Operations Payoff

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To Automate, or Not To Automate…

According to an article in Industry Week, The Boston Consulting Group estimates that use of robots will increase by 10% a year in the top industrialized nations. Why? Labor costs. A typical robot costs $4 per hour while a skilled worker runs $24 per hour.

While using robots has advantages such as highly productive repeatable work, there are several disadvantages. First and foremost, any piece of equipment can quickly become the bottleneck. Many companies use automation to increase productivity before removing waste from processes, when in fact the process they’re automating shouldn’t be done at all.

Once a process is automated, it becomes economically and emotionally difficult to remove the automation as part of a waste reduction effort. Companies should always follow this order when trying to reduce waste – eliminate, simplify, automate. In other words, processes should be eliminated or improved first.

The second major disadvantage is eliminating jobs. Most robots are installed to cut labor costs and reduce head count. While a robot makes perfect sense for a repeatable process, there’s nothing more flexible than a human being when it comes to process improvement. If products are new, processes are being improved and supply chains are changing, it’s best to hold off on automation until the process stabilizes and is repeatable.

In today’s political climate, there’s a push to increase the minimum wage. While there may be some social benefit from doing that, increasing the minimum wage has the unintended consequence of encouraging automation that takes away jobs and may be premature within the organization’s processes.

If you’d like to develop a strong strategy for automation in your manufacturing or distribution company, call me to explore the possibilities before you leap.

© 2015 – Rick Pay – All Rights Reserved.

One thought on “To Automate, or Not To Automate…

  1. Great points! Implementing software (e.g. ERP) has a similar danger of institutionalizing wasteful processes. Because of the high initial cost of new equipment or software there is often pressure to put them into use quickly, inadvertently missing important aspects of the overall improvement. Thanks for promoting caution.

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