Disruptive Technologies: Bert & Ernie Joining Amazon
Jackie Doherty & Ed Yardeni
Bert, Ernie, Kermit, and Scooter are all finding jobs at Amazon’s warehouses. We’re not talking about Sesame Street Muppets but rather autonomous mobile robots that the tech giant is testing to reduce the strain on its workers, and allow them to focus on activities that require critical thinking. Perhaps to encourage workers to welcome these robots, Amazon has named them after the loveable Muppet characters.
In our Roaring 2020s scenario, labor shortages force companies to pay their workers more and to offset the higher costs by augmenting the mental and physical productivity of their workers. They are already doing so with a host of technologies, including artificial intelligence, augmented realty, automation, robots, 5G communication, 3D manufacturing, cloud and quantum computing, and so on. The pandemic accelerated the pace at which this transformation is happening.
Ever faster and cheaper computers and sensors have meant that industrial robots are enjoying a renaissance of sorts in what’s been dubbed “the Fourth Industrial Revolution.” Robots are being created to do advanced work that once was thought only possible to be done by humans. Add software to the mix, and these robots allow companies to both reduce their HR expenses and increase their output, thereby boosting their productivity and bottom lines. And over the past year, as manufacturers have expanded and reshored their operations amid a tight labor market, the importance of robots has only grown.
Let’s take a look at some of the companies working to make work easier and more productive in the US and in China:
(1) Robots that weld. Path Robotics says that its mission is to enable robots to build so that humans can create. Right now, that means the company has developed robots that can weld.
Most robots are programmed to perform one task repetitively. They’re custom made for each client based on what that client is producing. Privately held Path says that its robots are different because they use artificial intelligence and computer vision systems to self-adjust for unique parts, analyze where a weld is needed, and execute a weld. That means the same robot can be used to weld various items for many different clients, which dramatically changes the economics of the business, enabling it to be scaled.
“We started this company looking for the biggest pain point in manufacturing,” Path Robotics’ CEO Andy Lonsberry said in a May 4 podcast with WOSU. They discovered it was welding because there’s a shortage of skilled welders that’s supposed to reach a 300,000 shortfall by 2024. But there’s a shortage of workers in many trades. Just as they learned to weld, Path robots could learn to grind, paint, and assemble—manufacturing operations that occur before and after welding. The company expects to introduce a new product at year-end.
(2) Robots that manufacture smartly. Bright Machines has developed a modular system of manufacturing using robots to create what it calls “microfactories.” Using software, an operator can tell the machines what to do, and machines can be linked together to do numerous tasks, including assembling, fastening, welding, dispensing, pressing, and labeling. The system can be quickly deployed, and the instructions can be altered by using the software to change what the microfactory does.
Bright Machines, which is in the process of merging with a special-purpose acquisition company, began operations in 2018 and had sales of $34 million last year. On its website, the company lists numerous case studies showcasing how much money or labor its product has saved customers. In one example involving an automotive manufacturer, the microfactory reportedly increased unit production by 33% per hour, required only 25% of the human touches that the previous manual process needed, improved defect rates by 88%, and reduced assembly-line staff by 50%.
(3) Robots that pluck. Sanderson Farms plans to test robots at a Texas plant that processes chickens weighing nine pounds or more. The company already uses robots at three plants tasked with removing bones from small and medium-sized birds for white meat. It now aims to do the same with the larger birds.
The machines cost $5 million a plant, and they could replace 75 workers per facility. “All of our plants are very tight with labor,” CEO Joe Sanderson said in a May 27 Bloomberg article. Tightness in US labor markets is keeping a lid on American meat output, he said, tying much of the problem to enhanced unemployment benefits that are keeping some people out of the workforce. “We could hire a bunch of people if we could get them to come to work,” he said.
(4) Robots that work in China too. An excess of cheap labor helped China become the manufacturing floor for the world. But the country has seen wages rise, young workers become less interested in factory work, and its working-age population begin a decline that’s expected to continue for many years. As a result, many manufacturers are turning to robots to fill both repetitive jobs and those requiring more skill. And the Chinese government is supporting these efforts. Its Made in China 2025 industrial policy plan provides robotics manufacturers with subsidies, low-interest-rate loans, tax relief, and land rental incentives, a May 27 South China Morning Post (SCMP) article reported.
Like their American counterparts, Chinese companies deploying robots benefit from future cost savings and efficiencies. Midea, a home appliance manufacturer, invested the equivalent of $622 million in machinery for its factory in a city in southern China. The investment raised the factory’s efficiency by 62% and reduced its workforce by 50,000, the SCMP article reported. Midea acquired German industrial robot maker Kuka in 2017 for the equivalent of $5.1 billion.
Foxconn, a Taiwanese company, operates a “lights-out” factory in Shenzhen, China, where it produces Apple devices and iPhone components. The fully automated plant is staffed by 5G-powered robots that can operate in the dark because no humans are involved. The factory is on the World Economic Forum’s list of “lighthouse” factories—i.e., those featuring the world’s most advanced technologies.
__________________
Follow Dr. Ed's LinkedIn Blog. Try our research service. See our Predicting the Markets book series on Dr. Ed’s Amazon author's page.
Discussions of any company mentioned above should not be construed as a recommendation to buy, sell, or hold the company’s stock. The authors do not own shares in any of the companies mentioned in this article. Please see our hedge clause at https://www.yardeni.com/pub/copyright.pdf