According to a new study on factory automation in the U.S. by MAPI, the Manufacturing Alliance, U.S. manufacturers looking to automation to reduce costs and increase throughput, and a combination of forces is driving companies to take that even higher both in recent years and those ahead.
The report, Automation Investment in U.S. Manufacturing: An Empirical Picture, was written by Cliff Waldman, Director of Economic Studies at MAPI, and sponsored by Rockwell Automation. The report is based on survey responses from U.S. manufacturers.
“Automation implementation exhibits characteristics of both capital investment and innovation investment,” observes Waldman. “While deploying machinery into a production line has characteristics of capital equipment investment, it does not appear to be as short-term oriented as capital investment.”
The results show a high incidence of actual and planned automation investment in U.S. manufacturing, both in total and spanning a wide range of company size groupings and industries. Data on the drivers of investment and the company evaluation criteria for assessing the benefits of new automation capital suggest a possible spreading effect across supply chains and industries as the need for globally competitive production costs and product quality becomes increasingly intense.
Capital investment in automation is being driven by productivity and quality improvements.
“Automation also does not appear to be an element of business expansion.,” Waldman added, “Rather, it is more like process innovation whose principal goals are cost reduction and product quality improvement.”
Major findings include:
1. The incidence of actual and planned automation investment is very high in the U.S. manufacturing sector. The high incidence spans across company size and industry cohorts.
2. The most prevalent of a wide range of criteria used by survey respondents to evaluate the performance of new automation technologies is whether they lower total production costs, evidence that increased global manufacturing integration is raising the pressure for automation investment as cost competition looms ever larger as a U.S. manufacturing company operating incentive.
3. The survey shows that both costs and product quality are pressured, a difficult problem even in the context of lean supply chains, as quality escalation can add to the cost of production. For any manufacturer, particularly a larger one with significant global exposure, this likely means that the initial automation implementation is just the beginning of a journey. Automation will be an ongoing concern and part of a broader complex of evolutionary, and in some cases revolutionary, operating changes.
4. Those that have recently engaged in or plan to engage in automation as a stand-alone investment are likely at the beginning of this post-lean automation adoption journey, while those that have automated and/or plan to automate as part of a broader effort with company technological infrastructure are likely further along in their technological transformations. Given the split in the respondent pool along these lines, it seems that there is currently a wide range of advancements along the technology adaptation curve in the U.S. manufacturing population.
5. The survey reveals a remarkably high incidence of automation in the cohort of very small manufacturers that likely comes from supply chain pressures and can be said to be further evidence of the spreading of automation suggested by the fact that customer, supplier, and competitor use were noted by respondents as primary drivers of automation investment.
6. By allowing for efficiencies in at least some kinds of production, the supply of new automation capital makes it easier for manufacturing entrepreneurs to overcome the often significant barriers to entry in goods-producing markets and for marginal small manufacturing companies that might otherwise have exited the market to stay and compete.
7. While external forces are catalyzing widespread automation activity in U.S. manufacturing, internal company concerns are acting as something of a break. As the survey shows, labor force issues are among the potential impediments. Human capital challenges, including the difficulty of finding and retaining computer-literate production workers, certainly show themselves to be a cost of automation if nothing else because they slow the full implementation of automation capital into the goods-producing process. But given the overwhelming incidence of automation investment, both planned and actual, in our national survey of manufacturing companies that span a wide range of company sizes and industries, it seems clear that cost and performance pressures are by and large trumping workforce and other internal impediments in the automation decision function.
8. If smaller companies that are holding out on automation investment because of cost considerations continue to do so, they will be at a competitive disadvantage in any supply chain that affects their current or future profitability.
9. While stratifications do not reveal an industry bias in automation investment per se, stratifications by share of companies that engaged in automation investment as part of a broader effort with their technology did reveal a distinctly higher incidence in computers and transportation equipment, two of the relatively higher-productivity sub-sectors.
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