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News archive for June, 2014

Corena Golliver

June 2014

Our Thoughts on the Shifting Value of Labor Versus Machinery

A recent article in Pieria made some interesting points on how the recession has impacted worldwide use of automation versus use of labor.

The author of this article, Simon Wren-Lewis, describes his recent experience at a car wash that was utilizing human labor rather than an automated car wash system. Indeed, it is very unusual these days to come across a manual car wash, and as Wren-Lewis notes, this likely suggests that in an unusual turn of events, human labor in this market had actually become more cost effective than repairing and replacing the old machine.

The logic behind this is as follows: when a recession begins, people begin to cut down on their expenses on luxury goods and non-necessities. Washing your car would, for most, be considered a non-necessity. So, as customer demand for car washes go down, there begins to be less money available for the upkeep of the machinery. When the machinery becomes too old, if there is still low demand, the gas station owner becomes less likely to be able to afford the high upfront cost of a large piece of new machinery. If in doubt about the demand, it is much easier for the gas station owner to hire a few employees who would require a few years of salary before they became more expensive than the machinery. And, when there are not enough people who want car washes, these employees can be put to other tasks, or if demand drops altogether, these employees can be put into other positions or let go at a far lower cost to the owner than the cost of replacing an automated car wash.

So at present, there are more car washes using human labor because, in a strange turn of events, human labor is not often cheaper than machinery.

However, this is truly a reflection not on the cost of automation machinery, but on the unfortunate state of unemployment. Part of the purpose behind developing automated machinery is in that it should ultimately be cheaper and more efficient than people doing the same job. However, this is only true in cases where there is a dramatic difference in productivity between the machine and the person. Machines could be much faster at cleaning cars than people are, but there simply is not enough demand for them to be faster.

Thus, though we may have the technology to automate this process, we have in some ways gone backwards in that human labor has become the less expensive option compared to the technological option. This suggests that in the future, we may be witness to an interesting balancing act as we try identify when we can automate but it does not actually make financial sense to do so.

© Hacalaki

June 2014

Article Series: How Can We Automate Responsibly? (Part Six)

This is the sixth article in our series on the positives and negatives of automation. As a manufacturer of automation machinery, we feel that it is our responsibility to be forthright about the controversies and questions that are a part of the industry. We provide these articles in an attempt to have a more informed customer and partner base, and in so doing, we hope to encourage a healthy dialogue on many of these topics. Rachel Greenberg writes marketing and technical content for Automation GT.


How do we minimize the numbers of people displaced?

Many people do not realize that manufacturers can actually choose the degree to which they automate their system. This means that, though a company may conceivably be able to automate their entire process to the point that there are no human beings in a room, it is not always prudent or even fiscally responsible to do so.

Automated processes are specific to a company. That means that each automation process will present the automation designers with unique challenges. Sometimes there will be smart answers that allow the engineers to automate the whole process, but other times a human operator simply makes more sense.

For example, if a toy manufacturer were trying to automate the process of packaging marbles into small mesh bags, they would have a few options in jobs that people could do. For example, they could make a machine that only automates the process of putting a zip tie on the ends of the mesh bag and sealing the bag. This would still require people to put the marbles in the bag, load the bags into the machine, and collect the finished bags of marbles. Or, they could automate the process of putting the marbles into the bag and closing off the end. This will still require someone to load the marbles and the bags into the machine and collect them at the end. Or, they could automate every step of loading and unloading, but still need someone who can move the bagged marbles into boxes for shipping.

As is likely apparent from this example, the variety in the degree to which you can automate is pretty large, especially with more complex processes. In this example, unless the actual manufacturing process for the marbles is connected to the packaging system, it would likely be a poor investment for the manufacturer to purchase a robot just to load the marbles into the packaging machine. For example, maybe their space is limited in such a way that they can’t connect the packaging process to the manufacturing process, or the system would have to bend around a weird corner just to keep the parts connected. This is a case in which a human operator would be an obvious better choice.

Of course, manufacturers will not always face such obvious choices, and may be tempted to automate their entire process if it is feasible. In this case, manufacturers should consider the impact that cutting employees could have on both their employees and on their factory.

If it is feasible for the manufacturer, the manufacturer may be able to offer training programs to help employees move into new positions at higher levels in the company. The company may be able to work with the city or state to support that type of program. As previously stated, large job losses can have a major impact on a small community, and a city may be very willing to help fund this kind of opportunity as a result.

And, though it may not be immediately apparent to a manufacturer, loss of people may have an impact on their business success. Consider this great example from a 2003 episode of This American Life (Chapter Fifteen in the transcript): a manufacturer of hotdogs has just moved his factory from one side of Chicago to a much better, newer building with better equipment on the other side of the city, but for some reason, his hotdogs aren’t coming our right.

It takes the manufacturer a year and a half of playing with the formula and studying all facets of production until he discovers the problem: in moving their location, they lost an employee who would move the uncooked hotdogs from one location to another in the old factory. Because the old factory was laid out oddly, this trip could take some time and would bring him through other parts of the factory. The manufacturer finally realized that this employee’s trip had been causing the hotdogs to warm for a half an hour before they were cooked. It turned out that the employee’s job was actually the extra ingredient in his recipe.

Part 1: Why automate in the first place?

Part 2: Who’s afraid of a little automation?

Part 3: How far up the ladder can automation go?

Part 4: How do we keep people employed? Or shouldn’t we?

Part 5: Addressing the concerns of the displaced

Part 6: How can we automate responsibly?

Vangelis Thomaidis

June 2014

American competitiveness: The tools and strategies that US manufacturers are using to excel

Guest post by Matt Coughlin from Manufacturing Business Overhaul.

During the beginning of the past decade, US manufacturing showed some troubling signs.  The percent of US-made goods decreased from the decades-long levels of 22-25% to below 20% (right around even with China) due to many factors, most notably cheaper labor and increasing productivity abroad.  Factories and jobs seemed to move steadily outside the US.

However, the last few years have seen a change in this trend, with a new set of buzzwords to go along with it.  “Offshoring” and “outsourcing” have been replaced with “reshoring” and “local for local”, and companies are seeing lots of reasons to bring their manufacturing operations back from Asia.

Despite higher costs of labor and overhead, the US has managed to maintain a 15% lead in productivity (as of 2010) over our closest rivals Japan and Germany despite the increasingly competitive global landscape.

In this article I will discuss how US-based design and manufacturing companies are utilizing new tools and strategies to maintain this edge.


Robotics and Automation

Despite the leveling of labor wages across the world, US manufacturing workers are still expensive compared to similarly skilled workers abroad (compare the average US hourly manufacturing worker cost at $35/hour to one in Taiwan at $9.50/hour).  However, companies are finding that they can bridge this gap with automation.  This a large factor in the US’s massive productivity advantage over its global competitors (in 2012 the US was about 10 times more productive per hour worked compared to Taiwan).

How is this possible?  One large factor is the rise of industrial robotics and automation.  In many cases the ROI for a robot is much higher than that of a manufacturing worker overseas.  The massive advantages in cycle time, production cost, quality and decreased waste, not to mention the lower overhead costs of maintaining a robot versus a human, are significant.

The expansion of a new generation of robotics and automation companies in every industry makes the investment in automation easy for most companies.  The ROI is easy to calculate and carries little risk.  There is an automation solution available for just about any niche, along with a company ready to set up, optimize, and maintain your automation equipment throughout its life cycle.


Local for Local

As global wages continue to even up and companies implement cost-saving automation in their factories, shipping costs are becoming a more significant factor in the overall costs of products.  This is driving the “local for local” movement, where companies are manufacturing products in the markets where they plan to sell the products.

Instead of making everything in one large factory in China, a company may have a factory in Michigan for US-bound goods and one in Rio for goods that will be sold in Latin America.

As automation and other tools optimize the manufacturing processes themselves, the Local for Local strategy aims to optimize the logistics and shipping of products.  Since the US is a large consumer of all types of manufactured goods, this means that more manufacturing facilities are coming back to the US to make goods bound for the local market.  This makes sense for companies and is good news for workers, consumers, and other local businesses.


3D Printing

There has been a ton of buzz around the 3D printing movement, and not all of it is hype.  Due to the drop in costs for a huge range of machines (from $400 make-it-yourself printers like the RepRap to more advanced industrial options), everyone from garage hobbyists to giant corporations are taking advantage of this developing technology.

The rise of cheap machines has created a new breed of micro-manufacturers sprouting up in garages and maker shops around the country, churning out innovative custom 3D printed products from iPhone cases to robots.

More sophisticated manufacturers have also gotten in on the action, using 3D printers to save big money and time on prototypes and product development.  They are also finding ways to print production parts in more and more industries.  Manufacturing giants like GE are already printing production parts using additive manufacturing methods.

As this technology develops, the cost of 3D-printable parts is dropping and a new class of highly customizable modular products is becoming available.  The US is leading the field in investment in additive manufacturing technology, and the advantages are clear.  For one-off prototypers and production shops alike, 3D printing is creating opportunities for big savings and big earnings.


Better Design Software

Ten years ago, it was nearly impossible for a lone engineer or small company to get set up with a decent 3D CAD program for less than $6000.  Today, there are several options priced for individual users (Solidedge for example) and even some open-source and free CAD tools available (qscad and brlcad are some examples).

This is great news for entrepreneurs and engineers, as it allows them to design products and manufacture them at home, without having to shell out thousands for the more complex programs needed by the big companies.

This is also good news for businesses, because it means that there is a growing army of local designers and engineers available for hiring or outsourcing design and engineering work, as well as a range of less expensive, less restrictive software options available.

Innovative companies are making cumbersome areas of the design and manufacturing process easy.   Take for example GrabCad’s online Workbench, an online PLM workbench which allows engineers on remote teams to share and collaborate on design files as easily as sharing a google doc.  Ten years ago PLM systems were massive, restrictive, expensive systems maintained by a staff of IT professionals.  Now even a tiny company can manage design and engineering files easily for a few dollars a month.

Another great example is ProtoMold, a US-based company that developed a completely new streamlined process for rapid production of molded parts.  You upload a design file to their website, get an instantaneous quote for a range of manufacturing process,  and then they then machine, mold or print and deliver your small batch (and even production quantity) order in incredibly short time, up to and including next day delivery for some processes.

These innovative tools bring down costs by allowing companies to take advantage of a more flexible work force, faster design and manufacturing cycles, and quick parts at competitive prices.


Flexible Work Force

Once upon a time, a normal company would have a staff of engineers.  These engineers would be trained in the workings of the company, the software, the products, and a number of other areas, and eventually become useful employees, performing their engineering tasks in their assigned area of specialty for many years.

In the last few years, a few things have occurred that have changed that paradigm.  First, a new generation of workers hit the scene that wasn’t content to stay at a company for many years.  These younger workers prefer to move around, work from home, use technology to get things done quickly and then move onto the next challenge.  The older generation lamented the impatience and entitlement of these youngsters, but many companies have found that there is a bright side.

There is a whole generation of well-trained, tech-savvy engineers and designers that can be hired as contractors for a fraction of the cost of a full-time employee.  Often these contractors work from home, so there is little overhead for office space and equipment.  US-based contracting companies manage these mobile workers and provide needed services on demand.  These temporary workers can be brought on and let go easily and cheaply as business conditions change.   They require little training, already have access to the necessary tools and software as mentioned earlier and are capable of adding immediate value.

Many companies are reducing their full-time engineering staff and instead are opting to work with contractors who can deliver results immediately, with little training, at a fraction of the cost of full-time staff.  The result is that overhead costs for many manufacturers have gone down, allowing them to invest in growth and innovation.


Looking Forward

The next decade will surely bring new changes and new challenges to US manufacturers, just as the last one did.  One thing has remained the same, and doesn’t look to change anytime soon: America’s culture of innovation, continuous improvement, and excellence in manufacturing.

The companies that excelled in the last few years have been those that leveraged technology and looked outside the box for new strategies to compete and win.  Automation, new technology, and a changing landscape of tools and innovative individuals will continue to bring new opportunities to the businesses that are looking for them.