This page teaches how to build a genuine automation candidate's own total cost of ownership and compare it against the labour cost it replaces, since a machine's own purchase price alone understates what it truly costs to run. This is mainly a money decision, made once a task has already passed the automation-candidate test of Lesson 4.1. A buyer or factory that compares only a machine's purchase price against a rough guess at labour savings risks approving automation that never actually pays for itself at the volume the buyer really runs.
A factory that ignores a rollout's own recurring cost, such as maintenance and consumables, understates the machine's true cost. A buyer that ignores how many pieces it actually runs on that task each month cannot tell whether the machine will earn back its own cost within any sensible period at all.
You need: a task already confirmed a genuine automation candidate (Lesson 4.1), the machine's own rollout cost and recurring cost, and the labour cost per piece it would replace.
By the end of this lesson you can:
Not covered here: identifying whether a task is a genuine automation candidate in the first place (Lesson 4.1), monitoring a factory's own energy and water use (Lesson 4.3), and building the complete decision tool (Lesson 4.4).
| Term | Meaning |
|---|---|
| Automation candidate | A task that is well-defined, repetitive and low in commercial judgement, and so a reasonable task to consider automating. |
| Making charge | The labour cost of cutting, sewing and finishing one garment. |
| Rollout cost | The full one-time cost of introducing a technology into an operation: readers or scanners, tags or labels, software setup and staff training. |
| Recurring cost | The ongoing cost a rollout adds every month after installation, such as replacement tags, consumables or a software subscription. |
| Total cost of ownership | A rollout's own total cost plus its own recurring cost over a defined period, used to compare it fairly against an alternative. |
| Technology break-even volume | The number of units or cartons a rollout must process before its own savings equal its own total cost. |
An automation candidate's rollout cost plus its own recurring cost over a stated period gives its total cost of ownership. Dividing that total cost of ownership by the labour cost saved on each piece gives the technology break-even volume, the number of pieces the buyer must actually run on that task within the stated period before the rollout pays for itself. A machine's purchase price alone, without its recurring cost and without the buyer's own real volume, cannot answer whether automating a confirmed candidate actually pays.
| What can differ | The shapes you meet | Why it matters |
|---|---|---|
| Export MTO vs. domestic MTS order | An export MTO order under deadline pressure, like Order A, can force Delta Garments to pay an overtime premium on top of the regular labour cost; a domestic MTS order restocked on a planned schedule, like Cedar & Co.'s own repeat orders, usually avoids overtime entirely | Comparing automation against an inflated overtime figure instead of the regular labour cost overstates the savings and understates the true break-even volume |
| Hybrid model, mixed volume | A factory running MTO and MTS lines side by side may only automate a task once the combined volume from both lines clears the break-even volume, even if neither line alone would | The break-even decision can depend on pooling volume across a hybrid model's own lines, not judging each line alone |
| Buyer's own order frequency | A buyer restocking monthly, like Cedar & Co., reaches a stated volume faster than a buyer restocking only twice a year, even at the same total annual volume | How volume is spread over the stated period, not only its yearly total, changes how quickly the break-even volume is reached |
| Recurring cost size relative to rollout cost | A rollout with a low one-time cost but a high monthly recurring cost can cost more than one with a higher one-time cost but low recurring cost, once totalled over a long enough period | Comparing only the one-time rollout cost between two options, ignoring recurring cost, can pick the more expensive option over time |
| Product families | The same total-cost-of-ownership and break-even-volume method applies whether the goods are apparel, socks and hosiery, knit-to-garment, terry and towels, or home textiles and bedding | A buyer new to this comparison applies the same method regardless of product family |
Sleeve attach on a basic T-shirt has already passed Lesson 4.1's own automation-candidate test on Order A. Omar, the owner of Cedar & Co., a domestic Make to Stock buyer restocking 4,000 pieces a month from Delta Garments on 60-day open account, asks Karim whether it is worth Delta Garments buying an automated sleeve-attach unit for this same task, and whether the answer changes the price Cedar & Co. pays.
Delta Garments quotes the automated unit's own rollout cost at USD 6,000, with a recurring cost of USD 100 a month for maintenance and consumables. Karim must compare this total cost of ownership against the labour cost the machine would actually replace, at Cedar & Co.'s own real monthly volume, not against Order A's own overtime figure, since Cedar & Co.'s planned monthly restocking avoids the overtime Delta Garments sometimes pays on tight export deadlines.
The worked numberAt Cedar & Co.'s own real volume, sleeve attach automation falls 12,000 pieces short of its own break-even volume within 12 months. Using Order A's own USD 0.15 overtime figure by mistake, instead of the USD 0.12 regular rate, would have understated the break-even volume to 48,000 pieces exactly, making the decision look like a tie rather than a genuine shortfall.
A common mistake is using a higher, occasional overtime figure, like Order A's own USD 0.15 per piece under export deadline pressure, as the labour cost automation is assumed to replace, when the buyer's own real volume never actually triggers overtime. This makes automation look like it pays back sooner than it really does. The fix is using the regular making-charge rate that genuinely applies to the buyer's own schedule, reserving the overtime figure only for a task where overtime truly recurs.
Buying a machine to replace a task a person currently does is only worth it once its full cost, not just its price tag, is compared fairly against the labour cost it would actually save, at the number of pieces the buyer genuinely runs. Adding the machine's one-time cost to its ongoing monthly cost over a set period gives its full cost; dividing that by the labour saved on each piece shows how many pieces are needed before it pays for itself. For Cedar & Co.'s sleeve attach, that number is 60,000 pieces within 12 months, but Cedar & Co. only runs 48,000 in that time, so automating now does not yet pay back.
Omar, the owner of Cedar & Co., has heard that Delta Garments pays an overtime premium of USD 0.15 per piece for sleeve attach on Order A's export deadlines, and asks Karim whether that is the labour cost figure that should be used to judge whether automating sleeve attach pays back for Cedar & Co.'s own domestic Make to Stock orders. The facts in front of Karim:
The question relayed to Karim:
Should Order A's own USD 0.15 overtime figure be used to judge automation for Cedar & Co.'s domestic orders? Decide before you open the decision.
No, the USD 0.15 overtime figure should not be used; the regular USD 0.12 making-charge rate is the correct labour cost for Cedar & Co.'s own volume.
Two facts decide this. First, this lesson's rule states the correct labour cost is the rate that genuinely applies to the buyer's own schedule, and Cedar & Co.'s planned monthly restocking has never triggered overtime on this task. Second, using the higher USD 0.15 figure by mistake would understate the technology break-even volume to exactly 48,000 pieces, making Cedar & Co.'s own 48,000-piece volume look like an exact break-even instead of the real 12,000-piece shortfall against the true 60,000-piece figure.
Treating an occasional export overtime figure as Cedar & Co.'s own domestic labour cost ignores exactly the schedule difference this lesson exists to catch.
Approving the automated sleeve-attach unit now, on the mistaken belief that Cedar & Co.'s own 48,000-piece volume already broke even, would leave USD 1,440 of the rollout's own USD 7,200 total cost of ownership uncovered within the first 12 months, a gap that recurs every year the real volume stays below the true break-even figure.
Use the T26-C04 Automation and environmental monitoring decision tool. Enter the rollout cost, recurring cost, stated period and labour cost saved per piece; the sheet calculates the technology break-even volume and compares it against the buyer's own entered volume.
[Download the Automation and environmental monitoring decision tool](../../templates/T26-C04-automation-and-environmental-monitoring-decision-tool.xlsx)
Download the Automation and environmental monitoring decision tool (Excel)
1. Why is Order A's own USD 0.15 overtime figure the wrong labour cost to use for judging sleeve attach automation on Cedar & Co.'s domestic orders?
2. A rollout costs USD 4,000 with USD 50 recurring cost per month, and saves USD 0.10 labour cost per piece. What is the technology break-even volume over 12 months?
| EN | AR | FR | TR | Meaning |
|---|---|---|---|---|
| Automation candidate | مرشح للأتمتة | Candidat à l'automatisation | Otomasyon adayı | A task that is well-defined, repetitive and low in commercial judgement, and so a reasonable task to consider automating. |
| Making charge | تكلفة التصنيع | Coût de façon | İşçilik (fason) maliyeti | The labour cost of cutting, sewing and finishing one garment. |
| Rollout cost | تكلفة التطبيق | Coût de déploiement | Uygulama maliyeti | The full one-time cost of introducing a technology into an operation: readers or scanners, tags or labels, software setup and staff training. |
| Recurring cost | التكلفة المتكررة | Coût récurrent | Tekrarlayan maliyet | The ongoing cost a rollout adds every month after installation, such as replacement tags, consumables or a software subscription. |
| Total cost of ownership | إجمالي تكلفة الامتلاك | Coût total de possession | Toplam sahip olma maliyeti | A rollout's own total cost plus its own recurring cost over a defined period, used to compare it fairly against an alternative. |
| Technology break-even volume | حجم التعادل التقني | Volume de seuil de rentabilité technologique | Teknoloji başabaş hacmi | The number of units or cartons a rollout must process before its own savings equal its own total cost. |
Once an automation decision is made on labour cost alone, the next question this course asks is how a factory tracks its own energy and water use accurately enough to manage it, rather than guessing at the total from a single monthly bill. Back to the course map