Leveraging the benefits of automation: the next step for Spanish industry

Automation benefits Industry Spanish

Leveraging the benefits of automation: the next step for Spanish industry

Leveraging the benefits of automation: the next step for Spanish industry

A study by the UOC reveals that industrial companies could significantly increase their sales if they were to rethink how they use new technologies

Automated companies are five times more profitable; they generate four times more added value and export up to seven times more than their more conventional competitors. However, despite the obvious advantages of incorporating new technologies into productive processes and delving into the dynamics of the economy 4.0, a study led by Joan Torrent, full professor of Economics and researcher at the Faculty of Economics and Business at the Universitat Oberta de Catalunya (UOC), shows that industrial companies in Spain do not know how to harness the full potential of these new technological tools.

The research contrasted and analysed data from a total of 5,551 industrial companies in Spain over a 25-year period, from 1991 to 2016. The first conclusion shows that value chains in automated companies are more productive than in their non-automated counterparts. In fact, the employees at these companies are 1.4 times more productive than those at companies that do not use automated technology, although this doesn't mean that labour costs have skyrocketed, given that the study also shows that salaries at automated companies are only 1.2 times higher than at those that are not.

Despite these results, one of the study's main conclusions reveals that it's not enough just to invest in new machinery, but that industrial companies also need to know how to harness it and combine different technologies. Consequently, they also need to invest in staff training, which, as Torrent pointed out, represents a significant opportunity cost. He explained: "Technologies can't produce the platform effect by themselves. In other words, they are neither fully nor extensively used by the bulk of the production sector."

The research also verifies one of the consequences of the arrival of machines to industry: staff redundancy. The evolution in employment over the 25 years in question confirms that by automating processes and introducing large quantities of data to guide them leads to a progressive loss of industrial occupations.

To put it plainly, given today's productive climate, Spanish industry has drawn the shortest straw possible when it comes to automation, with thousands of jobs becoming obsolete in a short space of time and without being able to enjoy any of the benefits such as a sustained and significant boost in productivity. However, the researchers have also discovered that the current state of affairs is not the result of an irreversible process and that things could still change, given that, while automation might lead to job losses in the short term, the right combination of technologies can increase employment opportunities and improve quality in the long term.


A snowballing presence

The presence of robots in companies in the Spanish industrial sector is ever greater and has more than doubled over the past 25 years. While in 1991 just 17.7% of companies had some variation of this technology, this percentage had risen to 39.1% in 2016. However, the researchers have highlighted that the deficit in Spanish industry is not so much a question of quantity, but rather the way in which the chosen tools complement each other.

While 4 out of 10 industrial companies employ some kind of automated process, not even 3 out of 10 make the best use of the potential complementarity among the different automated tools. "It's important to understand the idea behind automation technologies as a collection of technologies that interact with each other and stimulate a radical transformation in industrial activity," Torrent said.

The proper use of virtual assistants and controlling processes devised for managing large quantities of data are, for example, some of the areas in which the Spanish industrial sector is showing great room for improvement. As Torrent pointed out: "Industrial companies in Spain, namely SMEs, use assisted automation and numerical control technologies for very preliminary and basic activities, which undoubtedly weakens their potential productivity."

The other side of the coin as exposed by the study is the positive results from investments in control mechanisms based on data. This is the most profitable technology for increasing productivity in a production plant, as the effect it has is particularly complementary to other technologies, such as process automation, and allows for greater flexibility in organization systems.

The study also reminds government of the risks of not fully confronting the challenge of technological transformation towards the fourth industrial revolution. The researchers forewarn that biased public policies could be counter-productive, as they may cause businesses to inaccurately measure the scope of their investments. "Public policies on business acceleration are often highly biased and departmentalized, when in reality the digital transformation needs coordinated, cross-cutting policies," Torrent concluded.

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