Collaborative Robots as a hedge against Isolationism

As Isolationism makes global production difficult and policies unpredictable, Collaborative Robots could offer a bridge gap solution.

The United States has lost 7 million manufacturing jobs since 20001 and it is commonly debated whether automation or globalization has contributed more. One argument is that automation enables globalization and makes their impact indistinguishable2. With globalization the target of many political movements, a robotics company in Boston might be able to offer firms a way to hedge their bets in times of uncertainty.

Rethink Robotics, founded by the former director of CS at MIT, offers an automation solution called the “Collaborative Robot” or “cobot”. Unlike most robots, cobots are certified to work alongside humans without protection. Sawyer, Rethink’s flagship product, learns how to do repetitive human tasks through observation, not manual coding. The company claims that their products can do 90% of the repetitive work that was previously beyond the reach of automation3,8. The robot arms take minimal set up, can be re-trained easily and at $40,000 per arm, are quite affordable4. This might seem like just the next step in automation, but their software driven ability to learn and Rethink’s data platform might be a catalyst for something more.

It is currently the age of localization – NAFTA is under review, TPP is dead, countries like India are mandating local production for most FDI or procurements. With so much uncertainty, a lot of capital projects are on hold. The Mexican Association of Industrial Parks found that 37.5% of projects were put on hold due to uncertainties regarding NAFTA5. Rethink could help mitigate this political risk. Labor can’t move across borders with a similar cost structure, but cobots can. Furthermore, they don’t need to be retrained and won’t suffer any loss in productivity. They can also serve as a way to get gains of automation without committing to fixed capital in one site.

Rethink is currently focused on refining and proving out their technology. In 2017, they released a new AI platform to offer customers better diagnostics and a smaller robot that has been selling better. These releases coincided with a $18M Series E round (investors included Bezos, GE and Goldman Sachs)3. As the first mover in the cobot field, Rethink leads the pack in terms of software innovation. This is not just a competitive advantage, but is arguably the only source of value in a field where competitors such as ABB, Fanuc and Kuka can and are easily catching up on the hardware.

The variable cost per hour of operating two arms (arguably equal to one human) is $3 per hourA. This is lower than the ~$3.5/hr for manufacturing jobs in China and is approaching the $1-$2 range that is commonly seen in countries like India6,7. At such competitive costs, the use case for “On-shoring” is obvious. Positioning themselves as enablers of “anti-globalization”, Rethink can offer companies a flexible, disciplined and quickly trained work force that can be deployed and tele-operated across the world. Consequently, Rethink is focused on global growth and has recently signed critical distribution agreements in China, Japan, Mexico and U.K.8 – all countries with changing international trade landscapes.

As Rethink looks to establish itself as a key player in manufacturing, it needs to partner with a global manufacturer and prove that it’s technology can operate at scale. Operators want to see success stories before investing in new technology16.

A hypothetical use case could have been Carrier Corporation – a public example in which the US Govt. intervened with $7M in tax credits to save 1,400 manufacturing jobs but instead ended up only delaying inevitable layoffs by a year9. Rethink is not going to buck the trend of political movements and the loss of human jobs to automation. But it can offer firms an economical way to keep production on-shore with the flexibility to consider off-shore in the future. For example, Carrier could have transitioned part of their work force to cobots, and delayed a decision to off-shore or on-shore. Instead, they are now committed to a $16M automation plant.

While adoption of collaborative robots has been robust, it is an open question whether they support or buck the trend of globalization. While I believe that the technology allows firms to keep their options open due to their ability to deliver flexible and cheap automation solutions, the argument could be made they are truly revolutionary and could enable local manufacturing and standardized processes in all local markets of a global company.

A. Calculated based on 20 hours of operation for 6.5 days a week, $40,000 per arm, 2 arms per machine and a life of 5 years

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Endnotes

  1. Worstall, Tim. “The U.S. Lost 7 Million Manufacturing Jobs–And Added 33 Million Higher-Paying Service Jobs.” Forbes. October 19, 2016. Accessed November, 2017. https://www.forbes.com/sites/timworstall/2016/10/19/the-us-lost-7-million-manufacturing-jobs-and-added-33-million-higher-paying-service-jobs/#752b30164a20.
  2. Tyson, L. (2017, June 07). Labor Markets in the Age of Automation. Retrieved November, 2017, from https://www.project-syndicate.org/commentary/automation-labor-market-inequality-by-laura-tyson-2017-06
  3. “Rethink Robotics Announces $18 Million in New Funding.” Rethink Robotics. December 23, 2016. Accessed November, 2017. http://www.rethinkrobotics.com/news-item/rethink-robotics-announces-18-million-new-funding/.
  4. Khalid, Asma. “How A Robot Is Changing Furniture Making At A Factory In Fitchburg.” How A Robot Is Changing Furniture Making At A Factory In Fitchburg | Bostonomix. October 30, 2017. Accessed November, 2017. http://www.wbur.org/bostonomix/2017/10/30/automation-factory-work.
  5. Graham, Dave. “Trump’s threats chill corporate investment plans in Mexico.” Reuters. December 09, 2016. Accessed November, 2017. http://www.reuters.com/article/us-usa-trump-mexico/trumps-threats-chill-corporate-investment-plans-in-mexico-idUSKBN13Y2JB.
  6. Jessica R. Sincavage, Carl Haub, and O.P. Sharma, “Labor costs in India’s organized manufacturing sector,” BLS Monthly Labor Review (May 2010).
  7. Yan, Sophia. “‘Made in China’ isn’t so cheap anymore, and that could spell headache for Beijing.” CNBC. February 27, 2017. Accessed November 15, 2017. https://www.cnbc.com/2017/02/27/chinese-wages-rise-made-in-china-isnt-so-cheap-anymore.html.
  8. “Rethink Robotics Expands Global Reach with Domestic and International New Distribution Partners.” Rethink Robotics. Accessed November 15, 2017. http://www.rethinkrobotics.com/news-item/rethink-robotics-expands-global-reach/.
  9. Paquette, Danielle. “Analysis | Trump said he would save jobs at Carrier. The layoffs start July 20.” The Washington Post. May 24, 2017. Accessed November, 2017. https://www.washingtonpost.com/news/wonk/wp/2017/05/24/here-is-the-number-of-jobs-carrier-is-moving-to-mexico-after-trump-said-hed-save-them/?utm_term=.0b50bc499ae1
  10. “The manufacturing jobs delusion.” The Economist. January 04, 2017. Accessed November, 2017. https://www.economist.com/blogs/buttonwood/2017/01/economics-and-finance.
  11. Lawton, Jim. “In The Race To Advance Manufacturing, China Is Betting On Robots.” Forbes. September 28, 2017. Accessed November, 2017. https://www.forbes.com/sites/jimlawton/2017/09/21/in-the-race-to-advance-manufacturing-chinas-betting-on-robots/#1fe25e3f78cd.
  12. Reese | November 11, 2015, 4:00 AM PST, Hope. “Why China is scooping up robots from Rethink Robotics to solve its manufacturing problem.” TechRepublic. November 11, 2015. Accessed November, 2017. https://www.techrepublic.com/article/why-china-is-scooping-up-robots-from-rethink-robotics-to-solve-its-manufacturing-problem/.
  13. Reilly, Michael. “Will this small, precise robot be the next automated factory worker?” MIT Technology Review. February 08, 2017. Accessed November, 2017. https://www.technologyreview.com/s/603608/rethinks-sawyer-robot-just-got-a-whole-lot-smarter/.
  14. Rotman, David. “Here’s how to use AI to make America great again.” MIT Technology Review. May 22, 2017. Accessed November, 2017. https://www.technologyreview.com/s/603465/the-relentless-pace-of-automation/.
  15. “Manufacturer Adoption of Collaborative Robots is Strong, Becoming More Aggressive in the Near Term.” PR Newswire: news distribution, targeting and monitoring. August 31, 2017. Accessed November, 2017. https://www.prnewswire.com/news-releases/manufacturer-adoption-of-collaborative-robots-is-strong-becoming-more-aggressive-in-the-near-term-300511734.html.
  16. Smith, Jennifer. “A Robot Can Be a Warehouse Worker’s Best Friend.” The Wall Street Journal. August 03, 2017. Accessed November, 2017. https://www.wsj.com/articles/a-robot-can-be-a-warehouse-workers-best-friend-1501752600.

 

 

 

 

 

 

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8 thoughts on “Collaborative Robots as a hedge against Isolationism

  1. Great read, and a great company/technology. I really like the idea of “collaborative” robots – I think this positioning would allow for the better adoption of technology by traditional industries in the future, however, one key question moving forward is whether these “cobots” truly enable globalization or simply eliminate the need for the underlying labor content altogether? one could argue that this technology actually enables isolationism by providing domestic companies the means to avoid the need for off-shoring or outsourcing low-cost, low-complexity tasks, and essentially levels the labor playing field between developed and developing countries. I’m not necessarily suggesting that this is an undesirable outcome, but certainly, one to think about as we move towards more and more automation in the workplace.

  2. Great technology and definitely a potential source of strong debates around evolution of human jobs vs. evolution of technologies, should it be widely adopted.

    Let’s image a world in which this technology is developed and spread globally. Labor cost is not relevant anymore as criteria for global companies to choose where to locate their facilities. Productivity is much more uniform worldwide since human factor in operations is now very low. Then, are models of global supply chains that we used to observe getting irrelevant ? I do not think so, and I would argue that should “cobots” be adopted widely, logistics and transportation cost will still require industrial companies to find balance between (i) producing close to raw materials sources (which are not distributed evenly on the planet) and (ii) producing close to end market served (which are not the same depending on the products). As a consequence, I would expect large industrial players to keep on managing a global footprint, thus promoting further globalization.

  3. Really interesting article, about a topic and technology I’ve never heard of. The first question I have is how effective are these robots compared to humans? Are they more / less / roughly equivalent? Another question I have is how quickly these robots can be deployed and ramped up? Is it faster than it would take for a human to ramp up? Are there increased safety concerns with having humans and cobot arms working side by side? Based on your comment above that various nations have entered into agreements to work with these cobots, my biggest question overall is how deeply these are being used today? Do they simply have a prototype with a contract to deliver the product in the future, or are these currently in use all over the world?

    Overall, there seem to be significant cost reductions in terms lower shipping costs by manufacturing domestically with cobots through low fixed costs, even accounting for the $40,000 PP&E cost which can be amortized over 5 years.

  4. Great article. After reading it I visited Rethink’s website and was truly amazed by what these cobots are capable. One point I wanted to raise about this issue in the inherent irony in it. Most of these isolationist movements have started, to certain extent, because people have lost their jobs to less expensive immigrant labor. However, what they may trigger is not the re-employment of those that lost their jobs but further automation and less need for human labor. In this scenario, one question that I have is where will people channel their frustrations, if the inflow of immigrants is no longer the cause to blame. Would people insurge against cobots? Or would they find another scapegoat? I guess that still remains to be seen…

  5. The political and commercial climate of globalization today is fraught with uncertainties. As the author rightfully pointed out, collaborative robots (“cobots”) offer companies a great option to delay costly fixed commitments to wait for greater political clarity while maintaining efficient and low-cost operations. As the collaborative robot technology mature, it may be able to eventually transform a full-scale manufacturing facility into a summation of portable robots and programmed learning. This will greatly ease the pressure of companies to make the often difficult decision of factory locations by removing the trade-off between cost and compliance with protectionist measures, as manufacturing base can be easily re-located with similar cost structure and minimal loss in operating efficiency.

    However, cobots, by themselves, do not support or buck the trend of globalization. They are merely tools that help companies build flexible and cost-efficient manufacturing facilities as well as level-playing the cost curves across locations. Each individual company will need to make its own decision on whether to embrace or resist globalization which often entail many considerations beyond operating costs, and how collaborative robots can fit into its specific strategy.

  6. Great article, Harshit. I very much agree with your suggestion that this type of technology will help companies deal with isolationist trade policies. Unfortunately, it seems likely to exacerbate the challenges in the labor market that have driven the rise of isolationist trade policies. By making automation cheaper than offshoring workers, it simply increases the incentive for firms to substitute local workers for robots. Further, jobs that had previously been more protected from offshoring (e.g. service industry jobs) now become exposed to replacement by robots. I find it hard to envisage a world where the political influence of workers replaced by worked continues to be felt, potentially leading isolationist-like policies that restrict the use of the robots themselves.

  7. Very informative article! I was completely unaware of the advent of this technology. Reflecting a bit further, I am not surprised. As the world shifts further towards isolationism, the penetration of this technology will only increase. Isolationism is primarily a result of frustration against cheap offshore labor. I am curious how governments will react as people’s focus shifts from cheap labor to technologies such as collaborative robots being the reason of their unemployment? Will people protest en masse to limit the usage of such technology? Will governments succumb to the pressure?

  8. I disagree with your position that this technology is just a method by which companies can keep their options open as the world economy swings from globalization to isolationism and potentially back again. I think that by the very nature of the cost advantage that you outlined in your article, this will be a more revolutionary technology. Although limited to repetitive tasks, this technology will continue to advance, and with this product development will surely come even further cost reductions. I believe that the isolationism we are seeing right now, while significant, is temporary. Manufacturers will continue to favor low cost solutions over labor protection, and will wield their powerful lobby to ensure isolationism doesn’t persist.

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