From the outside, little has changed about the massive industrial spaces that house much of our nation’s manufacturing and warehousing operations — but inside, those spaces are hosting fewer assembly lines and more robots.
Yes, robots are already here. When we think of automation, we tend to think of it in future terms, but emerging technology is already being rapidly deployed throughout the country. Manufacturing and warehousing are now driven by complex data systems; robots that can pick, pack, assemble, handle and inspect products are making their way onto workroom floors.
Although robots are being deployed by the thousands, there’s still enormous potential to expand automation in the manufacturing and warehousing sectors. A McKinsey analysis found that 64% of working hours in manufacturing were automatable, and that’s based only on the technologies available in 2015. The rapid innovation of new tech is increasing that number steadily.
However, there is a limit to how many jobs automation can replace. Robots haven’t completely replaced human workers yet — and there’s good reason to think they will never eliminate the need for skilled labor. In fact, automation has the potential to exponentially increase manufacturing efficiency and profits, and to create more jobs than it destroys, transforming our current labor landscape.
Automation is transforming labor market considerations and producing a need for new types of worker training. And markets that embrace automation and all that comes with it are thriving. Here, I’ll take a deep dive into the impacts of automation on labor markets and workforce training and present the case study of a market that has successfully attracted automation.
Automation and the Future of Jobs
Despite widespread anxiety about the impact of automation on workers — 72% of American adults express worry about a future where robots and computers can do many tasks currently completed by humans — robots are not actually taking all the jobs.
In a tight labor market with record unemployment, automation has the potential to take many low-skilled, manual jobs off the table. The jobs that are most easily captured by automated processes, such as picking and packing, are heavily repetitive.
Transferring these tasks from human workers to automated machines reduces labor costs and provides meaningful benefits in efficiency and productivity, according to McKinsey, including “increasing throughput and productivity, eliminating variation and improving quality, improving agility and ensuring flexibility, and improving safety and ergonomics.” Automated processes are what allow the nation’s largest distribution services, such as Amazon and Walmart, to provide such a high level of service to customers.
Despite the specter of looming job losses, economists predict that automation will actually create more jobs than it destroys. More significantly, these jobs will be well-paying, skilled, career-level positions, offering manufacturing enterprises a new opportunity to boost the economic situation of workers in depressed areas.
A Deloitte study calls technology the “great job-creating machine.” As positions contract due to new technology, other positions are rapidly created, reshaping the job market. Indeed, a large portion of future workers will be employed in jobs that don’t yet exist. And the creation of new tech jobs has a multiplier effect, according to recent research in the Bay Area: For every new job created in the tech sector, four jobs are created in local goods and services sectors across all income levels.
The Inland Empire: A Case Study for Industrial Automation
To see the impact of automation in real time, it’s worth examining a current case study.
With 600 million square feet of industrial space, California’s Inland Empire is the largest industrial zone in the U.S., if not the world. And the region is prepared to remain at the top of the industrial leaderboards with its widespread commitment to the power of automation.
The Inland Empire region has historically been a depressed submarket. Although on paper, the area was able to quickly pull itself out of the mire of the Great Recession, job creation has been centered in low-wage sectors including warehousing and transportation. More than half of current jobs in the area don’t pay enough for workers to make ends meet.
But those rapidly growing, low-wage jobs are poised to be eliminated with the spread of automation. In fact, research from the University of the Redlands shows that a majority of the region’s jobs — almost 63% — have the potential to be automated.
As these jobs are eliminated, higher-paying tech jobs are created, offering workers new economic opportunities. These jobs have the potential to lift the entire region, increasing spending and consumer demand, which in turn further increases the need for labor.
“In envisioning the future of work, we are challenging traditional workforce models in order to equip workers with the skills to be successful in this tech-dependent economy,” says California Assemblymember Sabrina Cervantes, who also chairs the policy committee in the California State Assembly that oversees issues relating to job quality and the California economy.
The real concern about the rapid spread of automation is in the gap between current worker skills and future positions. To address this gap, government officials, including Cervantes, are invested in allocating resources to train new workers and reskill those whose positions have been eliminated. Record funding levels allow high school students access to two years of free community college; programs at technical schools, junior colleges and high schools provide training in technical skills, increasing job mobility.
“As we prepare for significant growth in our region, it is essential that we expand access to work and ongoing educational opportunities that can provide sustained support to California’s working families,” Cervantes says.
Survival in the age of automation isn’t about who is smarter or stronger — it’s about who is willing to adapt. In the Inland Empire, the future looks bright. A readiness to adapt to new technology means the chief job creator of the region, manufacturing and warehousing, will stay relevant for the foreseeable future. The Inland Empire is ripe to become a global hub for automation.
Preparing CRE for an Automated Future
Emerging technologies are developing more rapidly than ever before in human history. In the industrial sector, four primary technologies are making inroads:
- Blockchain technology has the potential to increase transparency across the supply chain.
- Artificial intelligence allows for increased connectivity, eliminating the need for huge, centralized warehouses and instead allowing partners to ship their own goods through multiple platforms.
- Green technology is making inroads as manufacturers think about how to close supply chain loops and make packaging returnable and recyclable.
- 5G connectivity is the driver behind automated delivery, and although drones are already being piloted, 5G is the key factor in pushing self-driving vehicles to expand to public roads.
Staying relevant in this new, tech-heavy market requires industrial companies to be players. Businesses must either invest in emerging technology or become obsolete. As businesses expand, investing in markets that have embraced automation is essential.
At Colliers, when we begin the site selection process, we conduct an extensive market analysis. The number one factor in site selection is labor — success is all about labor availability, and not just what labor looks like now, but what labor will look like in the future. With that in mind, we help clients prioritize markets with programs in place to bridge the skills gap and train or retrain workers to prepare for the new world of automation.
Businesses should work with industry partners and government agencies to promote access to educational opportunities. Manufacturing markets such as Greenville, SC and the Inland Empire are leading the way in establishing these opportunities. In Greenville, innovative technical training programs for young workers lead the way forward, boosting both economic growth and employee wellbeing as they embrace new technologies.
Automation is our future. And industry would do well to prepare it.
About the Author:
Gregory Healy, Senior Vice President, leads the U.S. Supply Chain and Logistics Consulting team. With over 20 years of global manufacturing and supply chain experience as both a senior executive in the corporate world, as well as owning a supply chain consulting practice and a third-party logistics business, Gregory has real world experience that brings a unique perspective to the Colliers team.