Productivity increases from smart manufacturing and the Internet of Things are transforming companies’ bottom lines. They’re also shaping the future of our nation.
While election-year rhetoric reliably paints U.S. manufacturing as a sector in decline, if not outright peril, the reality is almost exactly the opposite. America’s manufacturing output reached a 27-year high in 2015 and is showing no signs of slowing. Even China, the only country that has surpassed the U.S. manufacturing sector in terms of sheer scale and scope, still has lower per-capita production levels.
That’s because of the transition to advanced manufacturing across much of the U.S.’s industrial base, which has leveraged ever-higher levels of automation to boost productivity and reduce costs. Manufacturing jobs, writes Forbes contributor Tim Worstall, “have not been lost to China, they’ve been lost to the machines.”
We’ve come a long way since 1961, when General Motors introduced the first industrial robot to its assembly lines. In recent years, “smart manufacturing,” in concert with the Internet of Things, or IoT, has transformed many factory floors into highly automated facilities that are networked across all levels of the supply chain and require far fewer people to operate.
“Over the past several years, I’ve visited a range of factories: a steel fabrication plant in New York, a window manufacturer in Florida, car factories in Ohio, a frozen-French fry plant in North Dakota, a jet-engine plant in North Carolina, a producer of plastic coffee pods in Virginia, a jar manufacturer in Indiana, and a fishing-line producer in South Carolina,” writes strategy + business editor Daniel Gross. “The common denominator in each: There just aren’t that many people in them. There are lots of whirring gizmos, belts that move goods through the stages of production, and machines that package and stack the finished products on pallets. But the people on the floor are mostly involved in tending to raw materials, quality control, maintenance, and oversight.
This transformation has contributed to two sea changes in the U.S. economy. The manufacturing workforce has declined by nearly 30 percent over the past two decades. However, the value of manufactured goods produced in America has increased by nearly 90 percent during the same time period.
These changes have real impact on individual companies’ bottom lines, but for small manufacturers, the decision to increase automation is not always that simple. Consider some of the pros and cons of automation:
- Automation can increase quality, consistency, and throughput.
- Automated systems typically require considerably fewer people to operate them, reducing labor costs.
- Automated systems are typically safer and more reliable than more-manual production processes.
- The high costs of robotics and other automated systems pose considerable barriers to entry for smaller companies with less access to capital than larger competitors.
- The complexity of automated systems also can exacerbate the impact of downtime caused by equipment failure, particularly if small companies can’t find or train workers skilled at repairing sophisticated machinery.
- Complex automated systems have higher maintenance costs and often require special expertise to operate and troubleshoot, which can offset the savings from the smaller numbers of workers typically found in automated manufacturing operations.
Much attention has also been paid to the impact automated manufacturing has had on society as a whole. This most commonly has been seen in the form of lower employment and layoffs as traditional manufacturers restructure or close as a result of competitive pressures.
Historically, however, these trends have been a good thing, writes RealClearFuture editor Rob Tracinski. Calling this dilemma the “paradox of productivity,” Tracinski notes that advanced manufacturing plants have fewer but more highly skilled and better-paid employees, who spend much of their time programming and maintaining the automated systems that do the brunt of the work.
“Here’s the thing that’s really, really hard for people to accept: this is a good thing,” Tracinski writes. “This is what we want. This is, and always has been, the real wellspring of American prosperity.
Nor is the current wave of automation the first time that industrial jobs have been lost as a result of innovations that increase productivity. From the earliest stages of the Industrial Revolution, even simple advances in manufacturing technology have resulted in better wages for a smaller number of workers—and an overall increase in prosperity, according to Tracinski. “If you want a better-paying job, you have to let a machine take it away from you,” he writes.
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