In my recent post, "Rise of the Machines - 4 Factors Driving an Increase or Robotics in the Manufacturing Supply Chain", I discussed a few elements that are supporting the move towards leveraging robotics in manufacuting. We are certainly seeing a move towards automation in the manufacturing process, and in at least one Chinese Province (Guangdong Province) there is an active effort to replace human labor with robots.
It is no secret that sourcing labor in low cost countries is becoming more expensive as labor costs increase. Now, in addition to rising labor costs, we are seeing the move to robotics in manufacturing driven by a change in societal demographics as well. The aging of the workforce in China's Guandong province has spurred a regionally focused effort to replace human labor with robots. An aging population, as well as an increasingly educated younger demographic, is most certainly contributing to the rising cost of labor in China. However, rather than meet this challenge with increased wages and benefits for labor, manufacturing is moving toward a more automated process thus reducing the reliance on human labor.
The first example of an unmanned factory where the entire manufacturing process is conducted by robots was announced recently in Dongguan City within China's Guangdong province. In the plant, all processes are operated by computer controlled robotics and automation and overseen by a staff of only 60 workers, reducing the previous labor force of 650 by over 90%. Moving to an fully automated plant has enabled a drastic improvement in productivity and quality, where previously production capacity was 8000 pieces per person per month with a defect rate of 25%, now the plant is operating at a capacity of 21000 pieces per person per month with a defect rate of 5%.
This is just the first example, of many to come, of a major push toward automation in the manufacturing process in China. The Pearl River Delta in Guangdong province is experiencing a tremendous shortage of labor due to the younger generation rejecting manual labor and an aging population. This effect has caused a labor shortfall estimated to be between 600,000 and 800,000 people. Because of this, the government in Guangdong province has implemented a plan to mitigate the labor shortage with robotics through an injection of cash to implement robotics to offset this labor shortage. Within this area of China, there are plans to spend in the ballpark of $150 billion to replace human labor with robotics to automate the manufacturing process.
It will be interesting to follow this initiative, which aims to automate 80% of manufacturing production by 2020, and the economic impact that this will have on the region. Perhaps, the labor shortage justifies the reduced human element in the manufacturing process, but what does this do to the local economy? The effort will certainly change the labor landscape from a labor intensive environment to one that requires fewer people. The big question that I have is whether or not the remaining jobs of maintaining, monitoring, and controlling the robotic systems will be met with higher salaries and help to keep local spending at point that will sustain the local economy. Or, will the change remove a significant amount of cash flow from the local economy due to so fewer people earning wages and spending money.
As the manufacturing process moves more toward automation, it will be critical to the global economy that we find a healthy balance between automation and the human role in the process. I suggest that the global community closely watch the impact that such an automated manufacturing environment will have on the economics in the local community. As the effort is to automate 80% of production, we will have the opportunity to observe how such a drastic change in the manufacturing landscape will effect both production output but more importantly the economic impact. As a society we are conditioned to continuously seek process improvement, but at what point does this improvement result in dimishing returns?
Perhaps the "robot replace human programs" in the Guangdong province in China will be a preview to the world of the economic impact and societal impact that a robot dominated manufacturing sector will have.