This week, The Wall Street Journal featured a well-researched article on China’s push to shift its factory culture away from labor and toward robots. Reasons include a rise in labor costs, the flattening and impending decrease in worker population and falling costs of advanced robotics technology.
Left unsaid was whether this is part of a wider acceleration in the digital takeover of work worldwide. It is.
Exponential Technologies
Supply chain professionals are fully aware of Moore’s Law, which predicts exponential performance improvements in semiconductors. Similar “laws” underlie networks, 3D printing and other digital technology.
For a long time, industrial robots were left out of this dynamic, experiencing instead relatively unexciting progress in a limited set of applications, most notably in automotive assembly plants. Starting in 2009, however, growth cranked up. It’s still early – SCM World data ranks robotics behind data analytics, cloud and several other disruptive technologies – but things are accelerating.
Digitization Is Moving Faster Than Business
Last month at our Leaders Forum in Dublin, the theme was all about strategy. Presenters from Amazon, Nike, HP and Stanley Black & Decker offered strategic views on how supply chain contributes to competitive advantage. All addressed such essential ideas as visibility, innovation, customer centricity and flexibility.
In recapping the key takeaways from the event, however, it was the pervasiveness of digital disruption that really stood out. Supply chain strategists are adopting and mixing digital technologies to make business faster, more responsive and more agile. New data available from smart manufacturing systems is being crunched with new tools for simulation and matched to new sources of demand insight in ever faster iterations.
The constraint is no longer technical but commercial as business practices fail to keep up with supply chain possibility.
Robots Replacing People
China’s move to robotics should raise alarm bells for any executives still doubting the speed of the transition now underway. With a workforce of around 900 million people and the still fresh memory of an economic miracle built on low-cost labor, China might seem an unlikely place for robotics to explode.
In fact, companies like Foxconn have spent several years developing and installing thousands of industrial robots. In 2015, China bought more industrial robots than all of Europe. Even faster growth was seen in Mexico, which nearly doubled units bought compared to 2014.
The robotics revolution was long thought to be mainly about Europe, Japan and the US. No longer. The whole world is on board and things are speeding up.
The move to robotics is speeding up for three main reasons:
- Costs are dropping – through the early 2000s, industrial robots often cost several hundred thousand dollars apiece and required extensive programming and installation effort. Today, prices are as little as 10% of that, with sponsored ads appearing in Google searches from companies like Universal Robotics for a $34,199 unit. Considering how cost curves typically evolve in new technologies, we should expect this trend to continue.
- Applications are getting easier – one of the essential shifts in robotics is toward smaller, safer and more readily programmable “collaborative robots”. These units cost less, but more important, are easily installed alongside people and generally programmed by learned movement rather than traditional coding. This greatly widens the scope for where it makes sense to install a robot. Packing lines, for instance at Johnson & Johnson, handle finicky tasks picking and packing boxes of medical supplies. Robots need not require a total retooling when incrementalism is realistic and worthwhile.
- Supply chains are localizing – research we conducted in 2013 pointed not only to the fast rise of robotics and automation, but also to a shift from global to regional supply chains. Benefits of producing closer to customers include faster, more responsive supply, easier localization of products, leaner working capital requirements and lower risk. Recent television advertisements from Wal-Mart promising big “made in America” commitments show that merchants believe it will also drive revenue. Robotics makes this easier.
The arrival of digital is now behind us. Its impact is just starting to be evident. Robotics is going to be huge, and soon.
