But a funny thing happened on the way to future: the robots weren’t quite up to the task. While Musk had promised production of 20,000 Model 3s per month by December, a mere 2,425 rolled off the line for all of the last three months of 2017, leading up to a record loss in Q1 2018 of $785 million. Ultimately, Musk had to reverse course, pulling his new robots off the lines and hiring hundreds of employees a week to rescue the Model 3 targets.
As Tesla continues to burn through its cash, the missed production targets have resulted in order cancelations, a falling share price and downgrades on both stock and debt. In July, Tesla claimed it had hit the 5,000-per-week production target, but a nervous Street seems not at all confident that the rate is sustainable.
Musk offered his mea culpa in a tweet: “Excessive automation at Tesla was a mistake. To be precise, my mistake. Humans are underrated.”
That’s hardly a surprise for most manufacturing CEOs. For all their promise, two decades of overblown hype and expensive false starts have clearly demonstrated that robots will not replace humans any time soon. In fact, a study of plant performance by the consulting firm Oliver Wyman actually found that the most automated factories ranked not at the top for productivity—but at the bottom.
“People are the most flexible form of automation you can have,” says Ron Harbour, a Wyman partner who has studied industrial automation for decades.
Tom Shoupe, COO of Honda of America Manufacturing, agrees. “It is our fundamental belief that humans are the most important element of our operation,” says Shoupe. While Honda uses advanced manufacturing technology, including sophisticated robotics, “we’ve taken the approach that we automate only where it’s appropriate, where there’s an efficiency issue, and then we allocate our people to something that requires more human touch. The touch, the feel, the senses of human beings can’t be replaced by machines.”
A Robot’s Role
It isn’t all hype, of course. Rapid advances in technology offer increasingly tantalizing opportunities. Robots and automation already play a prominent role in all parts of Industry 4.0, coming together with learning algorithms that allow both bots and humans to optimize production and improve quality. Increasingly sophisticated systems will be critical to addressing important elements of the skills gap, which, according to the most recent study by Deloitte and the Manufacturing Institute, will result in 2 million unfilled jobs by 2025. The hardest to fill will be those jobs that are dangerous, involve tedious repetition or are simply unpleasant. In other words, jobs that are perfect for robots.
“If we don’t automate, who is going to fill those positions? I’ll tell you—China will,” says Anthony Nighswander, CEO of Hicksville, Ohio-based APT Manufacturing Solutions, which helps other manufacturers automate their assembly lines. “Offshoring happened because there were jobs nobody wanted to do here, so China said, ‘We’ll take them.’ Why would we not want to take those back with robots?”
Many U.S. manufacturers likely would agree with that, having by now accepted that robots will play a prominent role in Industry 4.0. In this latest industrial revolution, and the era of the “smart factory” well under way, computers and automation are coming together in a new way: robotics are connected to computer systems that are equipped with artificial intelligence and learning algorithms that can allow both robots and humans to make fast decisions to optimize production and improve quality, all to the exacting specifications of a knowledgeable and demanding end user.
At the same time, CEOs who have been down this road will tell you that too much automation too soon can be the death knell of an otherwise successful manufacturer. As with the three industrial revolutions that came before this new digital age, change can’t happen overnight. “The context I like to keep in mind is when companies went from steam to electric, they tended to electrify the production line exactly as it had been set up in its steam configuration,” says Siemens U.S. CEO Barbara Humpton. “Then the groundbreakers said, ‘Wait, I can put equipment in any configuration I want because I don’thave to power it down a steam production line.’ But the thing we’re talking about a lot here at Siemens is, with each one of these changes, we’ve elevated the role of the human in the process.”
Right at this moment, she adds, we are seeing competing influences at work: “The fear that something is changing and the awareness that as we do this, we unleash people to be doing things that add value in new and different ways.”
In the first phase, robots take over repetitive, high-volume production tasks that were often dangerous or boring—and unlikely to attract young workers. Until recently, Travis Hollman, CEO of Hollman, the world’s largest manufacturer of wood and laminate lockers, was ambivalent about using robots on his production line. He’s a big believer in humans and thinks Elon Musk missed a crucial fact: “You can’t get to a perfect product if people don’t genuinely care about it and aren’t involved in making it.”
In July, he took the plunge and purchased his first robot, a machine that will do the heavy lifting and sorting of materials that was previously done by people who would often injure their backs. Those people will now oversee the machines. “It’s not going to replace people, but it will save people from getting hurt. It will help with worker’s comp,” he says.
It will also boost productivity, potentially threefold, as the machines can be stacked three deep in the company’s 300,000-squarefoot factory in Irving, Texas, and operate “lights out” overnight, so the materials are ready for humans by morning. “We have the capability to make it very efficient in the future as we buy more machines, but right now it’s a money-out thing, saving injury and relieving stress on the company.”
But Hollman is reticent to try automation anywhere in the process that involves customization, which is key for the company’s customers, who include fitness chains, major U.S. sports leagues and university sports teams.
The lockers are tailored to individual team needs and include facial recognition technology, LED screens that outline daily training regimens and other high-tech amenities. The company is constantly looking for innovative solutions for customers, and Hollman can’t see how robots wouldn’t interfere with that process.
“Maybe in the future,” he says. “But right now the technology isn’t there. It might work for Elon Musk to make the same car over and over. But we’re trying to make a customized product to suit each individual need. Every time we try a new material, it might be different tooling, different machining of different parts—I don’t see how you turn that over to robotics.”
Robotics—at least the kind that isn’t cost prohibitive—has been viewed as suitable primarily for manufacturers doing high volume, high scale, less customization. However, the technology is evolving. “A lot of those perceptions are grounded in a reality,” says Humpton. “But we’ve had people working on the question of ultimate customization for the last five to six years, and the technologies now exist.”
That’s thanks, in part, to the R&D done by companies like Siemens, which invests more than $1 billion a year in the U.S. alone. “We’re going to see the technologies become cost competitive in the coming years,” she says. “If you were the first to own an iPhone, you might have paid $600 for it. You don’t necessarily have to do that today.”
A new generation of less expensive, collaborative robots will account for a third of all industrial robots sold in 2025, according to Loup Ventures, a research-driven venture capital firm.
These “cobots,” at a pricetag of $25,000-$45,000, compared with upward of $100,000 for a traditional robot, also offer more flexibility and faster reaction time.
“We created a robot with sensors, so the robot will run at full speed, but if a human gets within a caution area, the robot will keep its cycle, but slow down,” explains Roger Varin, CEO of Stäubli’s North American mechatronics operations in Duncan, South Carolina. If the human gets too close, the robot stops. As soon as the human walks out of the danger zone, the robot starts up again. “That gives the manufacturer the opportunity to integrate it in different ways based on changing scenarios and new requests from customers.”
The Fear Factor
But there’s more to trepidation than cost. “Most companies just don’t even know where to start,” says Alexandre Capone, senior manager architect at digital transformation consultancy Capgemini. “We’re talking about a lot of new technology, robotics and AI machining, and if you’ve never touched it, you’re scared of it.” Even those that have begun are not yet thrilled with their results. Capgemini’s 2017 study of 1,000 large manufacturers across eight countries and six manufacturing subsectors found 75 percent had a smart factory initiative in place or were working on it, but only 14 percent were satisfied by their level of smart factory success.
Even those that have begun are not yet thrilled with their results. Capgemini’s 2017 study of 1,000 large manufacturers across eight countries and six manufacturing subsectors found 75 percent had a smart factory initiative in place or were working on it, but only 14 percent were satisfied with their success.
For SME manufacturers, before investing big bucks, CEOs need to know they’ll be able to boost efficiency or grow revenue, not wind up with a robot in a corner collecting dust. (In fact, several CEOs at Chief Executive’s recent Smart Manufacturing Summit admitted they had cobots effectively making coffee in the breakroom because they didn’t know what else to do with them.)
Capone recommends starting with a low-cost, high-value task, such as visual inspection. “That’s probably the least costly thing you can do with A.I., to put a camera on a machine to detect if the product is good or bad. You can start using the sensors to collect the data right away.”
Of course, you risk falling for the technology. “Engineers love to try and automate everything, but it may not make business sense—there may not be a return on investment, it may not improve the quality of the product, it may take too long to do the automation, depending on how quickly the customer wants to get their product,” says Bob Eulau, CEO of Sanmina, a $7 billion B2B manufacturer of optical, electronic and mechanical products that began automating its production lines 15 years ago and now has 25,000 machines connected around the world via the cloud. “We talk about the concept of ‘selective automation.’ We are very careful to make sure we use automation in the right places and capture value when we choose to do it.”
By starting small, a company can get experience with the technology, gather data and soon realize the kinds of efficiencies that enable growth—and more investment. Since UniCarriers Americas, a forklift manufacturer based in Marengo, Illinois, began working with robots in 2012, the company has increased automation capabilities by 50 percent and allowed the business to grow enough to double headcount from 300 to 600. “Because we run a leaner operation and
vertically integrate, we’ve become less dependent on outside sources,” says Jim Radous, president. “We control more of the design capabilities and the parts that go into the product and that keeps us more competitive, more internally focused on efficiencies and allows us to stay within a very tight fixed-cost parameter as we add people to our process.”
Keeping that focus on the end customer is paramount to guiding any manufacturing company through digitalization and automation. That, and remembering the value of the most complex and capable machine in their plant: People.
Even the International Federation of Robotics said in its April 2017 report that “less than 10 percent of jobs are fully automatable.” Robots will never be able to handle tasks “requiring high levels of creativity, empathy, persuasion or understanding of which knowledge to apply in which situation.” As such, machines should complement and augment human labor activities, playing a supporting role so that humans can “focus on higher-skilled, higher-quality and higher-paid tasks.”
To get there, CEOs must seek a balance between human and machine so as not to sacrifice the je ne sais quoi that has made American manufacturing competitive since the first industrial revolution. “The human being’s ability to interpret and to initiate and to apply ideas is critical to making things happen,” says Honda’s Shoupe. “We feel like one without the other is a complete loss for us.”