Businesses spend money on automation, not employees

Tough times for the unemployed have been a boon to automation

By ·

“Down at the well they got a new machine
The foreman says it cuts man power by fifteen.”
Country Comfort, by Elton John and Bernie Taupin

By now, you’ve probably heard about a New York Times story last week that reported what everyone in the materials handling business has known for the past year: businesses are spending money on automation, not employees.

“Workers are getting more expensive while equipment is getting cheaper,” the Times reported, “and the combination is encouraging companies to spend on machines rather than people.”

What struck me most was a quote from Dan Mishek, the managing director of a Minnesota company that makes plastic products for equipment manufacturers. According to the Times, Mishek’s company spent $450,000 on new technology last year, but hired just two new workers, whose combined annual salary and benefits are a third of what he spent on technology. Of course, the technology and equipment spend is a one-time investment while the salaries and benefits keep recurring and get more expensive every year.

Explaining the disparity between the two numbers, Mishek said publicly what a number of individuals have said to me privately. “I want to have as few people touching our products as possible,” Mishek told the Times, “… especially when workers are getting even more expensive.”

Part of what’s driving these investments is the tax credits and depreciation bonus passed by Congress last year. At the time, a panel of experts on CNBC predicted it was a great deal for American competitiveness but not for the American worker. “A company can buy new accounting software that makes them more competitive,” one of them said. “But they also layoff two accountants.”

But I think there’s something else going on, and it’s not pretty. We are at the start of a long-term and painful structural change away from providing lots of jobs that require little skill towards a few jobs that require a reasonable degree of technical skill. Caught in between are the unemployed who don’t have the skills needed to fill the jobs that are going wanting.

“People don’t seem to come in with the right skill sets to work in modern manufacturing,” Mishek complained to the times. “It seems as if technology has evolved faster than people.” That too is a complaint I have heard over and over in private conversations with end users, consultants and solution providers in our industry.

As we enter the political season, I hear politicians from both sides of the aisle proclaim that what we need are policies that will bring back manufacturing to the United States. That will put the unemployed back to work.

I think that’s great. But without education programs and policies to develop the skills in demand from businesses like Mishek’s company, those policies will be for naught. And that won’t happen over night.

Not so great for the unemployed. In the meantime, it’s good to be in the automation business.


About the Author

Bob Trebilcock
Bob Trebilcock, editorial director, has covered materials handling, technology, logistics and supply chain topics for nearly 30 years. In addition to Supply Chain Management Review, he is also Executive Editor of Modern Materials Handling. A graduate of Bowling Green State University, Trebilcock lives in Keene, NH. He can be reached at 603-357-0484.

Subscribe to Modern Materials Handling Magazine!

Subscribe today. It's FREE!
Find out what the world’s most innovative companies are doing to improve productivity in their plants and distribution centers.
Start your FREE subscription today!

Article Topics

Automation · · All Topics
Latest Whitepaper
Your Guide to Voice for the Warehouse
Is voice a good fit for my operation? How would voice work in my warehouse? With the help of the Vitech Guide to Voice, you can find all the answers to your voice questions in one place.
Download Today!
From the October 2017 Modern Materials Handling Issue
An early adopter, Rochester Drug Cooperative is using robotic piece-picking technology to complement picking of slow-moving items. System report for Rochester Drug Cooperative, Robotic picking and inventory management, Innovative distribution center robotics solutions , IAM Robotics case study
This Month in Modern Materials Handling: Methodical steps into the future
The Warehousing Big Picture: Business as Unusual
View More From this Issue
Subscribe to Our Email Newsletter
Sign up today to receive our FREE, weekly email newsletter!
Latest Webcast
The State of the DC Voice Market
A lot has changed in the last 10 years, especially in voice technology. This webinar will cover the state of the voice market, review two leading voice solutions and help you gain a better understanding of the options and capabilities available today.
Register Today!
EDITORS' PICKS
Rochester Drug Cooperative: Robots ready for work
It’s still early stages, but Rochester Drug Cooperative is proving that mobile robotic piece...
Manufacturing Day: 2,716 events from Hawaii to Alaska to Puerto Rico
Events to be scheduled throughout the month, so the remaining 249,185 manufacturing firms in the...

System Report: Pouch sorter powers Stage’s fulfillment needs
How a hometown department store chain transformed its e-fulfillment processes with pouch sortation...
Cubing and Weighing Equipment: Measure Up
The use of cubing and weighing equipment is growing beyond dimensional weight applications.