The Strategy Page: Manufacturing & Automation Edition

At a glance:

1. U.S. Manufacturing is Back
2. Production Automation
3. The Shortage of Production Workers
4. The New Automation Formula
5. By Marc Emmer for Forbes:?Why Segmentation Is A Superpower In Strategy
6. Featured Video: New Markets

U.S. Manufacturing is Back

Spending on?U.S. factories reached a?record $108 billion?last year, outpacing production of healthcare facilities, schools, and office buildings. Fueled by infrastructure spending, significant capital is being directed to U.S. factories slated for large-scale projects for semiconductors, electric vehicles, and battery production. Outside California and a few urban centers, there is little in the way of electric vehicle charging infrastructure.?

The Biden?Administration has mandated that, if finalized, proposed rules could result in electrification of 67% of new sedans, crossovers, SUVs, and light trucks, 50% of new vocational vehicles (such as buses and garbage trucks), 35% of new short-haul freight tractors, and 25% of new long-haul freight tractors by 2023--just seven years from now.?

In U.S. manufacturing, other?fundamental changes are underfoot. Since tariffs were enacted, there has been a permanent shift away from reducing cost toward flexibility and risk reduction.?Producers impacted by high carrying costs are reducing inventory, amping up "just-in-time" and pondering the risks and delays of having product on the water. The economics of re-shoring and "Made in the USA" have shifted.?

A resurging U.S. manufacturing sector has legs.

Production Automation

Shockingly,?only 10% of U.S. companies?utilize robotics?in production.

Automation has?yet to meet its potential as the savior of American manufacturing. Conventional thinking has been that robots could replace labor and reduce the competitive advantage offered by offshore manufacturers.?

A well-known?example is a botched transformation at General Motors, where robots failed to recognize car colors and tried to install the wrong parts on the wrong cars. Even Tesla has struggled with automation, including a failed attempt to fully automate Model 3 production.

During?the pandemic, manufacturers scrambled for engineers and could not source adequate equipment and parts from Europe. Many automation projects were late. The dearth of engineering talent restricts both innovation and the ability to modify robots once they are deployed.

The Shortage of Production Workers

Manufacturing now?comprises about 10% of the U.S. workforce. There were 800,000 jobs added in the sector in the last two years alone.

Yet?manufacturing companies are struggling to find both skilled and unskilled workers amid higher hiring costs, higher payrolls, and competition with remote environments.

The New Automation Formula

The computing intelligence of machines is starting to rival that of humans, opening new opportunities for automation.?

We have?worked with many companies who achieved “lights out” automation, meaning their robots could run without human oversight. This is the type of automation found in close-tolerance aerospace parts production, which requires special equipment and operators who can program the machines.

Studies?have proven that efficiencies gained through labor savings are lost in “process flexibility.” If a machine is to make 100 parts in the middle of the night, the line can’t be utilized to make another part without a setup, which is costly and requires human interaction. Machines just don’t adapt to their environments.

Given?these complexities, companies are shifting to a new playbook. Cobots—robots that work side by side with humans—provide the greatest return on investment in the current environment.

Those?who are adopting the cobot philosophy no longer assess capex decisions solely on the production cost of a robot relative to a human. They instead consider how robots can complement human output, and vice versa.

Here?is an office automation example: We recently worked with a company who employs a customer service team. 90% of their customer service calls required them to answer the same five questions. The client is deploying a chatbot on their website to answer those questions, with a trigger to quickly escalate calls to humans. This type of thinking is growing in manufacturing and other environments.

Advances?in artificial intelligence are certain to accelerate automation. The best of U.S. manufacturing is still ahead.

By Marc Emmer for Forbes:?Why Segmentation Is A Superpower In Strategy

Many businesspeople want to think of themselves as strategists, but not everyone has the constitution to do strategy well. Our primary job as strategists is to identify the markets where we can win and over-deploy our resources there. There are no magic bullets in strategy.

Read more?

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Ellen Latham would probably have been happy teaching classes at her popular fitness studio in south Florida until she turned ninety. After being fired from her dream job as a spa director, she’d found stability with her own small business, and began developing a workout program that incorporated strength and cardio for all fitness levels.?

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Featured Video: New Markets

Our Strategy Experts:

Marc Emmer?is President and Chief Strategist & Facilitator at Optimize Inc. He is an?author, speaker and consultant recognized as a thought leader throughout North America as an expert in strategic planning.

John Morris?is a Senior Strategist & Facilitator at Optimize. He brings experience in venture capital, executive coaching, angel investing, investment banking and financial management to his strategy consulting role.

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