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Fanuc robots at work on a Honda automobile. | Source: Fanuc
A gaggle of researchers on the University of Cambridge discovered that robots can lower productiveness within the quick time period however can improve it in the long run. This U-shaped phenomenon is as a result of relationship between lowering prices, creating new processes and innovating new merchandise.
The researchers studied trade knowledge from the UK and 24 different European nations between 1995 and 2017 compiled by the European Union (EU). While robots have been proven to lift labor productiveness at an trade or nation degree reliably, it hasn’t been studied how robots have an effect on revenue margins at an analogous macro scale.
While the information didn’t permit the researchers to look at traits on the degree of particular person firms, they have been in a position to take a look at entire sectors, primarily in manufacturing the place robots are generally used. Combining the EU knowledge with robotics knowledge from the International Federation of Robotics (IFR) database.
Comparing these two units of information, the workforce was capable of analyze the impact of robotics on revenue margins at a rustic degree. The researchers then carried out a sequence of interviews with an American medical gear producer to check their experiences with robotic adoption. In all, the workforce discovered that at low ranges of adoption, robots have a unfavorable impact on revenue margins, however, at greater ranges of adoption, robots can improve income.
“Initially, firms are adopting robots to create a competitive advantage by lowering costs,” co-author of the examine Chander Velu from Cambridge’s Institute for Manufacturing mentioned. “But process innovation is cheap to copy, and competitors will also adopt robots if it helps them make their products more cheaply. This then starts to squeeze margins and reduce profit margin.”
According to the researchers, many firms undertake robotic expertise as a result of they need to lower prices. This ‘process innovation’ might be simply copied by rivals, lowering prices throughout the trade and creating smaller margins for everybody. Once these firms shift their focus from streamlining their processes to product innovation, which can provide them larger market energy and the power to distinguish from rivals, income improve.
“When you start bringing more and more robots into your process, eventually you reach a point where your whole process needs to be redesigned from the bottom up,” mentioned Velu. “It’s important that companies develop new processes at the same time as they’re incorporating robots, otherwise they will reach this same pinch point.”
The analysis workforce mentioned that if firms need to attain the worthwhile aspect of the U-shaped curve extra rapidly, then they need to concentrate on adapting their enterprise mannequin concurrently with robotic adoption. Companies can solely use the facility of robotics to develop new merchandise and drive income after robots are absolutely built-in into the enterprise mannequin.
This analysis was revealed within the journal IEEE Transactions on Engineering Management. It was supported by the Engineering and Physical Sciences Research Council (EPSRC) and the Economic and Social Research Council (ESRC), that are each a part of UK Research and Innovation (UKRI). Chander Velu is a Fellow of Selwyn College, Cambridge. Duncan McFarlane, one other co-author on the examine, is a Fellow of St John’s College, Cambridge.