Robots are popping up everywhere, driving new tech projects and innovation. Companies, from startups to giants, are starting to adopt this modern automation. But there’s a twist: brace for a decline in your profit. New research reveals robots might trigger a brief financial loss… initially.
Research from the University of Cambridge found that as companies adopt robots, their profits often follow a U-shaped trend – declining at first on low levels of adoption, before eventually rising again at higher levels of adoption. Here’s how robots could trigger an initial profit decline:
- Price Competition: Initially, most companies are trying to adopt robots to reduce costs and gain a competitive advantage. However, competitors can also easily replicate this strategy if it allows them to manufacture more products cost-effectively. This leads to price competition that contributes to a company’s dip in profits at low levels of robot adoption.
- Process Updates: Many applications of AI still remain in conceptual stages, limiting their commercial value, especially in the areas of network management and predictive maintenance. One of the Cambridge researchers states that as more robots are integrated, companies must simultaneously change their processes to avoid bottlenecks. With this, adopting robots requires major process updates, new procedures to integrate, and system redesigns that need a significant amount of investment.
- New Skills Needed: (What does it mean for engineering employment?) A survey by Gartner found that the major obstacle in the adoption of 64% of new technologies is talent shortage. This tech adoption was predicted to create 133 million new jobs, offsetting the displacement of 75 million ones. With new tools and processes being integrated, new skills are also needed, leading to an increasing need for companies to hire more people.Â
- Example: Zipline, a robotics company, seeks to hire over 100 employees across various roles including electrical and mechanical engineering.
Despite causing an initial dip in profits, robots are still dominating the tech market worldwide. In 2021, global service robots surged by 300 thousand to a total of 3.6 million units, and industrial robots were recorded an all-time high use, with around half a million units installed in factories worldwide. By 2023, their market value exceeded triple that of industrial robots.Â
Example: Chipotle partnered with a tech company, Hyphen, to test a robotic makeline along with a new robotic grill, aiming to boost its restaurants’ productivity.
Why do companies use robots? Companies integrate robots mainly to reduce costs by addressing labor shortages and streamlining processes.Â
- Addressing labor shortage: As a solution to labor shortage, many companies are increasingly adopting robots to fulfill manufacturing and specialized tasks. By 2025, around 85 million jobs will be displaced as machines are projected to overtake humans in performing work, compared to 71% of human performance today.
- Streamlining processes: AI-integrated automation helps companies create smart manufacturing processes where robots can adapt effectively to changing conditions using machine learning. It helps take away repetitive, monotonous, and dangerous tasks from workers, improving a company’s production speed and competitive edge. With this, companies consider automation as a long-term solution to production, manufacturing, and labor challenges.
But if a company is at a lower profit margin on a lower level of robot adoption, how can robotics be utilized to become profitable again?
- Strategic integration and process development: To avoid bottlenecks and maximize the potential of robots, a well-planned and strategic approach is needed by concurrently updating new processes alongside robot integration. This strategy can speed up a company’s transition to the profitable side of the U-shaped trend and drives long-term profit growth.
- Product innovation: New product development must also be prioritized alongside cost reduction and process development. As robots become fully integrated into a company, they can be used to drive revenue with new product innovations.
- Upskilled workforce: A study has found that as tech innovation and integration increase, so does job complexity. The need for workers’ competency and skills has vastly increased especially in the manufacturing and global supply chain industry. For companies to establish advanced manufacturing, they must invest in a future-ready workforce.
To find highly skilled Mechanical, Electrical, and Manufacturing engineers to help you adjust to technology advancements and robot integrations, call the talent experts at Solopoint Solutions today: