Let’s bust the myth that the only way to reduce costs is automation

If you bear in mind that automation is a double-edged sword, you’ll be a lot better off.

I feel compelled to make a confession at the outset here. I am not anti-automation. In fact, automation was the focus of my entire career after graduating in the very first batch from the University of New South Wales’ (UNSW) Mechatronics Engineering degree back in 1998! I recall studying PID controllers and programming a robot using hexadecimal machine code at the UNSW Engineering lab. You will still catch me regularly writing Visual Basic code for complex Excel spreadsheets. So I’ve certainly got a soft spot for automation. My intention here is to challenge your thinking to check if automation is the only solution left to reduce costs or increase capacity.

After graduating, my first job was working as a process engineer at a manufacturing company where they had hundreds of employees “making it all happen” — there was zero automation. That is where I learnt there is so much potential with the existing people and processes to reduce costs, before investing more in capital equipment.

My view quite simply is that there is definitely a place for automation. However, before you go down that path, there’s more you could get from your current processes, even if you think they are maxed out in terms of capacity and potential.

“Today we are bombarded with technological solutions to automate activities even in our day-today life. So it is not surprising that we seek more and more tech-based solutions in our manufacturing sites as well.”

At your manufacturing site, I’m sure you have come across employee relations issues, from absenteeism to poor performance, where you’d be forgiven for thinking, “Is there a solution where these situations don’t arise …?” Perhaps the quality defects that created all the rework last month, eroding a fair chunk of the profit margins, begged the question whether automation could have avoided the situation. Typical scenarios where automation is explored as a solution are when manufacturers want to pursue the benefits, such as increasing labour productivity, reducing labour costs, reducing or eliminating routine manual tasks, improving worker safety, improving product quality and reducing defects/mistakes.

Whatever the situation and the challenges, the main question that you should be asking is, “Have I got the best possible efficiencies from the current processes, equipment and employees?”

Whilst automation may be the answer to some situations, it may also bring some nasty surprises that you hadn’t anticipated. If your existing processes are poor, then automating in most cases will result in a poor automated process. My recommendation is to make any process effective first, then make it efficient.

Why do we fall into this trap?

We are bombarded with technological solutions for nearly everything we do. Manufacturing can have so many variables: equipment performance, employee issues, material variation, etc. We believe automation can be a plug-play technology that can eliminate all the headaches.

For example, you may have come across the term Industry 4.0 in print media, blogs, presentations and other places. Industry 4.0 is a term that is generating its fair share of interest, attention and hype.

What is Industry 4.0? At present, we are going through the fourth industrial revolution (Industry 4.0) since the invention of the steam engine late in the 18th century.

Coined as “Industry 4.0” by the German government in 2011 following the global financial crisis, it promises to advance the manufacturing sector with the Internet-of-Things (IoT), Big Data and cyber-physical systems – connecting our supply chains from paddock to plate. The progression from Industry 1.0 to 4.0 is shown in the following diagram:

Automation image

The cost of automation is decreasing, making it more affordable for small and medium businesses. While the thought of automation taking care of the issues you have today (productivity, throughput, etc.) can bring a sense of relief, I’m sorry, however, to burst your bubble! Automation could potentially introduce unforeseen problems as well.

Common pitfalls of this approach

With regards to concepts explored under Industry 4.0, there is a major difference between the technological advancements that the leading German automation companies are making and the food manufacturing sector here in Australia. Most here have not even gone through Industry 3.0 revolution yet. It is concerning that many may get into trouble by believing that they could make a quantum leap in a single bounce, expecting Industry 4.0 to be a silver bullet.

One of the case studies presented in this chapter involves Industry 3.0 implementations. What happened in the example is definitely not an isolated case; in fact it is not that uncommon even for the “big boys.”

The people in your business today generally “make it happen” due to their adaptability. Owing to this flexibility, there is one aspect of your current processes that may not be a concern right now – equipment tolerances. This can be particularly true when it comes to packaging processes.

You may have been able to negotiate an extremely low price for your raw material, as you didn’t have to worry about the tight tolerances. With automation, however, machines have a very low threshold to variability. Therefore, you may find all of a sudden that the raw material specifications need to be tightened up, which in most cases come with an increase to cost.

While you may get step change in productivity and throughput, don’t be surprised if the scrap levels increase as well. I’m not talking about the absolute quantity, as that would be a given considering the increased speeds.

I’m talking about percentage of scrap: the machine jam-ups, the stop-starts to troubleshoot issues, the increased raw material waste at end-of-run (which may not be reusable) can all increase scrap rates quite rapidly.

As operators try to grapple with new ways of working, be prepared to expect a slip-up here and there where batches may need to be either reworked or discarded.

Automation also adds another level of complexity to safety (OH&S). Let me explain both ends of the spectrum that I’m aware of as I write this chapter. On one end we have incidents causing fatalities where human and machine interaction have gone horribly wrong. When you speak with the families of the individuals who have passed away, it is irrelevant whether it was the operator’s fault or the machine malfunction that caused the fatality.

On the other end of the spectrum we now have “Cobots” (collaborative robots) that are designed to work side-by-side with human operators in a collaborative way. They are designed with sophisticated safety features where they immobilise at the slightest touch, preventing any danger to operators around them.

However, if you have a culture where employees take shortcuts and the term OH&S wakes you up in a cold sweat at night, then integrating even a Cobot to your workplace would require some serious effort. Even if the implementation goes well and none of the issues discussed so far are a concern for you, there is one more point that requires your attention before you sign that purchase order for automation: increased maintenance costs. Bringing in new equipment adds another layer of complexity to maintenance — spare parts, training of maintenance staff, preventative maintenance schedule, lubrication schedule, etc., all of which require time, resources and money.

Any tweaking or optimising of the programme that runs the automated equipment in most cases requires the OEM (Original Equipment Manufacturer) to visit the site and make all the necessary changes. This could add frustration for your own maintenance staff as they would feel somewhat helpless. Apart from the cost aspect, having to wait for the OEM to turn up can be frustrating and on some occasions crippling if you are in the middle of a production start-up, with your entire crew twiddling thumbs waiting for the product.

I am dwelling on the negatives of automation here. On the positive side, equipment providers will guarantee a certain level of response time, giving you some peace of mind.

I’ve just seen too many Murphy’s Law situations where things have gone wrong in the middle of Sunday night start-ups and help wasn’t available as expected, resulting in unplanned production run changeovers and creating heart palpitations for production crews.

Changeovers between production runs can get longer and complicated. Similar to what we explored in the sales growth chapter, adding extra equipment brings extra process steps that need to be incorporated into changeovers.

If not designed well, you will find that this equipment needs to be cleaned during every changeover. If a change to a different product or configuration is required, this will bring with it various accompanying demands: finding the correct changeparts, designing change-part trolleys, training staff to carry out changeovers efficiently and effectively, and needing additional tools. All of these will require some extra patience from you, before you even begin to see the same level of efficiency you had before automation.

Your high-cost investment needs a high level of operator care to ensure that you get the best value from it. Whether it is understanding the functionality of various sensors, learning that motors cannot be washed down (yes, it happens), or realising that the rubber mallet should be the last tool they pick up to clear blockages, all of these indicate one point — the business maturity level for equipment care is not at a level where they know how to look after these machines.

Ishan Galapathy, www.capabilityunlimited.com.au, has a wealth of knowledge in the field of Operational Excellence, working across six countries for nearly two decades, including companies such as Kellogg’s and Campbell Arnotts. An industry expert in Operational Excellence, a speaker, and an author, Ishan lives in Sydney, Australia, with his wife and children, and strives to thrive on purposeful living.

This article appeared in the August 2018 issue of HR Future magazine.

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