Search
Close this search box.
Search
Close this search box.

Automation Is At A Tipping Point

© AdobeStock
As the new year begins, it’s clear that companies of all sizes will need to automate on some level to keep up. 'Collaborative' robots anyone?

Across the U.S. industrial landscape, appendages are whirring like never before. But increasingly, it isn’t eyes, ears, hands, arms and legs that are doing the fabrication but networks of electronic sensors, robot “end effecters,” manipulator arms and electrically powered locomotion devices.

U.S. companies are trying to replace workers with machines at a record pace. Jolted by supply-chain difficulties, the labor squeeze and fast-rising employee compensation, more than ever are embracing the advantages versus the costs of “Industry 4.0” automation technology.

The case for automating in manufacturing is picking up as companies recognize they need to replace low-skill jobs if they’re ever going to make domestic manufacturing cost-competitive. At the same time, the automation wave is sweeping over services businesses too, ranging from restaurants to accounting firms, and is enveloping everything from frying tortilla chips to sorting out invoices to speed payments.

“The adoption of technology has accelerated,” said Jeff Burnstein, president of the Association for Advancing Automation. “Trends were happening as companies realized they needed to automate to become stronger global competitors. But Covid forced companies to take a look at how rapidly they were moving, and a lot of them realized they had to automate.”

Echoed Asutosh Padhi, managing partner in North America for McKinsey consultants and co-author of the new book, The Titanium Economy: “This is a moment for real acceleration of automation. There’s a felt need today, driven by talent shortages and investments in digital that a lot of companies have done.”

Eliminating Human Labor

Automation no longer is simply replacing jobs that humans don’t want to perform; think of how robots have overtaken the auto-assembly plant paint booth as a primary example of that kind of application. Nowadays, industrial automation is eliminating the need for human labor altogether across vast and increasingly sophisticated tasks, enabling the operation to proceed with more efficient and higher-quality results, and fewer people pulling fewer levers to get there.

“Technology now can fit a wide set of use cases,” said Bret Greenstein, partner for cloud and digital analytics with consultants PwC. “Things that were difficult to do are now easy to do. There’s a drain of talent, much of the workforce is retiring out, and technology is enabling. It’s a weird perfect storm. A fourth dimension is a comfort with automated, AI-based systems that didn’t even exist a few years ago. Now, with Alexa, there is a level of comfort that these things exist and aren’t just annoying.”

Slim labor availability and high labor costs continue to dominate companies’ reasons for accelerating automation. “Payrolls have been going up, inflation is going up [7%], and payrolls will continue to go up as companies have difficulty filling the jobs at the bottom of the food chain,” said Christian Hasenoerhl, a global leader for consumer and industrial accounts at the Korn Ferry executive search firm. “If your output is only at 95% or 90% of what you’re capable of, you can be leaving billions of dollars on the table if you don’t automate.”

A recent Chief Executive survey found that 51% of companies with more than $250 million in revenues are investing in automation to reduce the number of employees in the back office in response to rising wages, and 44% of those companies are doing the same in the plant.

Thus, orders for a major staple of automation, workplace robots, increased in the U.S. by 25% in the second quarter of 2022 compared with the same period in 2021, according to the Association for Advancing Automation, the robotics industry’s trade group, and were up 6% over 2022’s first quarter. Robot orders climbed by 22% in 2021.

Meanwhile, robotics-as-a-service revenues are increasing for companies that provide systems such as mobile robots, with many suppliers in 2022 nearly doubling their 2021 revenues, said Zehao Li, analyst for technology-information firm IDTechEx.

Pair the cost dynamic with two other automation drivers: the industries that are burgeoning these days, and the fact that companies wanting to “reshore” production from overseas typically are counting on automation to replace unskilled labor in order to make the financial case for such moves.

One industry that promises to lead America’s industrial renaissance, microchip  making, requires few unskilled workers and, instead, a lot of PhDs. Another such business, logistics and warehousing, relies heavily, for instance, on robotic forklifts in tight-fitting spaces across vast acres inside facilities that require relatively few humans to operate. And a third nascent industry, manufacturing electric vehicles and their batteries, calls for roughly 30% fewer workers than making traditional autos with internal-combustion engines.

‘Collaborative’ Robots

New EV factories also are a proving ground for one of the hottest areas of industrial automation: “collaborative” robots that work alongside and, in some cases, even around human workers. In the early days of robot installation in automotive plants, it was risky to life and limb to assume the machines could work in physical concert with people. But in one of today’s newest assembly plants, the factory in Dearborn, Michigan, where Ford builds the F-150 Lightning pickup truck, human-robot collaboration in an intricate sort of ballet weaving around the truck is a staple of the process and a huge efficiency boost.

Collaborative robots are “easier to set up, cost less, are safe and don’t require as much floor space or the same level of engineering expertise as fully autonomous robots,” Burnstein noted, and are a way for small and medium-sized companies to ease into robotics applications.

Predictive maintenance is another fast-growing area for industrial automation. “AI is making a big difference,” said Blake Griffin, senior analyst for Interact Analysis. “For a long time, you had to rely on subject-matter [human] expertise they developed over years and years. But now it’s starting to be built in, to help technicians monitor anomalies. AI is a huge play in keeping equipment up and running and healthy, reducing unplanned down time.”

Great Harvest Bakeries may have to turn to automation just to replace Hank X, a long-time employee who “dresses” grain mills at most of the company’s 170 locations, helping maintain the farm-to-table patina that is crucial to the consumer brand.

“But Hank is 65 years old with a bad back now, and his days as a mill dresser are numbered,” said Mike Ferretti, CEO of the company based in Dillon, Montana. “We may have found someone to replace him, but it brings up the question of automation. If we don’t solve this, franchisees will get wheat from elsewhere. The passion on both sides of that argument is incredible.”

Hank is an example of why “companies are using their AI to move their preventive maintenance schedules tied to when things are likely to fail,” Greenstein said. “Maybe a function actually only needs attention every 17 days, in which case the number of service personnel can be reduced. And supplementing service personnel with [augmented reality] so they can overlay what they’re seeing with data about times and schedules.”

Major Tool & Machine is implementing “adaptive-control machining” automation “that will lessen the need for highly skilled machinists and maybe put us in a situation where we can have people coming out of our training program that can operate some of these large, complex machines,” said Mike Griffith, president of the manufacturer in Indianapolis. “So if things go wrong, it will be able to stop it before it becomes a big problem. Traditional machinists can tell by feel, vibration and sounds what’s going on, but those skills take years to develop.”

Amazon’s new Monitron system keeps tabs on and can predict failures in a broad range of rotating industrial equipment such as motors, gearboxes, pumps, fans, bearings and compressors simply by detecting and communicating changes in vibration or heat. Plus, it aggregates huge amounts of information about system performance. It costs only about $700 for a starter kit and $50 a year to monitor each of its five sensors, with a smartphone app to boot.

The automation imperative presses on companies across the U.S. economy. For example, Guardian Pharmacy Services has automated most of its dozens of 15,000- to 20,000-square foot operations across the country that package drugs for long-term care. Its automation systems review prescriptions electronically and put the Rx in time-sensitive packaging with a punch card for a 7-, 14- or 28-day supply that is delivered to assisted-living facilities.

“With labor shortages and inflation, our margins are very thin, and automation is a tremendous help in achieving a reasonable profit margin,” said David Morris, CFO of the Atlanta-based outfit. “In fact, it’s hard to do it without it.”

Tyson, the huge chicken and beef packer, is in a race to automate after the pandemic hit hard at staffing in its more than 70 facilities, with plans to double its capital expenditures to about $2 billion from about $1 billion annually, Hasenoerhl said. This includes automating even the beef-rendering process, which is more difficult than having machines work with smaller and more predictably sized chickens.

Higher-Level Skills

Van’s Kitchen automated a secondary packaging line and a printing line last year to customize on demand what customers want to see in the packaging of the company’s egg rolls. “We were able to reduce by about 20% the number of people working there, moving four or five people to different areas,” said Theresa Motter, CEO of the company in Dallas. “It’s repurposing. ‘Now you’re an operator and can learn higher-level skills.’ We still need fewer, but some, people to monitor the process, refill ink, do cleaning, and repairs of the more electronic stuff.”

The new surge in automation also has moved easily into process businesses that aren’t manufacturing per se but where labor is in tight supply. Chipotle, for instance, has been testing a robot that can cook tortilla chips. “Chippy,” an autonomous kitchen assistant made by Miso Robotics, can replicate Chipotle’s exact recipe to cook and season chips and add a dash of lime juice at the end.

“Integrating AI to the chip station removes teams from this function, allowing them to focus on the culinary duties that drove them to join Chipotle,” said Curt Garner, CTO of the fast-food giant based in Newport Beach, California.

Panera also is testing a Miso Robotics system that monitors metrics of a battery of coffee pots such as volume, temperature and time data, and guarantees a fresh cup of coffee as well as more efficiency than employees’ manual checks can provide.

Process automation has begun taking over many white-collar procedures, especially in the back offices of a variety of data-intensive businesses. “The degree of automation to drive the expected velocity of work has only been amplified and accelerated,” said Nicholas Merizzi, industry cloud expert for Deloitte consultants. “People are looking at their value chains to say, ‘OK, where can I reimagine the possible?’ If legacy mortgage and loan-processing times took X number of days, how do we go about it differently? Everything is getting challenged to the core in how they collect, store, process and underwrite.”

For example, CCC Intelligent Solutions uses augmented reality and AI to assess in photos the damages to a car after an accident and figure out what needs to be fixed and how much it will cost to do that. “People don’t have to meet with the insurer, which is a laborious process,” said John Goodson, CTO of the Chicago-based company. “Traditional adjusters have to write 20 different rows of information about what it takes to fix that car, from ordering parts to labor estimates and painting. And typically, that takes about a half hour. This takes only one or two minutes.”

AI-powered automation is even overtaking customer service, an area that has been a pain point for companies for decades, prompting many of them to ship the phone-related jobs overseas—and then rethink their decisions. “Companies now are using AI to augment agents so each agent is as smart as the smartest person, capturing dialogue and turning it into some meaning so the things people say and the way people express themselves are indicators,” Greenstein said. “They’re using knowledge capture from engagement interaction, augmenting their data, and automating. A few years ago that was very difficult to do.”

The obstacles to continued momentum in automation remain formidable, including affording the cost, managing the difficulties of applications and generating an acceptable return on investment.

Affordability is especially a problem for smaller companies. The Chief Executive survey found that only 28% of companies with under $10 million in revenues are investing in tech and automation on the front lines, compared with 50% of companies with $1 billion or more in revenues. In the back office, the difference is even more striking: 59% of companies with $1 billion plus in revenues are making the investments, while only one-quarter of companies with under $10 million in revenues are doing the same.

But cost is a hindrance across the board. In a survey by Visual Components, 43% of manufacturing decision-makers said between 21% and 60% of their operations are being held back from being updated with new technologies due to continued cost pressures.

Training Challenges

Another data point from Visual Components, a company that provides 3D-manufacturing-simulation software, underscored a second pain point: If they invest in automation, companies aren’t sure they can train up their people to use it. Nearly half of manufacturing decision-makers admitted their organization is failing to invest in training on the use of new technologies, in a survey, while 30% don’t believe the majority of their workforce are skilled in using robotics and automation in the manufacturing environment. This partly results, the survey said, in problems such as low flexibility for different jobs with a robot (cited by 23%), poor layout design (18%) and a wrong focus point (22%).

“Skilled human resources will be needed at every stage of the process to design, build, operate, maintain and train others on these functions [but] Guild members are not confident these workforce-training systems are in place, and most agree that government programs for new worker training and retraining workers are currently not sufficient to meet the demands of industrial projects,” said a recent white paper by the Site Selectors Guild, an organization of economic-development professionals.

All of this already has led to some initial disappointments among CTOs and their companions in the C-Suite over ROI from automation. “Typically, 99 out of 100 CEOs I talk with have invested in digital,” Padhi said. “But fewer than 20 in 100 have seen quantifiable returns they’re comfortable with.” Nevertheless, the automation revolution in U.S. business marches on. “From manufacturing to logistics to retailing, it’s happening,” said Mark Taylor, CEO of the Society for Information Management. “The number of CEOs now indicating that [robotic process automation] is near the front of their project list is enormous. It’s reaching front-office functions too. They’re just taking what was in their spreadsheet and creating automation to answer it.”


MORE LIKE THIS

  • Get the CEO Briefing

    Sign up today to get weekly access to the latest issues affecting CEOs in every industry
  • upcoming events

    Roundtable

    Strategic Planning Workshop

    1:00 - 5:00 pm

    Over 70% of Executives Surveyed Agree: Many Strategic Planning Efforts Lack Systematic Approach Tips for Enhancing Your Strategic Planning Process

    Executives expressed frustration with their current strategic planning process. Issues include:

    1. Lack of systematic approach (70%)
    2. Laundry lists without prioritization (68%)
    3. Decisions based on personalities rather than facts and information (65%)

     

    Steve Rutan and Denise Harrison have put together an afternoon workshop that will provide the tools you need to address these concerns.  They have worked with hundreds of executives to develop a systematic approach that will enable your team to make better decisions during strategic planning.  Steve and Denise will walk you through exercises for prioritizing your lists and steps that will reset and reinvigorate your process.  This will be a hands-on workshop that will enable you to think about your business as you use the tools that are being presented.  If you are ready for a Strategic Planning tune-up, select this workshop in your registration form.  The additional fee of $695 will be added to your total.

    To sign up, select this option in your registration form. Additional fee of $695 will be added to your total.

    New York, NY: ​​​Chief Executive's Corporate Citizenship Awards 2017

    Women in Leadership Seminar and Peer Discussion

    2:00 - 5:00 pm

    Female leaders face the same issues all leaders do, but they often face additional challenges too. In this peer session, we will facilitate a discussion of best practices and how to overcome common barriers to help women leaders be more effective within and outside their organizations. 

    Limited space available.

    To sign up, select this option in your registration form. Additional fee of $495 will be added to your total.

    Golf Outing

    10:30 - 5:00 pm
    General’s Retreat at Hermitage Golf Course
    Sponsored by UBS

    General’s Retreat, built in 1986 with architect Gary Roger Baird, has been voted the “Best Golf Course in Nashville” and is a “must play” when visiting the Nashville, Tennessee area. With the beautiful setting along the Cumberland River, golfers of all capabilities will thoroughly enjoy the golf, scenery and hospitality.

    The golf outing fee includes transportation to and from the hotel, greens/cart fees, use of practice facilities, and boxed lunch. The bus will leave the hotel at 10:30 am for a noon shotgun start and return to the hotel after the cocktail reception following the completion of the round.

    To sign up, select this option in your registration form. Additional fee of $295 will be added to your total.