure used to evaluate the efficiency or profitability of an investment. In a business context, ROI is a key indicator of financial performance and decision-making.

It is calculated by comparing the gain or loss generated by the investment relative to its cost:

ROI equals net profit divided by investment cost, multiplied by 100.
  • Net profit = total revenue – total costs
  • Investment cost = cost incurred to implement and maintain the automation solution

Measuring ROI in Automation

In the context of automation, ROI measures the value automation brings in terms of cost savings, increased productivity, and other tangible benefits. To measure ROI effectively, businesses need to track and analyze several key metrics to understand the net profit value from the previous equation.

Here are some of the primary metrics used to evaluate the ROI of automation:

  • Time savings:
    • Metric: Reduction in time required to complete tasks.
    • Example: A company automates its invoice processing system, reducing the time from several days to a few hours, freeing up employees to focus on more strategic activities.
  • Cost reduction:
    • Metric: Decrease in operational costs due to automation.
    • Example: Implementing automated customer service chatbots reduces the need for a large support staff, cutting down salary expenses.
  • Increased throughput:
    • Metric: Increase in the volume of output or transactions processed.
    • Example: An e-commerce company automates order processing, allowing it to handle a higher volume of orders during peak seasons without additional staffing.
  • Customer satisfaction:
    • Metric: Improvement in customer service and satisfaction levels.
    • Example: Automated response systems provide quicker service to customers, leading to higher satisfaction and retention rates.

Let’s take a look at an example of a situation with a positive ROI.

Acme Manufacturing is a midsize company specializing in producing high-precision components for the aerospace and automotive industries. Its manual production scheduling system is giving it challenges; as the company grew, the complexity and volume of orders increased, highlighting the inefficiencies in their scheduling process, such as:

  • High scheduling costs: The manual system required extensive labor hours to manage, as schedulers had to manually coordinate various stages of production, often resulting in overtime pay and higher overall labor costs.
  • Delays and bottlenecks: Manual scheduling was prone to errors and delays. Any change in customer demand or production capacity could disrupt the entire schedule, leading to bottlenecks and inefficient use of resources.
  • Poor on-time delivery performance: With an unreliable scheduling system, Acme often struggled to meet delivery deadlines. This inconsistency affected customer satisfaction and threatened the company’s reputation.
  • Limited scalability: As Acme expanded, the manual system became increasingly unmanageable. The company found it difficult to scale operations efficiently without risking further delays and errors.

To address these challenges, Acme Manufacturing decided to implement an automated production scheduling system. The goals were to streamline operations, reduce costs, and improve delivery performance. The solution involved:

  • Automated scheduling software: Acme adopted a sophisticated scheduling software that integrates with their existing enterprise resource planning (ERP) system.
  • Real-time data integration: The new system integrates real-time data from various departments, including inventory, production, and sales. This integration allows for dynamic adjustments to the schedule based on actual production conditions and changing customer demands.
  • User-friendly interface: The ease of use reduced the learning curve and allowed for quick adoption by the team.
  • Scalability features: Designed to grow with the company, the software can easily accommodate increased production volumes and more complex scheduling needs as Acme continues to expand.

The implementation of the automated scheduling system brought significant improvements to Acme Manufacturing’s operations:

  • Reduced scheduling time by 75%:
    • The automated system drastically cut down the time required to create and adjust production schedules. What previously took hours of manual effort can now be accomplished in minutes. Assuming a total spent of $200,000 yearly on scheduling, Acme is now looking at $150,000 in savings per year.
  • Decreased labor costs by 20%:
    • With the reduction in manual scheduling effort, Acme was able to lower its labor costs significantly. The need for overtime was reduced, and the overall efficiency of the production team improved. Assuming a $500,000 annual cost on labor, a 20% decrease would yield $100,000 in savings.
  • Improved on-time delivery rates by 30%:
    • Enhanced scheduling accuracy and the ability to quickly adapt to changes allowed Acme to better manage production timelines. This improvement led to a substantial increase in the company’s on-time delivery performance, boosting customer satisfaction and strengthening its market position. Assuming this improved rate yields a 5% increase in annual revenues, and starting with a basis of $10,000,000 revenue, Acme can look forward to $500,000 in extra income per year.

Finally, assuming a total cost of automation of $275,000 between software, training and hardware expenses, put all these numbers together in the ROI equation:

ROI equals net profit divided by investment cost, multiplied by 100.

To determine the net profit, calculate total annual financial benefits:

  • Labor cost savings: $100,000
  • Efficiency and time Savings: $150,000
  • Increased revenue from improved delivery: $500,000
  • Total annual financial benefits: $750,000

From the total annual financial benefits, subtract the investment costs:

  • Total annual financial benefits: $750,000
  • Investment costs = $275,000
  • Net profit: $475,000

Finally, plug these numbers into the ROI equation:

Image2
  • ROI: 172.73%

By implementing an automated scheduling system, Acme Manufacturing transformed its production process, achieving significant cost savings, improved efficiency, and enhanced delivery performance, providing a total return of the initial investment of 172.73%.

The role of orchestration in automation

As businesses increasingly adopt automation to streamline operations and improve efficiency, the need for orchestration increases as well. Orchestration is the strategic coordination of automated processes, ensuring they work together harmoniously to achieve optimal outcomes.

What is orchestration?

In the realm of automation, orchestration refers to the automated arrangement, coordination, and management of complex workflows and processes across various systems and applications. While automation typically focuses on individual tasks or functions, orchestration integrates these discrete automated elements into a cohesive system that operates efficiently and effectively.

What’s the difference between automation and orchestration?

While automation and orchestration are often used interchangeably, they represent different levels of process optimization:

  • Automation: Automating individual tasks or simple processes to eliminate manual intervention. For example, automatically generating invoices based on order entries.
  • Orchestration: Coordinating multiple automated tasks and processes, ensuring they work together to achieve a larger business goal. For instance, orchestrating the entire order-to-cash process, which includes order processing, invoicing, payment collection, and customer communication.

You can read more about the difference between these two complementary processes in this detailed article.

In a nutshell, automation doesn’t truly shine until you apply it to your entire enterprise. It’s not just about having a couple of processes automated while the rest remain untouched. To achieve this level of automation, you need orchestration—the ability to organize all those automated processes in a way that they work seamlessly together.

Maximizing ROI with orchestration

Now that you understand how to calculate the ROI of automation, let’s take a look at how you can leverage orchestration to achieve automation’s full potential.

Enhancing efficiency

Orchestration significantly improves operational efficiency by seamlessly coordinating multiple automated processes. This integration leads to streamlined workflows, minimized downtime, and optimized resource utilization.

  • Streamlined workflows: Orchestration integrates disparate automated tasks into cohesive workflows, ensuring smooth transitions and eliminating bottlenecks.
    • Example: In retail, orchestration can automate the entire order fulfillment process, from inventory check and order processing to shipping and customer notification. This seamless flow reduces delays and errors, resulting in faster order completion and improved customer satisfaction.
  • Real-time monitoring and adjustment: Orchestration platforms provide real-time visibility into process performance, allowing for immediate adjustments and optimizations.
    • Example: A manufacturing firm uses orchestration to monitor its production line in real time. If a machine goes down, the system automatically reallocates tasks to other machines, maintaining production flow and minimizing downtime.
  • Resource optimization: Orchestration optimizes the use of resources by dynamically allocating them based on current demand and availability.
    • Example: In IT operations, orchestration can manage the distribution of computational resources across a data center, ensuring that server capacity is used efficiently and reducing the need for excess hardware.

Reducing costs

Orchestration has a bird’s-eye view of automated tasks, and because of that, it can drive cost savings by eliminating redundancies, reducing manual labor, and optimizing the use of technology and resources.

  • Elimination of redundant processes: Orchestration identifies and removes redundant tasks, streamlining operations and reducing waste.
    • Example: In a telecom company, orchestrated automation eliminates duplicate customer service tasks, such as repeated data entry across different systems, resulting in significant operational cost savings.
  • Reduction of manual labor: By automating and orchestrating processes, businesses can reduce the need for manual intervention, leading to lower labor costs.
    • Example: A logistics firm implements orchestration to automate its route planning and dispatch processes, reducing the number of hours spent by employees on manual scheduling and cutting labor costs.

Increasing flexibility and scalability

Orchestration enables businesses to adapt to changing conditions and scale their operations efficiently.

  • Dynamic process adjustment: Orchestration allows for real-time adjustments to processes based on current conditions and requirements.
    • Example: An e-commerce platform uses orchestration to dynamically adjust its promotional activities and inventory management based on real-time sales data, ensuring that high-demand products are always available.
  • Scalable operations: Orchestration facilitates the seamless scaling of operations, allowing for growth without disruption.
    • Example: A software development company uses orchestration to manage its continuous integration and deployment (CI/CD) pipelines, allowing it to scale its development operations as new projects and teams are added.
  • Adaptability to market changes: Orchestration provides the flexibility needed to respond swiftly to market changes and new business opportunities.
    • Example: A retail chain uses orchestration to adjust its supply chain processes in response to seasonal demand changes, ensuring that inventory levels are optimized for peak shopping periods.

Ensuring compliance and security

Orchestration helps maintain compliance with regulatory requirements and enhances the security of automated processes.

  • Automated compliance checks: Orchestration can include automated compliance checks within workflows, ensuring that processes adhere to regulatory requirements.
    • Example: A financial institution uses orchestration to automate the compliance review of transactions, ensuring that every transaction meets regulatory standards before approval.
  • Centralized security management: Orchestration provides centralized control over security protocols, ensuring that all automated processes follow best practices for data protection and access control.
    • Example: A healthcare provider uses orchestration to manage and enforce security policies across its patient data systems, ensuring compliance with data protection regulations like HIPAA.
  • Audit and traceability: Orchestration platforms often include features for logging and auditing processes, providing traceability and accountability.
    • Example: An e-commerce company uses orchestration to log all transactions and process changes, enabling detailed audits and ensuring transparency in its operations.

Orchestration is a powerful tool for maximizing the ROI of automation by enhancing efficiency, reducing costs, increasing flexibility and scalability, and ensuring compliance and security.

Best practices for implementing automation and orchestration

Implementing automation and orchestration effectively requires a structured approach that includes clear planning, the selection of appropriate tools, and a commitment to continuous improvement.

Let’s take a look at what the best practices to achieve this would look like.

Planning and strategy

A well-defined automation and orchestration strategy is the foundation of successful implementation. It ensures that efforts are aligned with business goals and that resources are used efficiently.

  • Have a clear strategy:
    • Align with business goals: A clear strategy ensures that automation initiatives are aligned with the overarching business objectives. Whether it’s cost reduction, efficiency improvement, or customer satisfaction enhancement, the orchestration of these automations should help you achieve those goals.
    • Optimize resources: Strategic planning helps allocate resources effectively, ensuring that time, budget, and human resources are used where they can deliver the most value.
    • Manage risk: A comprehensive strategy includes risk assessment and mitigation plans, helping to avoid potential pitfalls during implementation.
  • Develop an effective plan:
    • Define objectives: Clearly articulate what the organization aims to achieve with this transformation. Objectives could include improving operational efficiency, reducing costs, increasing accuracy, etc.
    • Identify opportunities: Analyze business processes to identify areas where automation can have the most significant impact. Prioritize processes based on factors such as complexity, frequency, and potential for improvement. Then figure out how these questions can be orchestrated together to reduce duplication of resources and improve efficiency.
    • Engage stakeholders: Involve key stakeholders from different departments early in the planning process. Their input is crucial for understanding the nuances of various processes and ensuring buy-in across the organization.
    • Set KPIs and metrics: Establish key performance indicators (KPIs) and metrics to measure the success of automation initiatives. Keep track of expenses and benefits to be able to understand the actual ROI at the end.
    • Develop a roadmap: Create a detailed roadmap outlining the timeline, milestones, and resources needed for each phase of the automation project. This roadmap should include short-term and long-term goals, with clear deliverables at each stage.
    • Pilot, then scale: Start with a pilot project to test the automation strategy in a controlled environment. Then start slowly growing and identifying orchestration opportunities. Use the insights gained to refine the approach before scaling up to more significant and complex processes.

Selecting the right tools

Choosing the right tools is critical to the success of automation and orchestration initiatives. The right tools will align with the company’s needs, integrate seamlessly with existing systems, and provide the flexibility to adapt to changing requirements.

  • What to look for in automation and orchestration tools:
    • Compatibility: Ensure that the tools integrate well with existing systems and technologies. Compatibility is essential for smooth data flow and process coordination.
    • Scalability: Choose tools that can scale with the business as it grows. This includes the ability to handle increased workloads and support additional users and processes.
    • Ease of use: User-friendly tools reduce the learning curve and increase adoption rates. Look for intuitive interfaces and robust support resources.
    • Customization and flexibility: Tools should offer customization options to fit specific business needs and the flexibility to adapt to future changes.
    • Cost-effectiveness: Evaluate the total cost of ownership, including upfront costs, maintenance, and potential savings from automation. Choose tools that provide good value for their cost.
    • Vendor support and community: Consider the level of support offered by the vendor and the availability of a community of users and developers. Strong support and a vibrant community can be invaluable for troubleshooting and extending the tool’s capabilities.
  • How to evaluate and select a platform:
    • Conduct a needs assessment: Start by assessing your organization’s specific needs and requirements. Identify the key features and capabilities that are essential for your automation and orchestration projects. Avoid selecting tools that provide features you simply don’t need.
    • Perform a proof of concept: Implement a PoC with shortlisted tools to test their performance in your environment. This step helps validate that the tools meet your requirements and can deliver the expected benefits.

Continuous improvement

Automation and orchestration are not set-and-forget solutions. Continuous monitoring and improvement are essential to ensure these systems deliver ongoing value and adapt to changing business needs.

Some of the key aspects of why continuous improvement is key in this field are:

  • Sustained performance: Continuous monitoring helps maintain optimal performance levels and quickly identify any deviations or issues.
  • Process adaptation: Regular optimization ensures that automated processes evolve in response to changes in the business environment, customer demands, and technological advancements.
  • Cost efficiency: Ongoing evaluation and refinement can lead to further cost savings by identifying additional opportunities for automation and eliminating inefficiencies.

Consider Camunda for your automation and orchestration needs

Camunda is a highly regarded platform in the orchestration space, known for its highly efficient BPMN (business process model and notation) modeler. It excels in providing powerful process automation and orchestration capabilities, with a focus on flexibility, scalability, and developer-friendly features.

Alongside Camunda Operate, you can monitor and troubleshoot the performance of your automated processes in real time. This helps you quickly take action and adapt based on the current context of your business.

Camunda integrates well with a variety of systems and supports complex workflows, making it a strong candidate for businesses looking to orchestrate their automated processes effectively.

Conclusion

Implementing automation and orchestration effectively requires a clear strategy, the right tools, and a commitment to continuous improvement. If you follow these best practices, your business can maximize their ROI from automation and ensure their processes are efficient, scalable, and adaptable.

Automation technology will continue to evolve, and staying proactive in planning, tool selection, and process optimization will be key to sustaining competitive advantage over those who simply ignore the increasing trend.

Start the discussion at forum.camunda.io

Try All Features of Camunda

Related Content

Learn the individual strengths of genAI and ML and then learn how they can complement each other in your business.
Learn about the best programming languages for microservices, plus how to compose and orchestrate microservices for your project.
What Intelligent Process Automation (IPA)? Learn the definition and benefits of IPA, plus use cases, workflows, and technologies needed to get started.