Automation levels are given a scale of 1.0 to 10.0. 1.0 is the lowest automation, 10.0 the highest. At the start of the simulation, all assembly lines have an automation level between 3.0 and 5.0. As automation levels increase, the number of labor hours required to produce each unit falls.

If you reduce automation, you will incur a retooling cost. The net result is you will be paying money to make your plant less efficient. While reduced automation will speed R&D redesigns, by and large it is not wise to reduce an automation level. 

Labor costs increase each year because of the Annual Raise in labor’s contract. Optional Labor Negotiations, TQM and Human Resources Modules also affect labor costs. 

The dollar value of capacity and automation purchases is limited to the total of:

- The maximum amount that can be raised through stock and bond issues;
- Last year's income added to last year's depreciation minus this year's stock dividend.

At an automation rating of 1.0, labor costs are highest. At a rating of 10.0, labor costs fall about 90%. Each additional point of automation decreases labor costs approximately 10%.
Despite its attractiveness, two factors should be considered before raising automation:

• Automation is expensive: At $4 per point of automation, raising automation from 1.0 to 10.0 costs $36 per unit of capacity;
• As you raise automation, it becomes increasingly difficult for R&D to reposition products on the Perceptual Map because more machines must be redesigned (see Figure 6.3). This does not apply to long moves. You can move a product a long distance at any automation level, but the project will take between 2.5 and 3.0 years.

Time Required To Move A Product On The Perceptual Map At Automation Levels 1 Through 10: Note that at all automation levels, less time is required to move a product 0.25 units (dark blue line) than to move a product 1.0 units (light blue line). Lines with higher automation require more R&D time because they have more machines to re-engineer.These times will increase when two or more R&D projects are underway. Products in the High End, Performance and Size segments, where positioning is an important criteria, can be repositioned more quickly with lower automation.

Changing Automation

For each point of change, up or down, the company is charged $4 per unit of capacity. For example, if a line has a capacity of 1,000,000 units, the cost of changing the automation level from 5.0 to 6.0 would be $4,000,000. Reducing automation does not have the same effect as selling capacity. You will not receive cash for lowering your automation, but will be billed instead. Changes in automation require a full year to take effect– change it this year, use it next year.