The Real Way to Justify an AGV Investment

When automation discussions begin, they often drift toward technology — navigation lasers, charging methods, fleet software. But leadership does not approve technology because it is interesting or cool. They approve investments because they change the risk profile and improve margin. It comes down to money, mostly. In this brief article we will take a look at how to justify an AGV investment.

To get to that answer, you cannot just compare a forklift with an AGV. It goes deeper. It is fully burdened manual material handling solution versus a burdened automation solution.  That means modeling everything.

Most manual forklift operations appear inexpensive on the surface. The trucks already exist. The operators are familiar. Local dealers support PM. Production continues. But the real cost structure tells a different story.

Start with labor. Five forklifts running across two shifts typically means ten operators. At a fully loaded cost of roughly $80,000 per year per operator, labor alone approaches $800,000 annually — or $4 million over five years.

Then add overtime, which never disappears in continuous operations. Add injury exposure and workers’ compensation claims. Add product damage from handling variability. Add vehicle maintenance. Add supervisory time spent scheduling, covering absences, and managing shift inconsistency.

Over five years, a manual system commonly falls between $5 to $7 million when fully burdened.

This assumes:

·       5 Forklifts

·       2 shifts

·       10 operators

·       $80K fully loaded labor for each driver per year

·       $15K maintenance per truck per year

·       5-year horizon

Now compare that to an AGV system — honestly.

To replace 5 manual trucks it usually takes around 8 AGVs as they have safety built-in and go a bit slower.   An eight-vehicle AGV system might require $2.4 M in capital investment.

Financed at 8% over five years, total repayment would look like this.

AGV System Math based on 5-year loan at 8%:

·       Annual payment factor ≈ 0.2505$2.4M × 0.2505 ≈ $601,000 per year

·       Total paid over 5 years ≈ $3.0MInterest ≈ $600K

·       Capital + interest = $3.6M

Manual System (5 Years)

·       Labor = $4.0M

·       Overtime = $600K

·       Injury = $450K

·       Maintenance = $600K

·       Damage = $300K

·       Management = $250K

Total ≈ $6.2M–$6.7M

Automation does not eliminate all labor.  You still need a material coordinator and maintenance support.   Budget approximately $240,000 annually for residual labor. Add maintenance at roughly $10,000 per unit per year.   Include energy costs, software support, and even a small residual allowance for product damage. 

Fully burdened over five years, the AGV system typically lands around $4 million. That’s even after financing costs and realistic operating expenses.

But the financial benefit is only part of the story.

Manual systems carry recurring labor escalation, overtime volatility, injury exposure, and performance variability tied to human factors. They require constant scheduling management and are sensitive to turnover and absenteeism.

AGV systems shift costs toward predictable capital and controlled maintenance. They stabilize throughput. They reduce variability. They lower dependency on scarce skilled operators.

That structural shift — from variable labor risk to controlled asset-based cost — is what leadership ultimately evaluates.

Safety is not merely emotional; it is financial.  Fewer incidents mean fewer claims, fewer investigations, fewer disruptions, and lower insurance pressure. Removing people from repetitive or high-exposure transport tasks directly reduces operational risk.

Implementation concerns are often overstated. Modern AGVs integrate gradually, operate alongside manual systems during transition, and require far less facility restructuring than commonly assumed.

When the financial model includes labor, maintenance, product damage, management overhead, and cost of capital — not just the purchase price — the economics become clear.

The conversation shifts from “Can we afford AGVs?” to “Can we afford to maintain a labor-intensive system that compounds risk every year?”

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