More on the benefits of human run factories

In an earlier posting, I made the point that human workers are better at innovation and flexible production than robots/automation. Willy Shih makes the same point in his new paper, “What It Takes to Reshore Manufacturing Successfully.” Shih looked at the experience of two companies who moved production back to the U.S. These companies faces challenges of re-establishing the work force’s factory-specific skill base and establishing a local supply base. He argues that the benefits to the companies in terms of better serving changing customer demands overcame the costs of meeting these challenges.
But his point on flexibility was more about the production process than about where the process was located (and how close it was to R&D/product development and the customer):

When choosing a location for assembly operations, it is natural to assume that higher wage rates will justify a greater use of automation. When work was offshored from the United States or Europe to Asia over the last two decades, the principal driver was labor arbitrage. With that offshoring came substantial substitution of labor for capital — the replacement of “hard” automation using expensive capital equipment with manual processes. Manual processes were less expensive, and human operators were far more flexible than machines that had to be reprogrammed with every model change. So when work comes back, most people assume that we will simply go back to using more automation.

But that is not necessarily the case. Manufacturing in China enabled rapid product changeovers, and we trained consumer markets worldwide to expect this kind of flexibility. If you want to have five million new smartphones on hand to sell on the first weekend after a new phone model launches, you will need a lot of people, not automation. While the latest automation technologies often have reduced setup or changeover times, managers should not assume that we should necessarily use more robots.
. . .
I recently visited a medical products factory in Denmark where the production engineers were continually experimenting with the balance between manual and automated processing. Having a slightly higher mix of manual operations promoted significantly more flexibility, and as the production engineers configured processing equipment for locations in eastern Europe and the Far East, they adjusted the labor mix in accordance with the labor costs. Even in high-labor-cost Denmark, the engineers were careful to avoid over-automating. Striking the right balance between capital and labor can benefit from an open mind and some experimentation. The mix may change over time with production experience and learning.

Our robot overlords may be coming in the future, but humans are still the most adaptive production system in existence today.

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