Covid-19 and Industrial Automation

This blog is a carefully-researched view on a potential advantage to industry of the ravages wreaked by the Covid-19 virus. All researched views quoted here are referenced and support the main thrust of the argument that the process automation industry will benefit from new and significant investment in automation, post-Covid-19. Many researchers see industry’s increasing investments in process automation, in a post-Covid-19 future, as a fast-growth area but they often generalise across automation technology as “robotics”, including distributed process control systems in that general term. In the quotations included in this article, please read “automation and control systems” where the terms “robotics” is mentioned.

“Historically, depressions have inflamed automation anxiety. Wars, in contrast, often end them. Depressions and anxiety tend to support investment in automation and process control.“ So Carl Benedict Frey wrote in the Financial Times on April 21, 2020 and continued “the second world war brought automation anxiety to an end is that everyone had to work at full capacity to beat the Axis powers. Recessions have the opposite effect: they leave working people with deteriorating job options, making the prospect of being replaced by a robot seem much worse. Unlike the war, Covid-19 requires people to stay at home. Furthermore, with jobless claims rising at record rates and the world economy shrinking, automation anxiety looks set to witness a revival — and with good reason. Coronavirus is likely to accelerate automation.”

The same general concept – of an increase in investment in automation as one result of Covid-19 – is supported from other sources, also. “Thematic Research” reported in March 2020 that “fallout from COVID-19 will focus organisations on the need to automate faster in the medium term, not least to help bridge the productivity gap. Projects like Industrie 4.0 will have an important role to play. It is a pressing task, made all the more urgent by COVID-19. Had business moved with more alacrity and determination when it had the opportunity, it would be in a better position today. Those that missed the boat will have the motivation to prepare themselves better for future crises.” However, the article also wrote that “The virus may serve to accelerate investment in factory automation when the global economy eventually rebounds, but that will take a while.”

So, how and when will this growth in the industrial automation business manifest itself?

Mark Muro, a contributor to The Economist Intelligence Unit, wrote on April 22^nd 2020 that “Less globalisation, more automation: the economic crisis induced by pandemic is likely to encourage a surge of labour-replacing technology. That will be disruptive, unequal and challenging for workers. Workers in developing countries are already jittery with worries ranging from “rebound” outbreaks and lay-offs to the onset of cabin fever. As if workers don’t have enough on their minds, the Covid-19 pandemic is resurfacing another concern: the one about technology’s impact on the future of work. Specifically, recent research suggests that the deepening recession is likely to bring a surge of labour-replacing automation. But what’s the connection between recessions and automation? On the surface, the implacable infiltration of automation into the economy would seem to be a steady, longer-term trend rather than an immediate fact. Likewise, it might seem intuitive that any rise in unemployment in the coming months will make human labour relatively cheaper, thus slowing companies’ move to technology. Yet that’s not actually how automation works. Unfortunately for the workers poised to be affected, robots’ infiltration of the workforce doesn’t occur at a steady, gradual pace. Instead, automation tends to happen in bursts, concentrated especially in bad times such as in the wake of economic shocks when humans become relatively more expensive as firms’ revenues rapidly decline. At these moments, employers can benefit by shedding less-skilled workers and replacing much of what they do with technology, while often investing in higher-skilled workers, which increases labour productivity as a recession tapers off…..Considering that the past decade has seen more automation and artificial intelligence (AI) applications readied for effective use than ever, it seems clear that the next few years will see more rather than less automation as the economy slows.”

Kemal Kilic and Dalia Marin write in “1 VOX  CEPR Policy Portal”, a research-based policy analysis and commentary from leading economists on the 10th May 2020, that “The COVID-19 pandemic has generated enormous uncertainty around the world (Baker et al. 2020). Our current research shows that this increase in uncertainty is leading firms to reassess business models that rely on global supply chains. Instead, they are accelerating robot adoption leading to a renaissance of manufacturing in rich countries.” 

Donald Trump and “America First” have helped to initiate an international move away from global supply chains and towards re-shoring of supply systems and manufacturing. Covid-19 – and, in the UK, Brexit – will exacerbate this trend. A longer-term effect of Covid-19 in all industrial processes will reduce manual operations and drive renewed investment in automated industrial process control systems, controlled on remote screens through Human Machine Interfaces by fewer people. FINNbiz client Silchester Control Systems, working internationally with and in a wide network of clients and partners, offers a flexible service to design and build new systems, to update older systems and for clients with any automation needs. These will emerge increasingly over the next few months as gaps appear in the mists shrouding the future and created by Covid-19, mists which were obscuring industry’s new opportunities. This will accelerate investment into, and the adoption of automated processes, new operating models using fewer manual and socially-distanced processes.