This is what Automation did to manufacturing

Business process automation is an irreversible trend several studies show.

Robots replaced manufacturing workers

The impact of automation technology on the manufacturing industry over the past couple decdes has been dramatic as some of these statistics show. 

  • One robot added in manufacturing between 1990 and 2007 replaced 3.3 workers nationally a recent MIT Study1  found.
  •  Automation eliminated2 7.2 million jobs since 1980. 
  • The membership3  in UAW (United Auto  Workers) unions fell from its peak of 1.5 million workers in 1979 to 390,000. The 74% decline is a result of auto manufacturing jobs being replaced by robots or outsourced.
  • The automation of manufacturing is continuing and 57% of remaining jobs can be automated4 within the next 20 years.

White collar jobs are next.

We are in the midst of automating white collar jobs. This time automation is done not with physical robots but with automation software.Digital transformation of business processes using Robotic Process Automation (RPA) and Artificial Intelligence (AI) make this automation possible. There are at least 100 companies that offer RPA products that can be used to automate various business processes.

According to a recent Bain study5 by 2030 employers will need 20% to 25% fewer workers, equivalent to 30 million to 40 million jobs in the US.

Business Automation impact on workforce. Source: Bain

This is not some consultant’s prediction of the future. Digital transformation is automating white collar jobs now. For example, a recent Deloitte study6 showed that 53% of respondents already have started Robotic Process Automation (RPA) projects in their companies and that in 2 years this percentage will increase to 72%.

The reason is simple, Robotic Process Automation saves money. McKinsey7 showed that by automating repetitive work $2.7 Trillion can be saved in wages in USA as the chart below shows.

Over 60% of data collection, processing and physical work can be automated saving $2.7Trillion in wages.  Source: McKinsey

Covid uncovered business resilience issues

Prior to Covid-19 business automation was driven by efficiency, cost savings and speed of execution. The Covid-19 Pandemic became a third driver. Covid-19 showed that many businesses were unprepared for the disruption of workforce availability. While parents had to stay at home taking care of children because of school closing, work was not getting done. Not all work can be done remotely.

A Business Wire article8 reported that: “According to Forrester’s Q1 2020 Global Digital Process Automation Survey, two-thirds of organizations stated they encountered broken processes when they shifted their workforce to remote work due to COVID-19, and now 60% are reconsidering their process strategy.” 

A recent McKinsey9 survey of 800 executives showed that 67% are accelerating digital transformation as a result of their Covid-19 pandemic experience.

 

 

Businesses are accelerating automation and AI. Source: McKinsey

A recent Bain study10 of the impact of pandemic on corporate priorities showed a significant shift towards focus on business resilience as the chart below shows.

Business resilience has become the primary reason for automation pos pandemic. Source: Bain

Jobs may not be coming back.

The pandemic has created a disruption in the US workplace as businesses reorganize and business automation takes place. In a working paper titled “Covid-19 Is Also a Reallocation Shock”11  University of Chicago researchers estimate that between 30% and 42% of laid off workers will not have jobs after the pandemic ends. Therefore, businesses which have not adjusted their business model or automated their business processes will be at a disadvantage as their costs will be higher and efficiency lower than those of their competitors.

Various forecasters show that 31.5% – 55.7% of jobs are not coming back post pandemic. Source: University of Chicago.

 Big investments – many vendors 

The charts and statistics shown in this article go hand in hand with the proliferation of technologies and vendors including many innovative start-ups funded by savvy VC investors.

The 180find Solution Directory lists 100 RPA vendors. Some of the vendors listed are established firms such as IBM, Oracle, Microsoft and SAP but most are new. Fairview Capital12  reports that over the past 5 years Robotic Process Automation investing grew at the highest rate of all Artificial Intelligence investing as the chart below shows. This is because the market for RPA software is expected to grow from $0.5B to $2.9B according to Forrester13

RPA investments grew fastest during the past 5 years. Source: Fairview Capital.

The Bottom line: 

It is hard to imagine a future of any business without some sort of automation. It is real and it is here. 

References:

  1. MIT Study
  2. Jobs eliminated.
  3. UAW membership.
  4. Jobs automated
  5. Bain Study
  6. Deloitte Study
  7. McKinsey
  8. Business Wire article
  9. McKinsey survey of 800 executives
  10. Recent Bain Study
  11. “Covid-19 Is Also a Reallocation Shock”
  12. Fairview Capital
  13. Forrester