The Rapid Emergence of Risk Mitigation and Operational Resilience as Critical Factors in Automation

Are risk mitigation and business continuity challenges top of mind for you?  Are you considering automation options as a potential solution?

If so, you aren’t alone.

As the Economist survey below shows, business resilience went from being one of the least important automation goals pre-COVID to the most important as we move through the pandemic.

In addition, “lower risk” was the least important before COVID and increased to the second most important automation goal.  So, risk mitigation and business continuity are top of mind for all companies as they evaluate investing in automation capabilities.

The economist survey shows business resilience gaining importance.

Changing Mindsets

The COVID-19 pandemic has changed the mindset for many companies from a “just-in-time” mentality to a “just-in-case” the unexpected happens again approach. Manufacturers, distributors and customers are evaluating process improvements to create more transparency and real-time response to potential breakdowns in the supply chain.  One way to improve reaction-time is through process automation in which robots, collaborative robots (“cobots”) and other emerging technologies are used to improve efficiencies.

By some estimates, many large CPG companies have increased safety stocks by 5% to account for supply-chain dislocation.  To help manage the increase in inventory, these businesses are acquiring cobots made by companies like Kiva, which assist in e-commerce fulfillment. (See more information on cobots and other robotic technologies, along with a case study on Amazon’s purchase of Kiva in 2012, in our Industrials Report).

Kroger is partnering with Ocado, a public, e-commerce grocery company in England, for both its warehouses and its retail outlets. Together, they will build an automated customer fulfillment center in the southern U.S. and also develop in-store fulfillment capabilities at Kroger stores in 2021.  Ocado recently acquired two robotics companies in the U.S. to accelerate its development and growth in the warehousing and fulfillment of groceries.

As we discuss in our Industrials Report, robotic automation is set for a seismic change by 2030 and according to Hernan Saenz of Bain, an estimated $10 trillion will be invested in automation by 2030.  The installed base of factory robots is projected to exceed 3.2 million units by the end of 2021, double the level in 2015, according to Rabo Global.  The global market for industrial robotics is forecast to rise from $45 billion in 2020 to $73 billion in 2025.

ROBOTIC AUTOMATION SET FOR SEISMIC CHANGE BY 2030

The robotics industry is entering a period of tremendous growth. Of the 8 million robots forecast to be shipped in 2030, nearly 6 million will be mobile. In addition, the robotics market is “set to transform over the next 10 years.” There will be enormous growth across all sub-sectors, highlighted in a total market valuation of $277 billion by 2030.1

—ABI Research, 2019

1 Sourced from “Massive growth in mobile robots expected as 6 million forecast to be shipped in 2030,” by Sam Francis, December 10, 2019, Robotics and Automation News

Moving Forward

A survey of supply chain executives published on January 13, 2021 by Blue Yonder, found that the share of companies with fully automated fulfilment centers may rise by 50% within a year. And, as Sudarshan Seshadri of Blue Yonder puts it, “Automation is just the table stakes.” The pandemic’s bigger, long-term impact may be a fuller embrace by firms of data their operations generate, and predictive algorithms to help guide real-time decisions. Many companies are using new technologies like digital twin to capture data and resign entire processes, including the design of factories and production lines.  Data mining and analysis technology will change the customer experience in many industries and we will explore that subject in a future blog.

At Cascade, our industrial and technology groups are having real-time conversations with owners and CEOs of business that are experiencing the dramatic shift occurring in their production processes and supply chains.  These companies are updating their business plans to prepare for the fundamental shift occurring due to Industry 4.0 and COVID.  Some are considering an exit to obtain liquidity at strong valuations and others are developing growth strategies to take advantage of the opportunities being created by the chaotic economic environment.  If you would like to learn more about our current activity and near-term outlook for the manufacturing and distribution sector, please contact us for a confidential conversation.