Abraham Lincoln once famously said, “Give me six hours to chop down a tree and I will spend the first four sharpening the axe.”
What Abe realised was, if you invest time and resources in the right tools to do the job, then the long-term benefits will more than compensate you for that effort.
It’s easy to relate to that story when we speak to businesses about automating their manufacturing processes. There are always lots of reasons not to invest right now. “It is too expensive”. “It will disrupt current production lines”. Or maybe just “well, things are going okay at the moment”, so there is not the immediate pressure of business need. Like painting the outside of your house, investing in new business technology is one of the things that is easy to put off until next year.
The truth is a decision to invest in automation or robotics is never straightforward. You are always seeking to balance the cost of automation with the benefits it will bring to your bottom line. How should businesses make that judgement?
Technology is a One-Way Street
Firstly, you need to be honest with yourself. The real question for businesses is not “should we automate?”, but “when is the right time”? The nature of technological progress means that there is an inevitability about the increase of automation. Most UK manufacturers accept this. In fact, in a recent survey, 90% of British manufacturers believed that smart factories will deliver more efficiency in the future. The same survey suggested that 81% of manufacturing businesses are planning to invest in new technologies to boost their productivity.
The fact is, technology moves in only one direction. There are no statues to the Victorian mill owners who thought that steam power was a passing fad. Technology changes and advances all of the time. The real question for a manufacturing business is actually about timing – when is the optimum moment to take the plunge and invest in technology and processes that will allow you to reduce costs, improve quality and drive your profits?
This investment is much needed, not just for those individual companies, but for the UK economy as a whole. The reality is, that by every available metric, UK investment in automation still lags some way behind our overseas competitors. This isn’t about waving flags or national bragging rights. It is about remaining competitive in a global market place, where your customers can switch suppliers from one market to another whilst barely drawing a breath.
Take Germany for instance, an industrial powerhouse. This is a country which has continually demonstrated its appetite for investing in new technology. Do you want to know just how far ahead of the UK they are? Well just look at the number of industrial robots per 10,000 factory workers. Germany has 309 robots per 10,000 factory workers. Japan has 303. The United States, 189.
The UK sits at the bottom of the G7 league table with just 71.
This is a deep structural problem, and one which is not sustainable in the long term. UK manufacturing has changed massively in recent years, but the simple fact is, we continue to lag behind international competitors when it comes to automation. The sector has managed to remain just about competitive, but this has been maintained in recent years by an increased reliance on the availability of low-cost, low-skilled labour from the EU.
Now that the UK has left the EU, there is every chance that the days of cheap labour are over for manufacturing. This will put an upward pressure on wage costs, which in turn will potentially leave less capital for major investment. It is a classic dilemma. There is the need to invest at the precise time when the lack of previous investment has reduced the capital available for businesses to do so.
Understanding the Costs
So, is this the right time to invest in automation for UK business?
The answer will, of course, depend on individual businesses.
Fundamentally, the decision that any manufacturing business will have to make is, “will the long-term financial benefits of investment in automation and robotics outweigh the short-term costs?”
Firstly, it sounds obvious, but any cost benefit analysis needs to start with a very clear idea of what those costs potentially are. You cannot make a judgement on the basis that “my guess is it will be quite a lot”. Make a decision based on real numbers, not anecdotes and perceptions. Speak to companies that specialise in automation and robotics. Find out what the costs might be. You may be surprised. Just as the cost of technology for your home has fallen, so too has the cost of technology across the board. Over the past three decades, costs of robots have fallen by half in real terms, and even further compared to labour costs. Technology that you imagined to be out of reach might well be within your grasp.
There may also be specific incentives in place to lessen, or even remove, that cost. In the recent Budget, the Chancellor announced what he called “super-deductions”. This is a specific initiative to incentivise investment in new technology for businesses. What it means, in very basic terms, is that if you spend money on automation or robotics, then you can claim back 130% of the cost from your tax bill. That is a pretty great deal. For larger companies, it means that not only is the Treasury is prepared to foot the entire bill to transform your business, but it will also hand you back some cash at the end.
The Treasury wants this new initiative to be a game-changer when it comes to business investment. Time will tell whether it is but, on paper at least, this does look like a very attractive proposition for the UK manufacturing sector.
Understanding the Benefits
Once you have a clear idea of cost, it is time to decide whether the benefits will justify that upfront investment. You need to set a sensible timeframe to evaluate this. If you look at a 3-month period, then it is unlikely that the cost will generate the return. You need to take a longer view – think about your business over the course of a year, five years, or even ten years. Automating your production processes is a long-term investment. Potential benefits need to be looked at in that context too.
The key benefits will be a reduction in the cost of labour and a subsequent increase in productivity. This is a direct saving to the business. It is also likely that automation will lead to more consistent, better quality products. Robots by their nature perform exactly the same task, in precisely the same way, over and over again. Humans are, well, “human”. They may be tired, hungover, distracted. This means, when it comes to routine and repetitive tasks, there is only ever going to be one winner in human v machine. However, studies have shown that automation is rarely as straightforward as robots replacing human jobs. In fact, some of the most successful examples of automation have seen workers spending their time on higher-value tasks such as finding solutions and developing new ideas. That is a benefit that often goes unnoticed – automation of processes sets your teams free to spend their time doing things that really can add value to your business.
Sharpen Your Axe
So, there you have it. Investing in automation can be expensive, disruptive and challenging. However, it can also deliver benefits in what you do, and how you work.
Whether this is the right time for your individual business to invest is something only you know, but it is important that it is an active judgment. In short, get a clear idea of costs, understand the support available through the tax system, set a sensible timeframe, and evaluate the benefits.
Remember, deciding not to do something is a decision too.
Automation at ENL Group
At our Slovakia site, where we deal with high volume manufacturing, automation delivers a huge benefit to us and our customers by improving our processes. We have invested in a number of robotics, which improve our speed of overmoulding, whereby the robots collect the moulded parts and insert them into the machine, helping to reduce cycle time; improve consistency of cycle time and part quality; reduce scrap; increase productivity and protect the mould. With the proven success of our installed robotics, we’re currently in the process of installing more! Watch this space for more news.