WHEN LOW-WAGE WORKERS ARE BETTER THAN ROBOTS

[4/20/17]  Time and time again, these pages have listed numerous benefits of automation and robotics. The discussions point out that mechanization doesn’t make us poor, that attempting to tax machines is counter-productive. Automation even makes our jobs safer as we can offload dangerous tasks to a metal creation.

However, automation is not always the best course of action and, as cost effective as automation has proved in many areas of our life, we are finding a rise of businesses beginning to automate for reasons other than improved productivity or cost effectiveness.

The latest news is that a company called Miso Robotics has developed an automatic burger flipper called Flippy. Naturally, media outlets are already writing headlines of how this is replacing jobs. The issue in this case is that this particular form of automation isn’t being driven by any kind of cost effective plan but as a result of government action.

When Should Companies Automate?

Before we go any further, we first need to understand where and how automation works and why it works effectively in those areas it is currently used. Automation requires a significant amount of capital investment, which is not a one-time purchase as the equipment needs to be periodically replaced when it is too broken to fix or too outdated to work on current products. Automated systems also require expensive maintenance professionals and tool changeovers can knock these expensive machines out of commission for hours while a new product is loaded for production. Even keeping up with tooling itself is a costly capital expense. Because of these limitations, automation is not appropriate for activities that have low volume and high levels of variability from product to product. It makes sense to build a tool and produce 10 million stamped gears out of a $10 million automatic press because the volumes can justify the purchase price, financing costs, tool changeover personnel and maintenance costs of the equipment. Trying to make this work when producing 10 custom metal items is foolish when one can use a human operated manual press. Those 10 custom items would be grossly uncompetitive compared to a human operated machine if run out of a large press. It’s not uncommon for companies to get in trouble by purchasing robotic production for a product mix that isn’t conducive to the equipment.