Automation and digital transformation are the next revolution in productivity. This is driven by a severe shortage of skilled labor and supply chain disruption is capping growth for advanced manufacturing across the sectors we serve. Automation has the potential to improve output, introduce new capabilities, improve margin, and grow revenue—but the skilled labor gap is making this change an imperative.
Misconception 1: Robots will take our jobs
Automation is not about replacing jobs but maximizing output from available people and elevating their skills to remain competitive. Even for companies not looking for exponential growth, automation can help increase yield and improve margins.
US GDP growth is projected at 1.1% for 2023, downgraded due to this labor shortage. There is an anticipated 2M unfilled manufacturing jobs by 2025, and today, we have 35% more unfilled manufacturing jobs than skilled workers.
Leaders are turning to automation to address this gap.
Most of the business leaders in the industrial sectors we serve are undergoing digital transformation and the move to automation, taking on projects like:
- Front office: Leveraging ERP to automate AP, AR, service operations, estimating
- Marketing and sales automation to support the buyer’s journey and refocus BD energy on activities that create value
- Robotic welding, laser cutting, and CNC manufacturing
- Tablets/metrics on the floor
- QA improvements for traceability, customer reporting, and leading indicator KPIs
- Real-time data intelligence throughout the company
Moves like these are driven by a need to improve efficiency and productivity, reduce costs, improve safety, improve yield and quality, and enable data-driven decisions. Companies of all sizes have invested in automation, with most of these companies falling in “stage 3” of automation adoption—piloting proof of concept with narrow deployment. They are approaching automation as projects, moving toward a tech-first culture and widespread deployment.
Automation & Digital Transformation Maturity Model
The leaders we’ve spoken with, most of whom are in stage 3, have seen success in these projects, but their barriers to full automation are not uncommon:
- Time to establish new processes and procedures while operating ‘business as usual’
- Availability of equipment
- Capital expense and due diligence to prove it’s a sound investment
- Lack of employee development
- Long-tenured employees resistant to change
- Employee self-worth—shift from active work to passive work, loss of artistry
- Turf, perceived loss of security
- Short-term perspective, current-based analysis vs. future-based processes
- Lack of process documentation as a starting point
- Too big of a focus
Misconception 2: It’s all or nothing
“Too big a focus” is one of the misconceptions that hold the industry back. In fact, there’s no big reveal. Full, lights-out automation suffers from a perceived enormous investment, especially with interest rates on the rise, and that has stalled progress. But automation isn't an all-or-nothing shift. In fact, it’s continuous improvement that is paying off for the winners, with 20% gains as a rule of thumb at each step.
Success of Departments in Applying Industry 4.0/5.0 (% of manufacturers)
An end-to-end, iterative approach presents its own challenges. To succeed, the move to automation demands a strong executive sponsor and widespread innovation. It’s a culture shift that demands change readiness.
Misconception 3: Build it and they will come (along)
Automation, even when broken down into manageable steps, demands change as it affects all layers of an organization. It’s a change that involves people, processes, and technology.
Here are a few ways companies manage change:
Launch Team works with companies to set the vision and guide employees through the change required for digital transformation success. Learn more about our process.
There is a measurable and compelling ROI to automation, but companies must take into consideration the cost of implementation and training. In a study of advanced manufacturing companies, the highest gains were reported in revenue, customer value, production capacity and quality, and most were able to demonstrate ROI in 18-24 months, though this varies widely based on the type of automation project.
Misconception 4: Near-term ROI
Capital investment is one of the top barriers cited at every stage of automation maturity. And for good reason: interest rates are impacting margins, access to capital is changing, and privately held companies must consider their exit plan before major investment, while PE or VC-owned companies may need to see the business case for short-term ROI. The real payoff is in cash flow over time and new revenue opportunities.
Automation and digital transformation may be the key to competitive advantage and sustainable profitability, but most advanced manufacturers are approaching it as an iterative journey, improving profitability and quality at every step.
KPIs for Automation
ROI and benchmark data vary widely by type of automation and your specific operations, market, and geography. [Ask for a consult, and we’ll provide specific benchmarks where we can.] Here are some KPIs (key performance indicators) that may be helpful to baseline, benchmark, and track your progress:
- Efficiency (labor hours per unit)
- Revenue per employee
- Yield rate
- Customer engagement
- On-time delivery
- Time to close for service
Ready to speed adoption and results from automation and digital transformation? It requires a culture of innovation and continuous improvement to stay ahead of the curve. Launch Team has a strong track record of helping companies grow and change. Download our guide.