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September 26th, 2007, 07:14 PM

Need more workers? Try a robot

Automation is becoming more affordable for small business owners interested in cutting manufacturing costs.

FORTUNE Small Business Magazine
By Mina Kimes
September 24 2007: 6:44 AM EDT

(FSB Magazine) -- Two of the best workers at Blue Chip, a manufacturing shop in Columbus, don't take lunch breaks. These model employees draw no salary, work unlimited shifts, and weld at lightning speed. Their performance isn't just superhuman it isn't human at all. "My robots are wonderful," says Steve Tatman, vice president of engineering at Blue Chip (bluechipmanufacturing.com). "Since adding them to the team, we've become more competitive and more efficient."

Blue Chip grosses about $5 million a year machining spare parts for the U.S. military. "I always thought robots were out of our league, pricewise," says Tatman, 47, who owns and operates the company in partnership with his wife, Tammy, Blue Chip's president. "They were a mystery to me." But when Blue Chip landed a Pentagon contract to manufacture thousands of drift pins (L-shaped tools the military needed to change tank treads), he decided it was finally time to explore automation. "It takes a human seven minutes to weld a drift pin," he says. "It takes a machine 45 seconds."

While new robots were pricey, Tatman discovered a cheaper alternative after contacting RobotWorx (robots.com), a company in Marion, Ohio, that refurbishes, sells, and installs used robot systems. Today's industrial robots evoke big fishing rods with joints more than they do the anthropomorphic creatures from The Jetsons. They excel at heavy lifting, executing repetitive tasks, and operating in hazardous environments. "We'll put robots in radioactive areas or have them painting for a long time," says RobotWorx president Keith Wanner, 51. "It takes your workers out of those situations."

While Blue Chip's employees were initially apprehensive about their new colleagues, they've since warmed up to them. "The guys call them R2D2 and C3PO," laughs Tatman, who says that the robots haven't replaced his human workers but have instead reduced the need to increase staff. "Having the robots keeps me out of the heat, the flash, and the fumes created by the welding process," says Darren Leister, 30, the welder who operates them. "Once you're done setting them up, you just hit start."

Industrial robots have long been commonplace in large manufacturing operations such as auto plants. Today some 171,000 robots toil in North American factories, and sales jumped 39% in the first half of 2007, according to the Robotics Industries Association (roboticsonline.com), a trade group. As robot prices come down, more small manufacturers are investing in automation. While robot orders from automotive companies dropped 30% in 2006, nonautomotive orders, many of them placed by small businesses, composed 44% of all purchases, up from 30% in 2005, says the RIA.

Until recently, Wanner says, robot technology was evolving so rapidly that most older models were unfit for resale. That's why Wanner's company initially sold only new robots. But now that the industry has matured, the life of a manufacturing robot is much longer. Wanner spotted this opportunity five years ago and started selling reconditioned robots at steep discounts. Today RobotWorx stocks about 500 robots in its warehouse and posts annual sales of more than $10 million. Four years ago Wanner purchased the domain names robots.com, usedrobots.com, and robotsforwelding.com, and today most of his sales leads come through the Internet via search advertising and other online marketing strategies.

Not surprisingly, used-robot vendors cluster in Rustbelt states such as Ohio and Michigan. "Factories close, they're looking to sell their equipment, and they come to us," says Wanner. One of his competitors, Rebotics (rebotics.com), has even managed to go global. "We've found customers in Mexico, Canada, India," says owner Bob Lieblang. Rebotics robots operate in industries such as parts assembly, packaging, and food processing, where they perform jobs ranging from welding and painting to materials handling.

Tatman's first robot purchase was a four-year-old machine from RobotWorx that cost $20,000; an equivalent new model would set him back $90,000. His second robot, a veritable senior citizen of eight years, cost $60,000, compared with $150,000 for a new version. While no longer cutting-edge technology, robot No. 2 had only pulled light duty in a welding research facility before Tatman took it home. Each robot replaced four human welders, runs 70 hours a week, and produces between $80 and $100 worth of goods in an hour.

Tatman says he recouped both investments in less than a year. After subtracting maintenance and other operational expenses, he estimates that the robots have saved him $60,000 each in manufacturing costs over the past four years. (The RobotWorx website features a handy calculator that helps shoppers estimate the ROI of buying a robot.)

While some customers may hesitate at hiring a robot with a past, the advantages can mirror those of hiring older employees: experience and dependability. Caveats: There's no such thing as a Renaissance robot. "They're not right for many low-run jobs or for tasks that require decision-making abilities," says Rebotics owner Lieblang. And caveat emptor applies to used robots as well as to used cars. RobotWorx and Rebotics offer one-year warranties and service contracts that include teaching new owners how to use the machines. But not all vendors provide support, training, or spare parts for their used robots. "Some used robots may be too outdated to get the parts," says Tatman. "If something goes wrong, you have to be sure you can fix the robot."

Back at Blue Chip headquarters in Columbus, Tatman expresses complete satisfaction with his used robots, which adorn the Blue Chip website like so many high-tech pinups. "With the robots around, we don't need to hire as many welders," he says. "But I do want more robots."