Supply Chain Pressures Driving Changes in Manufacturing

The MAPI Foundation - the research affiliate of Manufacturers Alliance for Productivity and Innovation - notes that supply chain pressures are becoming a transforming influence behind automation.

Automation use by competitors, customers, and suppliers were three of the top five drivers of automation investment over the past five years, inferring a supply chain and industry influence on this business decision. It also suggests that as supply chains become increasingly global, automation activity by U.S. manufacturing companies will likely spread around the world.

The impact of new technology on product quality was another top driver. The survey shows that the two most common criteria used by U.S. manufacturers for evaluating the performance of new automation technologies are whether they lower total production costs and whether they improve product quality.

Manufacturers that opted not to invest in automation responded overwhelmingly that the perceived return on investment did not justify the total cost of purchase and implementation. Waldman noted that the economic outlook does not appear to be a big motivator in the decision to invest or not to invest in automation.

Stratified by company size, a sizable majority of all cohorts invested or planned to invest in automation. Three-quarters of manufacturers whose average annual global revenues are less than $200 million engaged in automation investment activity in the prior five years. On the other extreme, 97% whose revenues were greater than $10 billion engaged in such investment activity.

But this investment trend is not without potential impediments. According to Waldman, “Human capital challenges, including the difficulty of finding and retaining computer-literate production workers, certainly show themselves to be a cost of automation if nothing else.” Still, given the overwhelming incidence of automation investment, Waldman says, “It seems clear that cost and performance pressures are by and large trumping workforce and other internal impediments in the automation decision function.”

The rapidly changing global manufacturing landscape suggests the need for a broader framework to evaluate the investment in and performance of new automation technologies that goes beyond traditional ROI metrics. In the MAPI Foundation's final study on productivity, Waldman will examine how companies should measure the ROI of new technology and will discuss the most effective metrics for evaluating the implementation of largely untested technologies.

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