Firms that are under short-term pressures may be reluctant to take the investment needed and lag behind. Lack of investment in automation has been put forward for poor growth in labour productivity in US and UK. Requires more specialised labour to develop software and maintain machinery. Some forms of automation may put off consumers.
Automation also enables a greater economy of scope. This means that one factory is able to produce a greater range of goods; this diversity and product differentiation is as important for firms as lower unit labour costs. In the 1950s, the goal was to produce goods as cheaply as possible.
In fact, there is enduring concern automation is costing jobs – an idea some economists argue is just an enduring faith in the Luddite fallacy. Automation enables firms to produce goods for lower costs. Automation leads to significant economies of scale – important in industries which require high capital investment.
Within manufacturing industries, automation has led to increased labour productivity as fewer workers are needed to produce the same number of manufactured goods. A perceived downside of automation is that it leads to jobs being displaced in traditional areas of work – in particular, ’blue-collar’ manufacturing jobs.
Determining cost of automation vs. cost of labor Cost is the most common starting point in these decisions. Begin by clearly defining your goals and identifying the indicators used to gauge success (these might be revenue targets, scrap rates, rework requests or downtime / uptime ratios).
The key question is whether the up-front cost to implement automation will pay off within the lifecycle of the system. ROI can come from more than one place:
The following calculation is an example meant to serve as a template for your application. Costs of custom automation equipment can vary widely depending on your needs. Note that this calculation does not factor quality, throughput, interest, depreciation, maintenance, training, etc.
Automated systems are generally recommended for high-volume orders. It’s an even more attractive option when consistent quality and repeatability in a production run is paramount.
Automation enables firms to reduce number of workers, and this limits the power of trades unions and potentially disruptive strikes . Automation also enables a greater economy of scope.
In addition to the benefits accruing to firms, automation can have various benefits for wider society. Consumers have gained the convenience of greater choice of goods and services. For example, ATM cash machines are a very simple example of automation which enables people to get cash when banks are closed.
Automation enables consumers to be able to customise the size, look and function of your fridge – rather than just picking a standard model from the assembly line. Automation can also enable shorter lead times, quicker delivery and more efficient use of stock and cash flow.
Automation refers to the process of automatically producing goods through the use of robots, control systems and other appliances with a minimal direct human operation. Within manufacturing industries, automation has led to increased labour productivity as fewer workers are needed to produce the same number of manufactured goods.
A perceived downside of automation is that it leads to jobs being displaced in traditional areas of work – in particular, ’blue-collar’ manufacturing jobs. Less visible is how the process of automation leads to the creation of new jobs in areas such as robot manufacture, research, marketing and software development.
It can create winners and losers. Some will benefit significantly from automation – owners of more profitable factories, and software developers. However, those who lose jobs from the process of automation, may struggle to gain equivalent employment.
Automation may increase corporate profit, but not necessarily median wages. Since 2008, we have seen a rise in real GDP, but median wages have stagnated. Company profit has increased, but the share of tax revenue paid by companies is not increasing.