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The Robotics
Revolution
The Next Great Leap in Manufacturing
The Boston Consulting Group (BCG) is a global management consulting firm and the world’s
leading advisor on business strategy. We partner with clients from the private, public, and not-for-
profit sectors in all regions to identify their highest-value opportunities, address their most critical
challenges, and transform their enterprises. Our customized approach combines deep in­sight into
the dynamics of companies and markets with close collaboration at all levels of the client
organization. This ensures that our clients achieve sustainable compet­itive advantage, build more
capable organizations, and secure lasting results. Founded in 1963, BCG is a private company with
82 offices in 46 countries. For more information, please visit bcg.com.
September 2015 | The Boston Consulting Group
The Robotics
Revolution
The Next Great Leap in Manufacturing
Harold L. Sirkin
Michael Zinser
Justin Ryan Rose
2 | The Robotics Revolution
Contents
	 3	 INTRODUCTION
	 6	 THE FORCES BEHIND THE ROBOTICS TAKEOFF
Cost and Performance
Technological Advances
Accessibility for Small Manufacturers
	12	 Industries and Economies Leading the Robotics
		 Revolution
The Impact on Industries
The Impact on Economies
	20	 HOW ROBOTS WILL REDEFINE COMPETITIVENESS
	22	 PREPARING FOR THE ROBOTICS REVOLUTION
	24	 FOR FURTHER READING
	24	 NOTE TO THE READER
The Boston Consulting Group | 3
It has been roughly four decades since industrial robots—with
mechanical arms that can be programmed to weld, paint, and pick
up and place objects with monotonous regularity—first began to
transform assembly lines in Europe, Japan, and the U.S. Yet walk the
floor of any manufacturer, from metal shops to electronics factories,
and you might be surprised by how many tasks are still performed by
human hands—even some that could be done by machines. The
reasons are simple: economics and capabilities. It is still less expen-
sive to use manual labor than it is to own, operate, and maintain a
robotics system, given the tasks that robots can perform. But this is
about to change.
The real robotics revolution is ready to begin. Many industries are reach-
ing an inflection point at which, for the first time, an attractive return on
investment is possible for replacing manual labor with machines on a
wide scale. We project that growth in the global installed base of ad-
vanced robotics will accelerate from around 2 to 3 percent annually to-
day to around 10 percent annually during the next decade as companies
begin to see the economic benefits of robotics. In some industries, more
than 40 percent of manufacturing tasks will be done by robots. This de-
velopment will power dramatic gains in labor productivity in many in-
dustries around the world and lead to shifts in competitiveness among
manufacturing economies as fast adopters reap significant gains.
A confluence of forces will power the robotics takeoff. The prices of
hardware and enabling software are projected to drop by more than
20 percent over the next decade. At the same time, the performance
of robotics systems will improve by around 5 percent each year. As ro-
bots become more affordable and easier to program, a greater num-
ber of small manufacturers will be able to deploy them and integrate
them more deeply into industrial supply chains. Advances in vision
sensors, gripping systems, and information technology, meanwhile,
are making robots smarter, more highly networked, and immensely
more useful for a wider range of applications. All of these trends are
occurring at a time when manufacturers in developed and developing
nations alike are under mounting pressure to improve productivity in
the face of rising labor costs and aging workforces.
To assess the potential impact of the coming robotics revolution on
industries and national competitiveness, The Boston Consulting
Group conducted an extensive analysis of 21 industries in the world’s
25 leading manufacturing export economies, which account for more
than 90 percent of global trade in goods. We analyzed five common
robot setups to understand the investment, cost, and performance of
INTRODUCTION
4 | The Robotics Revolution
each. We examined every task in each of those industries to deter-
mine whether it could be replaced or augmented by advanced robot-
ics or whether it would likely remain unchanged. After accounting
for differences in labor costs, productivity, and mix by industry in
each country, we developed a robust view of more than 2,600 robot-
industry-country combinations and the likely rate of adoption in each.
The following are some of the key findings of this research:
•• Robotics use is reaching the takeoff point in many sectors. The share of
tasks that are performed by robots will rise from a global average
of around 10 percent across all manufacturing industries today to
around 25 percent by 2025. Big improvements in the cost and
performance of robotics systems will be the catalysts. In several
industries, the cost and capabilities of advanced robots have
already launched rapid adoption.
•• Adoption will vary on the basis of industry and country characteristics.
Among high-cost nations, Canada, Japan, South Korea, the UK, and
the U.S. currently are in the vanguard of those deploying robots;
Austria, Belgium, France, Italy, and Spain are among the laggards.
Some economies, such as Thailand and China, are adopting robots
more aggressively than one might expect given their labor costs.
Four industrial groupings—computers and electronic products;
electrical equipment, appliances, and components; transportation
equipment; and machinery—will account for around 75 percent of
robotics installations during the next decade.
•• Manufacturing productivity will surge. Wider adoption of robots, in
part driven by a newfound accessibility by smaller manufacturers,
will boost output per worker up to 30 percent over the medium
term. These gains will be in addition to improvement from other
productivity-enhancing measures, such as the implementation of
lean practices.
•• Savings in labor costs will be substantial. As a result of higher
robotics use, the average manufacturing labor costs in 2025—when
adjusted for inflation and other costs and productivity-enhancing
measures—are expected to be 33 percent lower in South Korea
and 18 to 25 percent lower in, for example, China, Germany, the
U.S., and Japan than they otherwise would have been.
•• Robots will influence national cost competitiveness. Countries that
lead in the adoption of robotics will see their manufacturing cost
competitiveness improve when compared with the rest of the
world. South Korea, for example, is projected to improve its
manufacturing cost competitiveness by 6 percentage points
relative to the U.S. by 2025, assuming that all other cost factors
remain unchanged. High-cost nations—such as Austria, Brazil,
Russia, and Spain—that lag behind will see their relative cost
competitiveness erode.
•• Advanced manufacturing skills will be in very high demand. As robots
become more widespread, the manufacturing tasks performed by
The Boston Consulting Group | 5
humans will become more complex. The capacity of local workers
to master new skills and the availability of programming and
automation talent will replace low-cost labor as key drivers of
manufacturing competitiveness in more industries. There will be a
fundamental shift in the skills that workers will need in order to
succeed in advanced-manufacturing plants.
The right time for making the transition to advanced robotics will
vary by industry and location. But even if that time is several years
away, companies need to prepare now. They must gain a clear under-
standing of the cost dynamics in their global production networks and
develop insight into the robotics trends both in their industries and in
each country in which they manufacture. They must remain constant-
ly up to date with regard to changes in the price and performance of
robotics relative to the cost of human labor, what the competition is
doing, and how the technology is likely to evolve. Perhaps most im-
portant, manufacturers must start developing the workforces, techni-
cal skills, and processes needed to compete in the robotics age—and
ensure that their investments translate into productivity gains and
stronger cost competitiveness.
6 | The Robotics Revolution
THE FORCES BEHIND
THE ROBOTICS TAKEOFF
Industrial robots—machines that can
be automatically controlled and repro-
grammed and that can manipulate objects
and move along three or more axes—were
first introduced in Europe, Japan, and the U.S.
in the 1960s. About 1.4 million industrial
robots are in use around the world today.
Yet even in many high-cost economies, the
use of robots has remained limited in most
industries. In Italy, for example, only one-half
of 1 percent of tasks have been automated in
the chemical and primary-metals industries,
though around 14 to 16 percent could be au-
tomated today. Adoption rates have also re-
mained surprisingly low in industries that
long have been at the forefront of automa-
tion. Fewer than 8 percent of tasks in the U.S.
transportation-equipment industry are auto-
mated, for example, compared with a poten-
tial of 53 percent. The global installed base
for robots has been growing by around 2 to 3
percent annually for around a decade—
roughly in line with growth in manufacturing
output.
The use of industrial robots is also highly
concentrated. Nearly three-quarters of all
robots operate in just four industrial
groupings: computers and electronic
products; electrical equipment, appliances,
and components; transportation equipment;
and machinery. What’s more, 80 percent of
the robots sold each year are deployed in just
five countries: China, Germany, Japan, South
Korea, and the U.S. And because robotics
systems have historically been so expensive
to own and operate, they are found mainly in
large factories owned by corporations with
big capital budgets.
A dramatic takeoff in
advanced robotics is
imminent.
A number of economic and technical barriers
to wider adoption are beginning to fall, how-
ever. As a result, a dramatic takeoff in ad-
vanced robotics is imminent. We expect that
growth in the installed base of robotics will
accelerate to around 10 percent annually
during the next decade, by which time instal-
lations will surpass 4 million. (See Exhibit 1.)
Annual shipments of robots will leap from
around 200,000 units in 2014 to more than
500,000 by 2025 according to our baseline
projection, and to more than 700,000 in a
more aggressive scenario. Even so, we project
that, by 2025, those installations will repre-
sent only about one-quarter of all manufac-
turing tasks and far less than that amount in
other industries and major manufacturing
economies. The growth potential over the
long term, therefore, should remain immense.
The Boston Consulting Group | 7
Three major trends are speeding global in-
dustries toward an inflection point at which
advanced industrial robots will become much
more commonplace. That point will be char-
acterized by greater cost-effectiveness for ro-
bots when compared with human labor, tech-
nological advances that are wiping out
barriers to adoption in key sectors, and the
arrival of systems that smaller manufacturers
can afford and easily use.
Cost and Performance
For many organizations, the biggest reason for
not replacing manual labor with robots is
purely economic. We believe that most orga-
nizations begin to ramp up their investment
in automation when the cost of employing hu-
man labor rises high enough above the cost of
owning and operating robotics systems to
make human labor less cost-effective. We
have assumed conservatively that this point is
reached when the cost of human labor be-
comes 15 percent higher than the cost of ro-
botics labor. Yet even with the relentless rise
in wages around the world, the gap remains
wide enough to prevent mass deployment.
The economics of advanced robotics are im-
proving rapidly, however. For example, the to-
tal cost of purchasing and deploying a robotics
system for spot welding in the U.S. automotive
industry plunged from an average of $182,000
in 2005 to $133,000 in 2014 (not adjusted for
inflation). By 2025, the total cost is projected to
drop by approximately another 22 percent, to
around $103,000. The prices of robotics hard-
ware and software, which account for only
one-quarter of that total cost, are around 40
percent lower than they were a decade ago.
The cost of systems engineering—which in-
cludes installing, programming, and integrat-
ing a robotics system into a factory—has de-
clined even more. Ten years ago, the average
systems-engineering costs of a spot-welding ro-
bot amounted to $81,000. Those costs are now
down to around $46,000, on average, and are
likely to keep dropping for the rest of the de-
cade. The costs of peripheral equipment—
such as sensors, displays, and expensive safety
structures that protect workers and that to-
gether typically cost more than the robots
themselves—are plunging as well. (See Exhibit
2.) In fact, safety barriers may not be required
at all for many next-generation robots.
0
2
4
6
8
2007 2010 2013 2016 2019 2022 2025
GLOBAL STOCK OF OPERATIONAL ROBOTS, BY INDUSTRY
Actual global operational stock Aggressive projection Low projectionBaseline projection
Actual Projected
Units (millions)
Sources: International Federation of Robotics; BCG analysis.
Note: Market size is estimated from an evaluation of jobs within U.S. industries that may be automated, and the estimate is then extended to
global manufacturing output by industry.
Exhibit 1 | Global Robotics Installations Will Increase by About 10 Percent Annually Over the
Coming Decade
8 | The Robotics Revolution
At the same time that costs have been declin-
ing, the performance of robotics systems has
been improving by around 5 percent per year.
Taken together, the changes in price and per-
formance for spot welding, for example, have
been translating into an annual 8 percent im-
provement in the cost of robotics. To put this
into perspective: an investment of $100,000
today buys a robotics system that is capable of
performing more than twice as much work as
a robotics system costing the same amount a
decade ago. This pace of improvement in
price and performance is expected to be sus-
tained for the foreseeable future.
Robotics systems are thus becoming an eco-
nomically viable alternative to human labor
in more and more industries. A human weld-
er today earns around $25 per hour (includ-
ing benefits), while the equivalent operating
cost per hour for a robot is around $8 when
installation, maintenance, and the operating
costs of all hardware, software, and peripher-
als are amortized over a five-year deprecia-
tion period. In 15 years, that gap will widen
even more dramatically. The operating cost
per hour for a robot doing similar welding
tasks could plunge to as little as $2 when im-
provements in its performance are factored
in. (See Exhibit 3.)
Other industries are quickly approaching
inflection points. The U.S. electronics and
electrical-equipment manufacturing
industries currently deploy about 3,300
industrial robots, many of them relatively
basic and designed to perform simple tasks.
But manufacturers are in the process of
adding more versatile—and more
expensive—robots to take on increasingly
complex tasks. Today, the cost of a “generic”
robotics system—which has a high degree of
flexibility and thus can take on many
different types of work—is around $28 per
hour. By 2020, this cost is projected to fall to
less than $20 per hour, which would be below
the average human worker’s wage. This will
enable a significant increase in the number
of tasks that can be automated. We estimate
that, as a result, the percentage of tasks
Project management
Has consistently been 5–10 percent
of total system costs; absolute
costs are expected to decline
Systems engineering
(such as programming, installation)
Cost reductions are expected to slow
because possible gains in offline
programming have mostly
been achieved
Peripherals
(such as safety barriers, sensors)
Costs will continue to drop as a
result of the removal of safety
barriers
Robot
(including soware)
Minimal declines are expected because
pricing is close to material costs, and
production volume for the auto
industry is already high
55
43
33 30 28
33
40
45
40 36
81
62
46
39
33
13
11
9
0
50
100
150
200
2010
155
2005
103
7
2020
117
8
2014
133
Cost ($thousands)1
–22%
2025
Projected
TOTAL SYSTEM COSTS OF A TYPICAL SPOT-WELDING ROBOT
IN THE U.S. AUTOMOTIVE INDUSTRY
182
FUTURE COST TRENDS
Sources: ABB, Economic Justification for Industrial Robotic Systems, 2007; International Federation of Robotics, World Robotics: Industrial Robots;
expert interviews; BCG analysis.
Note: Because of rounding, not all numbers add up to the totals shown.
1
Values are in nominal U.S. dollars.
Exhibit 2 | While the Costs of Advanced Industrial Robots Fall, Their Performance Is Steadily
Improving
The Boston Consulting Group | 9
handled by advanced robots will rise from 8
percent today to 26 percent by the end of the
decade.
Some industries will be slower to adopt. In
furniture manufacturing, where tasks remain
more difficult to automate, the economic pay-
off of using robots is still a number of years
away. Based on our estimates, the adoption of
robots in that industry won’t begin in earnest
until 2020; and it will be near the end of the
next decade before even 10 percent of tasks
are automated.
Technological Advances
The technical capabilities of most industrial
robots today are still quite limited. Tradition-
al robots are rigid: they are fixed in the same
location and can handle only objects that are
of a uniform size, oriented in a predictable
way, and moving at a determined speed. Most
can process images and detect features on ob-
jects, but they lack the logic capabilities to
make decisions about those objects.
What’s more, heavy and expensive safety de-
vices have been required to protect workers
from robots in operation. Robots are typically
found isolated in the corner of a work envi-
ronment, performing tasks that are highly re-
petitive and require consistency and accuracy
or tasks that are hazardous to humans. If the
robots are mobile, collision avoidance sys-
tems are often necessary as well. Such imped-
iments have greatly narrowed robots’ useful-
ness for many industrial applications.
Thanks to leaps in technology, however, ad-
vanced robotics systems can now perform
tasks and work in environments that are far
less structured. As costs drop, companies can
afford to buy robots with arms that rotate
freely, giving them more flexibility to handle
objects and enabling them to deal with ob-
jects whose dimensions, features, and proper-
ties vary. Robots also have more sophisticated
sensors to see and feel objects and can be
more quickly and easily reprogrammed to
perform different tasks. Advanced robots are
more “intelligent” as well. They can apply
0
10
20
30
40
Wages and operating costs adjusted
for price and performance ($/hour)
2030202520202015
2023
AUTOMOTIVE FURNITURE3
ELECTRICAL EQUIPMENT
Robot (generic)2
Electrical wages
Robot (automotive)1
Southern U.S. auto wages
2013 industrial-robot
shipments (units)
10,320
2013 industrial-robot
shipments (units)
3,328
2013 industrial-robot
shipments (units)
23
2018
0
10
20
30
40
2030202520202015
Wages and operating costs adjusted
for price and performance ($/hour)
0
10
20
30
40
2030202520202015
Wages and operating costs adjusted
for price and performance ($/hour)
Robot (generic)2
Furniture wages
Sources: U.S. Bureau of Labor Statistics; Industrial Federation of Robotics, World Robotics: Industrial Robots; expert interviews; BCG analysis.
Note: Assumes an 8 percent rate of improvement in price and performance. Hourly rates for labor include benefits and overhead, an increase of
about 50 percent over base hourly pay. All values shown in nominal 2014 U.S. dollars.
1
The cost is for a typical spot-welding robot system in the U.S. automotive industry.
2
An example of a generic robotics system is ABB’s IRB 2400.
3
Includes other wood products.
Exhibit 3 | Robotics Are Already an Economically Viable Alternative to Human Labor in Many
U.S. Industries
10 | The Robotics Revolution
logic to make decisions about objects, judge
quality, and receive and provide feedback to
other parts of a production system through
information technology. Special safety barri-
cades are not required for many advanced ro-
bots, which means that they can work side-
by-side with humans. Even some very low-
cost robots can work together with humans to
complete their collective tasks.
Improvements are driving
wider adoption by small and
midsize manufacturers.
These capabilities have greatly expanded the
utility of robots in a range of industries. Meat
processing is one good example. Cutting and
trimming meat is very challenging for tradi-
tional robots because the pieces of meat
come in different shapes, and their properties
can vary significantly. One German company
has solved this problem with a 3D visual-
inspection system that enables advanced ro-
bots to trim and cut.
One traditional obstacle to wider robotics
use in the fabricated-metals industry has been
the difficulty of translating computer-aided-
design drawings for complex jobs, such as
grinding a gear to remove burrs and other de-
fects, into instructions for a robot. Computer-
aided-manufacturing software tools such as
Robotmaster, by Jabez Technologies—which
integrates robot programming, simulation, and
code generation—make doing so much easier.
Electronics manufacturing has presented spe-
cial challenges for automation. Robots are of-
ten used to place components onto flat sur-
faces, such as circuit boards, for example. But
it has been difficult to design a robot that can
install very small parts, such as connectors, at
odd angles with high degrees of precision and
at very high speeds—the abilities necessary
to build an automotive battery, for instance.
As a result, the industry remains quite labor
intensive. But there is progress: Japanese ro-
botics giant Fanuc has demonstrated a high-
speed robot that rotates along six axes and
has the dexterity to perform such tasks.
Most advanced robots can be quickly repro-
grammed for new jobs, giving manufacturers
the flexibility to produce small batches of
customized products without additional capi-
tal investment. Wiring accessory manufactur-
er ABB Elektro-Praga, for example, needed to
increase throughput at its factory in the
Czech Republic. The company wanted ma-
chines that could pick parts from a bin and
orient them properly for assembly, a task that
conventional robots could not perform at
high speed and with precision. It also wanted
robots that could work on different product
configurations with minimal adjustment.
ABB Elektro-Praga installed several of ABB’s
IRB 140 robots on a new assembly line linked
to a vision system equipped with digital cam-
eras. The vision system enables the robots to
orient parts and place them at a cycle time of
2.3 seconds per electrical socket, for example.
It takes only 10 minutes to adjust the system
to pick and place parts for different products,
which are often changed up to 30 times each
week. As a result of the new system, ABB
Elektro-Praga says that it has boosted
throughput of each shift by a factor of about
nine. Only one worker is required to oversee
the entire robotics assembly line.
Accessibility for Small
Manufacturers
The steady improvements in cost, perfor-
mance, and functionality of robotics systems
are driving another force in the next manu-
facturing revolution: the wider adoption of
robots by small and midsize manufacturers.
Until recently, such systems have been pro-
hibitively expensive and overly complex for
enterprises with limited capital budgets and
engineering resources.
The new generation of innovative systems is
putting robots within the financial reach of
small enterprises. Universal Robots, for exam-
ple, markets the UR5, an industrial robot that
is designed for material handling and assem-
bly and has a base price of $34,000. Its two
arms rotate along six axes, resulting in re-
markable flexibility for a machine of that
price. By our analysis, the total cost of install-
ing such low-cost generic robots can range
from $50,000 to $100,000 when accounting
for associated costs and the project manage-
The Boston Consulting Group | 11
ment required to make it all come together.
Universal says that the average cost of install-
ing the UR5 is around $50,000. Two of Re-
think Robotics’ robots—Baxter and the com-
pany’s high-performance robot, Sawyer—are
designed for precision applications, such as
machine tending and circuit board testing.
Each costs around $40,000, including accesso-
ries, warranties, and installation. Because
they can be redeployed quickly and easily
across multiple product lines, the Rethink ro-
bots can be used in high-mix environments
that are impractical for conventional industri-
al robots.
In addition to their low cost, the UR5 and Re-
think robots can easily be moved by hand
and repurposed by workers with no program-
ming experience. They can safely work next
to humans on the same production line with-
out expensive barricades or other protective
equipment, eliminating a major cost associat-
ed with conventional industrial robots.
RSS Manufacturing & Phylrich—a Costa
Mesa, California, manufacturer of high-end
plumbing fixtures and faucets with 72 em-
ployees—illustrates how such machines can
pay off for even small and midsize manufac-
turers. The company wanted an inexpensive
automation solution that could easily be
moved to perform different production tasks
in the factory, so it purchased a UR5. One of
the robot’s first jobs was to help fill an order
to make 700 valves a month. With its existing
computer-numerical-control milling machine,
the company could produce only 400 valves a
month with two work shifts. By using the
UR5 robotic arm to feed parts into and re-
move them from the milling machine around
the clock, RSS was able to fill the order in 11
days while increasing production capacity by
30 percent. By using the UR5 for another
job—to feed tubes into a bending machine—
the company was able to produce 1,500 piec-
es in four hours, a task that otherwise would
have taken two to three days. The company
estimates that it achieved a return on its in-
vestment in a few months.
As economic and technical barriers continue
to fall, robots are becoming accessible for
more companies. The production efficiencies
will spread beyond individual factories
through entire supply chains, industries, and
national economies.
12 | The Robotics Revolution
Industries and
Economies Leading the
Robotics Revolution
For the past few decades, the scramble
for competitive advantage in manufactur-
ing has largely revolved around finding new
and abundant sources of low-cost labor.
Rapidly rising wages in most big emerging
markets are bringing the era of easy gains
from labor cost arbitrage to a close. A little
more than a decade ago, for example, Chi-
nese labor costs were around one-twentieth
of those in the U.S. Today—after accounting
for productivity, logistics, and other costs—
the manufacturing cost gap between China
and the U.S. has nearly disappeared for many
products that are sold in the U.S. (See U.S.
Manufacturing Nears the Tipping Point: Which
Industries, Why, and How Much?, BCG Focus,
March 2012.)
As a result, manufacturers the world over are
under intensifying pressure to gain advantage
the old-fashioned way: by improving their
productivity. This imperative came through
loud and clear in our 2014 BCG Global Manu-
facturing Cost-Competitiveness Index, which
revealed changes in direct manufacturing
costs of the world’s 25 leading manufacturing
export economies from 2004 to 2014. In the
economies where cost competitiveness im-
proved or held steady during that period—
such as Mexico, the Netherlands, the UK, and
the U.S.—productivity growth largely offset
increases in such direct costs as wages and
energy. Economies whose productivity did
not keep pace with rising costs—including
Australia, Brazil, China, and most countries of
Western Europe—either lost ground in man-
ufacturing cost competitiveness or faced in-
creasing pressure. (See The Shifting Economics
of Global Manufacturing: How Cost Competitive-
ness Is Changing Worldwide, BCG report, Au-
gust 2014.)
Even though the shift toward automation has
been a driver of productivity improvement
for decades, advanced robots will help to ac-
celerate this trend and will boost productivity
even further in a number of ways. Robots can
complete many manufacturing tasks more
efficiently, effectively, and consistently than
human workers, leading to higher output
with the same number of workers, better
quality, and less waste. Robots will free up
skilled workers to focus more of their time on
higher-value tasks. Because advanced robots
often can perform many tasks autonomously,
moreover, they can keep working through the
night as human workers sleep, in effect serv-
ing as a third production shift.
To estimate the potential productivity gains
from wider adoption of robots, we calculated
the savings in total manufacturing labor costs
over the next decade under the conservative
assumption that machines will perform at
least one-quarter of the manufacturing tasks
that can be automated, compared with a
global average of around 11 percent today.
We adjusted our model for differences in ro-
The Boston Consulting Group | 13
botics adoption rates by economies and in-
dustries, as well as projected increases in fac-
tory wages.
We estimate that, as a direct result of install-
ing advanced robots, and depending on the
location, output per worker in manufacturing
industries will be 10 to 30 percent higher in
2025 than it is today. This increase will be
over and above the productivity gains that
can be expected to come from other mea-
sures, such as lean production practices and
better supply-chain management. The impact
on cost is likely to be just as dramatic. We es-
timate that, because of wider robotics use,
the total cost of manufacturing labor in 2025
could be 16 percent lower, on average, in the
world’s 25 largest goods-exporting economies
than they would be otherwise.
All manufacturers and economies will not
share these benefits equally, however, be-
cause adoption rates of advanced robotics
will vary sharply. The basic economic trade-
off between the cost of labor and the cost of
automation will continue to be a primary
consideration. So will the technical capabili-
ties of machines to replace manual labor. La-
bor laws, cultural barriers to substituting ma-
chines for humans, the availability of capital,
the foreign-investment-policy environment,
and the age and skill levels of workers are
also important considerations.
To get a fuller picture of advanced robotics’
potential to boost productivity, therefore, it is
important to assess the opportunities and
challenges industry by industry and economy
by economy.
The Impact on Industries
Two key considerations will heavily influence
how widely robots are deployed in industries.
How cost-effective is it to substitute machines
for human labor? And how easy is it to auto-
mate production tasks? (See Exhibit 4.)
Manufacturing industries in which labor ac-
counts for the highest portion of costs are gen-
erally the most likely candidates for automa-
tion, although it will be more challenging for
some industries than others. Labor costs
range from around 15 percent of production
costs in typical chemical, food-product, and
steel plants to approximately 30 percent in ap-
–40 – 20 0 20 40
Textile products
Yarns and fabrics
Beverage and
tobacco products
Food
Wood
products
Electrical equipment,
appliances, and components
Computer and
electronic products
Machinery
Fabricated metals
Primary metals
Nonmetallic mineral products
Plastics and rubber products
Chemicals
Printing
PaperLeather
Apparel
Deviation from global average manufacturing wage (%)
Miscellaneous
Furniture
Transportation
equipment
Most likely to lead global adoption
Laggards Technologically limited
Highly
automatable1
Limited ability
to automate
Adoption in high-wage economies only
Ability to
automate
based
on currently
available
technology
Sources: U.S. Bureau of Labor Statistics, “International Labor Comparison of Hourly Compensation Costs in Manufacturing Industries, 2012”; BCG
analysis.
Note: Petroleum and coal manufacturing are not depicted because of a high and variable wage premium, consistent with immovable, resource-
intensive industries.
1
These are defined as occupational tasks that have the potential to be replaced with advanced robotics.
Exhibit 4 | Some Industries Are More Likely to Benefit from Robotics Because of High Wages
and Automatable Tasks
14 | The Robotics Revolution
parel, furniture, fabricated-metals, electronics,
and printing facilities. Location is also import-
ant, of course. Industries concentrated in a
low-cost economy—such as India, where man-
ufacturing wages adjusted for productivity
averaged $5.25 per hour, with benefits,
in 2014—will be less likely to adopt automa-
tion than those based in a high-cost economy,
such as Australia, where hourly productivity-
adjusted labor costs average $55.70. But there
are also major cost differences among indus-
tries. Whether manufacturing for the petro-
leum and coal production industries takes
place in a high-cost economy or a low-cost
one, for example, the median wage is about
double that for all manufacturing industries.
In the apparel industry, wages are 32 percent
lower, on average.
Some industries have tasks
that simply are not robot
friendly.
The technical limits of wider robotics use will
also vary by industry. Each industry has its
own set of job roles—such as material
handlers, welders, assemblers, and quality
inspectors—and each role has its own set of
tasks. Some of these tasks are potentially
automatable, while others are not. Further-
more, different production tasks call for
different robotics functions—some of which
will require more expensive robotics systems
than others. A machine that simply lifts
materials of the same shape and size from
one place and moves them to another may be
far less costly than one able to visualize and
feel nonuniform materials. What’s more,
some industries have tasks, such as picking
up pieces of cloth to be sewn into apparel,
that simply are not robot friendly and there-
fore will likely be done, for the most part, by
workers in low-cost locations for at least the
near to medium term. The growth potential
of robots in these industries is more limited.
If a way could be found to automate such
processes, however, robotics could transform
the clothing industry from one in which
manufacturing is done globally to one that is
more local.
We calculated the costs of robotics for 21 in-
dustries by aggregating all of the production
tasks and types of robots required by those
industries. We then adjusted those costs for
expected improvements in performance and
projected them over ten years. Finally, we
amortized the investment in robotics systems
over five years to arrive at a cost per hour in
U.S. dollars and compared that amount with
the projected labor costs in each economy.
On the basis of these cost-performance pro-
jections and automatable tasks, we developed
estimates for robot adoption for the next de-
cade in each of the 21 industries.
The four industry groups that currently ac-
count for the vast majority of global robot
use will remain in the vanguard: computers
and electronic products; electrical equipment,
appliances, and components; transportation
equipment; and machinery. (See Exhibit 5.)
According to our projections, these four in-
dustry groups will account for around 75 per-
cent of robot installations globally through
2025. (See Exhibit 6.) Currently, at least 85
percent of the production tasks in these in-
dustries are automatable. Most tasks involv-
ing assembly and the tending of machines,
for example, are highly repetitive and involve
rigid materials, so they can be performed by
relatively basic robots. Wages in these indus-
tries are also relatively high because many
tasks require highly skilled workers. Global
wages in the transportation and computer in-
dustries, for example, are roughly 20 percent
higher than average global manufacturing
wages.
As a result, in many economies, investments
in robotics systems in these industries are
likely to generate a return on investment in
the near term. Robotics systems currently
cost around $10 to $20 per hour, on average,
to own and operate in the U.S. in these sec-
tors—already below the cost of human la-
bor—and will decline further over the next
decade. We project, therefore, that robots will
perform 40 to 45 percent of production tasks
in each of these industries by that time, com-
pared with fewer than 10 percent today.
In another cluster of industry groups, robots
will most likely be adopted in high-wage econ-
omies in the near term, and wider adoption
The Boston Consulting Group | 15
INDUSTRY RATIONALE AND IMPLICATIONS
Computers and electronic products
Electrical equipment, appliances, and components
Transportation equipment
Machinery
Plastics and rubber products
Miscellaneous
Petroleum and coal products
Primary metals
Chemicals
Nonmetallic mineral products
Wood products
Paper
Fabricated metals
Food
Textile mill products
• More than 85 percent of production tasks within the industry are
identified as potentially automatable
• High manufacturing wages in the industry will lead to economical
adoption in most economies
• Will reach near saturation in the late 2020s
• Limited penetration today; high percentage of automatable tasks
• Moderate factory wages
• Likely to be adopted only in high-wage economies in the near term;
future decreases in the cost of robotics will drive further adoption
• Materials are typically ill suited for manipulation by robots; current
technology limits robots to a few tasks
• Low manufacturing wages
• Significant future adoption will require low-cost solutions or
technological breakthroughs
Actual Projected
100
80
60
40
20
0
20252024202320222021202020192018201720162015201420132012
GLOBAL STOCK OF OPERATIONAL ROBOTS, BY INDUSTRY1
Plastics and rubber products
Other
Food
Chemicals
Miscellaneous
Petroleum and coal products
Primary metals
Computers and electronic products
Machinery
Electrical equipment, appliances, and components
Transportation equipment
%
Industry leaders in adopting robotics
Sources: OECD STAN Bilateral Trade Database; BCG analysis.
Sources: International Federation of Robotics; BCG analysis.
1
Includes the current stock of robots and changes by shipment volume that add to the operational stock of robots. Historical trends indicate that
around 60 percent of all shipments add to operational stock while the remainder are replacement purchases. The analysis assumes that the
fraction adding to the operational stock will remain constant through the next decade.
Exhibit 5 | Four Industries Will Lead the Adoption of Advanced Industrial Robots
Exhibit 6 | Four Industries Will Account for About 75 Percent of Robotics Installations by 2025
16 | The Robotics Revolution
will occur as the costs and performance of sys-
tems improve. These groups include plastics
and rubber products; petroleum and coal
products; and primary metals. We project that
robots will perform 10 to 20 percent of tasks
in these industries globally by 2025. Econom-
ics will be the main limitation. Although
around 86 percent of tasks in plastics and rub-
ber-products plants can be automated—such
as material handling, assembly, welding, and
machine operation—manufacturing wages
are expected to remain relatively lower. This
will limit the financial benefits of automation,
especially in low-wage emerging markets.
A number of industries will remain a poor fit
for robots in the near term. Chemicals, wood
products, paper, fabricated metals, food pro-
cessing, and textile products are prominent
examples. We project that robots will per-
form only about 1 to 5 percent of tasks in
these industries a decade from now. Global
manufacturing wages in these industries are
low because they tend to have a smaller por-
tion of automatable jobs and because the
economic trade-offs don’t justify broad robot-
ics adoption, at least for now.
Over the next decade, five
countries will account for 80
percent of robot shipments.
Technical impediments to widespread robot
use also exist in certain industries. As men-
tioned previously, the biggest hurdles for ma-
chines in apparel manufacturing are the abili-
ties to pick up single pieces of cloth and then
align them so that they can be cut and fed
through a sewing machine—tasks that are
still better done by humans. As a result, the
hourly cost of owning and operating a robot
in a U.S. apparel, textile, chemical, or paper
plant ranges from around $40 to $47. By 2025,
that cost is projected to drop to around $20 to
$25 per hour, which would still not be com-
petitive with labor in apparel factories in
many countries. In other industries, many of
the tasks that can be automated—such as
handling heavy or hazardous materials—are
already performed by machines.
The Impact on Economies
Robotics will penetrate the manufacturing
sector to different degrees in different econo-
mies as well. The mix of industries in each
economy will be one of the variables in as-
sessing robot penetration. Another will be
regulations that make it difficult and very ex-
pensive for companies to replace workers;
economies with such regulations will proba-
bly adopt robotics at lower rates. Other vari-
ables include the cost, supply, and flexibility
of labor and the availability of investment
capital.
On the basis of these factors and current
trends, our projections show that five coun-
tries—China, the U.S., Japan, Germany, and
South Korea—will account for around 80 per-
cent of robot shipments over the next decade;
China and the U.S. alone will account for
around half of those shipments. (See Exhibit 7.)
We found that industries in certain econo-
mies are embracing robots much more ener-
getically than we would expect, given the un-
derlying economic factors. In other econo-
mies, robotics adoption is lagging even
though the economic rationale for automa-
tion seems compelling.
To get a sense of who is in the vanguard, we
analyzed the world’s 25 biggest manufactur-
ing export economies. These economies,
which account for around 90 percent of goods
exports, are included in the 2014 BCG Global
Manufacturing Cost-Competitiveness Index.
We grouped these economies into four cate-
gories of robotics adopters: aggressive, fast,
moderate, and slow. (See Exhibit 8.)
Aggressive Adopters. Indonesia, South Korea,
Taiwan, and Thailand have been installing
more robots than would be expected given
these economies’ productivity-adjusted labor
costs. South Korea, for example, is installing
robots at a pace that is about four times the
global average. As a result, robots in South
Korea are projected to perform around 20
percent of tasks—considered the takeoff
point for adoption—by 2020 and 40 percent
of tasks by 2025. Thailand’s manufacturing
sector is installing robots at around the same
pace, while companies in Taiwan and Indone-
sia are installing them at about twice the rate
The Boston Consulting Group | 17
0
20
40
60
80
100
Total robot
shipments (%)
2025202420232022202120202019201820172016201520142013201220112010
PredictedActual
Mexico
Other
Taiwan
Australia
Brazil
Thailand
France
Italy
Canada
Russia
UK
South Korea
Germany
Japan
U.S.
China
TOP FIVE (%) 79 77 76 78 80 81 83 83 84 84 84 83 83 81 80 77
112 151 146 163 200 250 300 350 400 450 500 550 550 500 500 450
UNITS
(THOUSANDS)
ADOPTION
CATEGORIES
ECONOMIES
Japan U.S.UKChinaCanada Russia
South Korea Taiwan ThailandIndonesia
Italy SwitzerlandSwedenNetherlandsFranceBelgiumAustria Brazil India Spain
GermanyAustralia Czech Republic Mexico Poland
FAST
MODERATE
SLOW
AGGRESSIVE
Sources: International Federation of Robotics; BCG analysis.
Sources: The Economist Intelligence Unit; Organisation for Economic Co-operation and Development; The Fraser Institute; ETUI’s website
www.worker-participation.eu; Ius Laboris; L&E Global; Thomson Reuters Practical Law; BCG analysis.
Exhibit 7 | Five Economies Will Account for Nearly 80 Percent of Robot Shipments Through 2025
Exhibit 8 | Major Goods-Exporting Economies Follow Four General Patterns of Robotics
Adoption
18 | The Robotics Revolution
of average economies. In developing econo-
mies, such as Indonesia, one motive for
installing robots faster than might seem
warranted is to help factories achieve the
same quality standards as those in developed
economies. If these trends continue, robots in
some developing economies will perform
around 50 percent of tasks by 2025, and
adoption will reach the traditional market-
saturation point for technology—approxi-
mately 60 percent—in 15 to 20 years.
Robots in some developing
economies will perform 50
percent of tasks by 2025.
The high adoption rate is partly explained by
the fact that all four economies are experienc-
ing higher-than-average wage growth, have
some of the lowest unemployment rates in
the world, and have workforces that are aging
fast. South Korea has even launched a new
five-year plan to expand its intelligent-robot
industry and promote widespread adoption.
The plan calls for $2.6 billion in public and
private investment; a tripling of annual reve-
nues, to $7 billion; and $2.5 billion in annual
exports by 2018. Forward-looking businesses,
therefore, are investing in robots when they
build new capacity. What’s more, workers can
be dismissed with relatively little severance
pay under current labor regulations, making it
easy to replace humans with robots in these
aggressive-adopter economies.
Fast Adopters. Canada, China, Japan, Russia,
the UK, and the U.S. are all witnessing rapid
adoption that is in line with their economic
outlook. As mentioned earlier, industries
generally ramp up automation when using
robots becomes 15 percent cheaper per hour
than employing humans. We project that
robots in some of these economies will
perform 30 to 45 percent of tasks by 2025 and
that adoption will reach the saturation point
in 20 to 25 years.
Manufacturers in the fast-adopter economies
often incur limited costs when dismissing em-
ployees. Government approval typically is not
required for layoffs, although some econo-
mies, such as China, are starting to toughen
their policies. Severance benefits, if required
at all, usually range from two days to one
month per year of service. Most fast-adopter
economies also have relatively high labor
costs, when adjusted for productivity, and sev-
eral economies have rapidly aging workforces.
Nevertheless, companies in China are install-
ing robots in new factories even though wag-
es in most of China remain relatively low.
This may be because companies anticipate
that the rapid rise in Chinese wages over the
past decade will continue for the foreseeable
future. They could also be anticipating that
skill shortages in several provinces will wors-
en. In fact, robot purchases in China rose par-
ticularly sharply in 2013, when it more close-
ly fit the pattern of an aggressive adopter.
In that year, robot shipments increased by
59 percent—to 37,000 units—far outpacing
China’s 11 percent expansion in manufactur-
ing output and 6 percent growth in hourly
productivity-adjusted wages. If China contin-
ues on this more aggressive adoption path,
average total labor costs in manufacturing
could be 30 percent lower in 2025. If it re-
mains a fast adopter, however, costs are ex-
pected to be 24 percent lower.
Moderate Adopters. Australia, the Czech
Republic, Germany, Mexico, and Poland are
installing robots at a measured pace that is
in line with those countries’ economic
growth. Industries are ramping up automa-
tion investment more moderately than fast
adopters when they reach the inflection point
of 15 percent cost savings over workers.
Robots are expected to perform 30 to 35
percent of tasks by 2025, and adoption is not
likely to reach market saturation before 2035,
at the earliest.
Labor regulations that require employers to
justify work dismissals and disburse severance
pay slow down robot adoption. Restrictions
on foreign ownership and government control
over market interest rates in several econo-
mies also deter investment in automation.
Slow Adopters. Austria, Belgium, Brazil,
France, India, Italy, the Netherlands, Sweden,
Spain, and Switzerland are installing robots
The Boston Consulting Group | 19
at the slowest rate among the top 25 manu-
facturing export economies. This is despite
the fact that, with the exception of India,
these nations have some of the highest labor
costs, when adjusted for productivity. They
also have aging workforces and are expected
to face serious skill shortages. If this trend
continues, robots will perform at most 15
percent of tasks by 2025, and it will take
several decades to reach market saturation.
This will make it harder for the slow adopters
to compete with the faster ones.
Regulations in some economies that prohibit
replacing workers with robots are among the
biggest barriers to automation. Companies
must often negotiate with governments to
dismiss workers and then must pay high sev-
erance packages to those former employees—
in some cases equal to more than two years
of wages. In India, for example, companies
with more than 100 employees require per-
mission from the ministry of labor and em-
ployment to fire someone. This lack of flexi-
bility not only hinders the automation of
existing factories, it also discourages new
long-term capital investment in production
facilities. In other economies, heavy govern-
ment control of interest rates and restrictions
on foreign ownership and investment are ad-
ditional deterrents to slow adopters.
These differences in robotics adoption may
seem small and less noticeable now. But over
time they are likely to lead to significant gaps
in productivity gains and manufacturing
costs among leading export economies—es-
pecially as more and more industries reach
the inflection point and investment in robots
accelerates. Indeed, we believe that as wage
gaps between low-cost and high-cost econo-
mies continue to narrow, robot adoption
could emerge as an important new factor
that will contribute to redrawing the compet-
itive balance among economies in global
manufacturing.
20 | The Robotics Revolution
HOW ROBOTS
WILL REDEFINE
COMPETITIVENESS
To understand the likely winners and
losers in the robotics revolution, we
estimated the impact that projected robotics-
adoption rates would have on productivity
and labor costs in each of the 25 leading
manufacturing export economies, given their
mix of industries. (See Exhibit 9.)
In many cases, the impact on cost competitive-
ness will be dramatic. According to our
projections, the biggest beneficiaries will be
manufacturers in South Korea, where the
combined cost of human labor and robotics in
2025 will be an estimated 33 percent lower
than it would be without greater robotics
adoption. That is double the average cost
reduction estimated across all 25 economies—
and should give South Korea a real advantage.
We estimate that labor costs will be around
25 percent lower in Japan, 24 percent lower
in Canada, 22 percent lower in the U.S., 21
percent lower in Germany and the UK, 20
percent lower in Australia, and 18 percent
lower in China and the Czech Republic.
Economies that are expected to adopt robot-
ics relatively slowly will see far less impres-
sive cost reductions. We project that robots
will lower costs by just 3 percent in Mexico
and will have negligible influence on labor
costs in India and Indonesia, where manufac-
turing wages are expected to remain very low
through 2025.
The savings from advanced robots will also
be modest in a number of developed econo-
mies that already suffer from a combination of
relatively high wages, low productivity, tight
labor markets, and labor restrictions. In
France, Switzerland, Belgium, Italy, Russia,
Sweden, Austria, the Netherlands, Brazil, and
Spain, labor cost reductions will range from
about 9 percent to 6 percent. This translates
into losses in competitiveness of as much as 4
points for a host of economies, when indexed
against the U.S. (See Exhibit 10.)
In economies such as India and Mexico, losing
ground will have little tangible impact. Be-
cause labor rates are projected to remain low
in those economies for the next ten years, they
will still likely have very competitive cost
structures a decade from now—and will, there-
fore, remain attractive locations for the many
industries in which automation is difficult.
Several high-cost economies, however, stand
to fall further behind. Cost increases that have
exceeded productivity growth have eroded
the competitiveness of, for example, Belgium,
Brazil, France, and Italy over the past decade.
We expect these economies to be slow to in-
vest in automation, despite the strong eco-
nomic case for doing so and the urgent need
to accelerate productivity, because of a host of
economic, cultural, and social barriers. Such
tardiness will likely lead to further deteriora-
tion of these economies’ competitiveness.
The Boston Consulting Group | 21
0
10
20
30
40
0
10
20
30
40
Labor-cost savings from
advanced robotics in 2025 (%)
Tasks performed by
advanced robots in 2025 (%)
South
Korea
Canada Taiwan Germany China1
Thailand France Belgium Russia Nether-
lands
Austria Mexico Indonesia
Japan U.S. UK Australia Czech
Republic
Global total
Poland Switzer-
land
Italy Sweden Brazil Spain India
Sources: OECD STAN Bilateral Trade Database; U.S. Bureau of Labor Statistics; BCG analysis.
1
The China figures are based on labor data for the Yangtze River Delta region.
Exhibit 9 | Greater Adoption of Robots Could Lead to Global Labor-Cost Savings of About
16 Percent by 2025
THE POTENTIAL CHANGE IN BCG’S MANUFACTURING COST-COMPETITIVENESS INDEX AS A RESULT OF ROBOTICS, 2014–20251
Conservative
Aggressive
SCENARIOS
4444
333
2222222
1110
–1–1–1
–2
–4
–6
–10
0
10
Gain ground
versus the U.S.
Lose ground
versus the U.S.
–11 –12 –3 –5 –4 –2 0 0 –6 1 –5 1 1 –2 –2 2 –0 0 0 1 2 6 6 7 7
–4 –0 –1 –0 0 –1 0 –0 –0 –0 –0 1 1 0 0 1 0 0 1 1 1 1 1 2 2
South
Korea
Canada Czech
Republic
U.S. France Italy Australia Switzer-
land
Sweden Austria Spain Mexico Indo-
nesia
Germany China Japan UK Taiwan Poland Belgium Thailand Nether-
lands
Brazil Russia India
Sources: OECD STAN Bilateral Trade Database; U.S. Bureau of Labor Statistics; BCG analysis.
Note: Each economy is measured relative to the U.S., thus a one-point gain versus the U.S. means that the direct manufacturing costs of the
economy in question will become one percentage point cheaper relative to the U.S. by 2025.
1
BCG’s Global Manufacturing Cost-Competitiveness Index tracks changes in direct manufacturing costs in the world’s top 25 export economies.
For further information, see The Shifting Economics of Global Manufacturing: How Cost Competitiveness Is Changing Worldwide, BCG report, August 2014.
Exhibit 10 | Robots Could Shift the Economics of Global Manufacturing
22 | The Robotics Revolution
PREPARING FOR THE
ROBOTICS REVOLUTION
Few manufacturing companies will be
left untouched by the new robotics
revolution. But getting the timing, cost, and
location right will be critical. Investing in
expensive robotics systems too early, too late,
or in the wrong location could put manufac-
turers at a serious cost disadvantage against
global competitors. To gain competitive
advantage, companies need to adopt a
holistic approach to the robotics transition.
We recommend that companies take the
following actions:
•• Understand the global landscape. First,
companies need a clear picture of the
trends in robot adoption around the world
and in their industries. They need to know
how the price and performance of robots
are likely to change in comparison with the
total cost of labor in each economy where
they manufacture—and how this compari-
son is likely to change in the years ahead.
They must also factor in other consider-
ations, such as the flexibility of labor rules
and the future availability of workers, that
support or hinder wider robotics adoption
in a given economy. It is important to keep
in mind that these are moving targets.
•• Benchmark the competition. Companies
need to be well aware of what their
competitors are currently doing and
understand what they will do in the
future. If robotics adoption is expected to
rapidly increase in their industry, they
should assume that the total cost of
systems will fall. This knowledge will help
companies more accurately estimate the
cost and timing of investments as well as
make decisions about where to locate new
capacity.
•• Stay technologically current. Rapid advances
in technology mean that companies must
stay abreast of the evolving capabilities of
advanced robotics systems. They should
have a clear view of whether and how
quickly innovation is resolving technical
barriers that so far have inhibited the use
of robots, such as the ability to manipulate
flexible or oddly shaped materials or to
operate safely alongside workers. Just as
important, when will these new applica-
tions be cost-effective? As they take stock
of the new capabilities and the improve-
ments in price and performance, many
companies—even small and midsize
manufacturers—may discover that
installing robotics is more cost-effective
than they once thought. In some cases,
having a view on the evolution of robotics
and automation can help a company
determine whether it is better to wait for a
better technology to emerge or to imple-
ment a new process that allows them to
upgrade technology without having to
duplicate what they have already done. In
many ways, timing is crucial.
The Boston Consulting Group | 23
•• Prepare the workforce. As more factories
convert to robotics, the availability of
skilled labor will become a more import-
ant factor in the decision about where to
locate production. Tasks that still require
manual labor will become more complex,
and the ability of local workforces to
master new skills will become more
critical. The availability of programming
and automation talent will also grow in
importance. Companies and economies
must prepare their workforces for the
robotics revolution and should work with
schools and governments to expand
training in such high-compensation
professions as mechanical engineering
and computer programming.
•• Prepare the organization. Even if the
economics don’t yet favor major capital
investment, companies should start
preparing their global manufacturing
operations now for the age of robotics.
They should make sure that their net-
works are flexible enough to realize the
benefits of robotics as installations
become economically justified in different
economies and as suppliers automate.
They should get themselves up to speed
on new advanced-manufacturing technol-
ogies and think about how they will
transform their current production
processes so that these technologies can
achieve their potential. For many manu-
facturers, adapting to the age of robotics
will require a transformation of their
operations.
Manufacturers do not have the luxury of
waiting to act until the economic conditions
for robotics adoption are ripe. Our projec-
tions show that when the cost inflection point
arrives, robotics installation rates are likely to
accelerate rapidly. This will provide the op-
portunity to create a substantial competitive
advantage. Companies and economies that
are ready to capitalize on the opportunity
will be in a position to seize global advantage
in manufacturing.
24 | The Robotics Revolution
The Boston Consulting Group
publishes many reports and articles
on global manufacturing that may
be of interest to senior executives.
Examples include the following.
The Rise of Robotics
An article by The Boston Consulting
Group, August 2014
The Shifting Economics of
Global Manufacturing: How Cost
Competitiveness Is Changing
Worldwide
A report by The Boston Consulting
Group, August 2014
Prepare for Impact: 3D Printing
Will Change the Game
An article by The Boston Consulting
Group, September 2013
Behind the American Export
Surge: The U.S. as One of the
Developed World’s Lowest-Cost
Manufacturers
A Focus by The Boston Consulting
Group, August 2013
The U.S. Manufacturing
Renaissance: How Shifting
Global Economics Are Creating
an American Comeback
An e-book, knowledge@Wharton,
November 2012
U.S. Manufacturing Nears the
Tipping Point: Which Industries,
Why, and How Much?
A Focus by The Boston Consulting
Group, March 2012
for further reading
note to the reader
About the Authors
Harold L. Sirkin is a senior partner
in the Chicago office of The Boston
Consulting Group. He is a coauthor
of The U.S. Manufacturing Renaissance:
How Shifting Global Economics Are
Creating an American Comeback.
Michael Zinser is a senior partner
in the firm’s Los Angeles office and
is a coleader of BCG’s Manufactur-
ing practice. He is a coauthor of The
U.S. Manufacturing Renaissance: How
Shifting Global Economics Are Creating
an American Comeback. Justin Ryan
Rose is a partner in BCG’s Chicago
office and the leader of the firm’s
green energy topic in the Americas.
He is a coauthor of The U.S.
Manufacturing Renaissance: How
Shifting Global Economics Are Creating
an American Comeback.
Acknowledgments
This report would not have been
possible without the efforts of Jenna
Beletic, Matt Gambler, Tunuka Grey,
Amy Helenbrook, Joel King,
Stephanie Kuo, Chris Prochak,
Brian Quist, and Lee Talbert. The
authors would also like to thank
Dave Fondiller, Lexie Corriveau,
Madelaine Desmond, Beth Gillett,
and Michael Petkewich for their
guidance and interactions with the
media, as well as Pete Engardio for
his writing assistance. Finally, the
authors would like to thank
Katherine Andrews, Gary Callahan,
Angela DiBattista, Lilith Fondulas,
Kim Friedman, Abby Garland, and
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zinser.michael@bcg.com
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BCG Chicago
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BCG_The_Robotics_Revolution_Sep_2015

  • 1. The Robotics Revolution The Next Great Leap in Manufacturing
  • 2. The Boston Consulting Group (BCG) is a global management consulting firm and the world’s leading advisor on business strategy. We partner with clients from the private, public, and not-for- profit sectors in all regions to identify their highest-value opportunities, address their most critical challenges, and transform their enterprises. Our customized approach combines deep in­sight into the dynamics of companies and markets with close collaboration at all levels of the client organization. This ensures that our clients achieve sustainable compet­itive advantage, build more capable organizations, and secure lasting results. Founded in 1963, BCG is a private company with 82 offices in 46 countries. For more information, please visit bcg.com.
  • 3. September 2015 | The Boston Consulting Group The Robotics Revolution The Next Great Leap in Manufacturing Harold L. Sirkin Michael Zinser Justin Ryan Rose
  • 4. 2 | The Robotics Revolution Contents 3 INTRODUCTION 6 THE FORCES BEHIND THE ROBOTICS TAKEOFF Cost and Performance Technological Advances Accessibility for Small Manufacturers 12 Industries and Economies Leading the Robotics Revolution The Impact on Industries The Impact on Economies 20 HOW ROBOTS WILL REDEFINE COMPETITIVENESS 22 PREPARING FOR THE ROBOTICS REVOLUTION 24 FOR FURTHER READING 24 NOTE TO THE READER
  • 5. The Boston Consulting Group | 3 It has been roughly four decades since industrial robots—with mechanical arms that can be programmed to weld, paint, and pick up and place objects with monotonous regularity—first began to transform assembly lines in Europe, Japan, and the U.S. Yet walk the floor of any manufacturer, from metal shops to electronics factories, and you might be surprised by how many tasks are still performed by human hands—even some that could be done by machines. The reasons are simple: economics and capabilities. It is still less expen- sive to use manual labor than it is to own, operate, and maintain a robotics system, given the tasks that robots can perform. But this is about to change. The real robotics revolution is ready to begin. Many industries are reach- ing an inflection point at which, for the first time, an attractive return on investment is possible for replacing manual labor with machines on a wide scale. We project that growth in the global installed base of ad- vanced robotics will accelerate from around 2 to 3 percent annually to- day to around 10 percent annually during the next decade as companies begin to see the economic benefits of robotics. In some industries, more than 40 percent of manufacturing tasks will be done by robots. This de- velopment will power dramatic gains in labor productivity in many in- dustries around the world and lead to shifts in competitiveness among manufacturing economies as fast adopters reap significant gains. A confluence of forces will power the robotics takeoff. The prices of hardware and enabling software are projected to drop by more than 20 percent over the next decade. At the same time, the performance of robotics systems will improve by around 5 percent each year. As ro- bots become more affordable and easier to program, a greater num- ber of small manufacturers will be able to deploy them and integrate them more deeply into industrial supply chains. Advances in vision sensors, gripping systems, and information technology, meanwhile, are making robots smarter, more highly networked, and immensely more useful for a wider range of applications. All of these trends are occurring at a time when manufacturers in developed and developing nations alike are under mounting pressure to improve productivity in the face of rising labor costs and aging workforces. To assess the potential impact of the coming robotics revolution on industries and national competitiveness, The Boston Consulting Group conducted an extensive analysis of 21 industries in the world’s 25 leading manufacturing export economies, which account for more than 90 percent of global trade in goods. We analyzed five common robot setups to understand the investment, cost, and performance of INTRODUCTION
  • 6. 4 | The Robotics Revolution each. We examined every task in each of those industries to deter- mine whether it could be replaced or augmented by advanced robot- ics or whether it would likely remain unchanged. After accounting for differences in labor costs, productivity, and mix by industry in each country, we developed a robust view of more than 2,600 robot- industry-country combinations and the likely rate of adoption in each. The following are some of the key findings of this research: •• Robotics use is reaching the takeoff point in many sectors. The share of tasks that are performed by robots will rise from a global average of around 10 percent across all manufacturing industries today to around 25 percent by 2025. Big improvements in the cost and performance of robotics systems will be the catalysts. In several industries, the cost and capabilities of advanced robots have already launched rapid adoption. •• Adoption will vary on the basis of industry and country characteristics. Among high-cost nations, Canada, Japan, South Korea, the UK, and the U.S. currently are in the vanguard of those deploying robots; Austria, Belgium, France, Italy, and Spain are among the laggards. Some economies, such as Thailand and China, are adopting robots more aggressively than one might expect given their labor costs. Four industrial groupings—computers and electronic products; electrical equipment, appliances, and components; transportation equipment; and machinery—will account for around 75 percent of robotics installations during the next decade. •• Manufacturing productivity will surge. Wider adoption of robots, in part driven by a newfound accessibility by smaller manufacturers, will boost output per worker up to 30 percent over the medium term. These gains will be in addition to improvement from other productivity-enhancing measures, such as the implementation of lean practices. •• Savings in labor costs will be substantial. As a result of higher robotics use, the average manufacturing labor costs in 2025—when adjusted for inflation and other costs and productivity-enhancing measures—are expected to be 33 percent lower in South Korea and 18 to 25 percent lower in, for example, China, Germany, the U.S., and Japan than they otherwise would have been. •• Robots will influence national cost competitiveness. Countries that lead in the adoption of robotics will see their manufacturing cost competitiveness improve when compared with the rest of the world. South Korea, for example, is projected to improve its manufacturing cost competitiveness by 6 percentage points relative to the U.S. by 2025, assuming that all other cost factors remain unchanged. High-cost nations—such as Austria, Brazil, Russia, and Spain—that lag behind will see their relative cost competitiveness erode. •• Advanced manufacturing skills will be in very high demand. As robots become more widespread, the manufacturing tasks performed by
  • 7. The Boston Consulting Group | 5 humans will become more complex. The capacity of local workers to master new skills and the availability of programming and automation talent will replace low-cost labor as key drivers of manufacturing competitiveness in more industries. There will be a fundamental shift in the skills that workers will need in order to succeed in advanced-manufacturing plants. The right time for making the transition to advanced robotics will vary by industry and location. But even if that time is several years away, companies need to prepare now. They must gain a clear under- standing of the cost dynamics in their global production networks and develop insight into the robotics trends both in their industries and in each country in which they manufacture. They must remain constant- ly up to date with regard to changes in the price and performance of robotics relative to the cost of human labor, what the competition is doing, and how the technology is likely to evolve. Perhaps most im- portant, manufacturers must start developing the workforces, techni- cal skills, and processes needed to compete in the robotics age—and ensure that their investments translate into productivity gains and stronger cost competitiveness.
  • 8. 6 | The Robotics Revolution THE FORCES BEHIND THE ROBOTICS TAKEOFF Industrial robots—machines that can be automatically controlled and repro- grammed and that can manipulate objects and move along three or more axes—were first introduced in Europe, Japan, and the U.S. in the 1960s. About 1.4 million industrial robots are in use around the world today. Yet even in many high-cost economies, the use of robots has remained limited in most industries. In Italy, for example, only one-half of 1 percent of tasks have been automated in the chemical and primary-metals industries, though around 14 to 16 percent could be au- tomated today. Adoption rates have also re- mained surprisingly low in industries that long have been at the forefront of automa- tion. Fewer than 8 percent of tasks in the U.S. transportation-equipment industry are auto- mated, for example, compared with a poten- tial of 53 percent. The global installed base for robots has been growing by around 2 to 3 percent annually for around a decade— roughly in line with growth in manufacturing output. The use of industrial robots is also highly concentrated. Nearly three-quarters of all robots operate in just four industrial groupings: computers and electronic products; electrical equipment, appliances, and components; transportation equipment; and machinery. What’s more, 80 percent of the robots sold each year are deployed in just five countries: China, Germany, Japan, South Korea, and the U.S. And because robotics systems have historically been so expensive to own and operate, they are found mainly in large factories owned by corporations with big capital budgets. A dramatic takeoff in advanced robotics is imminent. A number of economic and technical barriers to wider adoption are beginning to fall, how- ever. As a result, a dramatic takeoff in ad- vanced robotics is imminent. We expect that growth in the installed base of robotics will accelerate to around 10 percent annually during the next decade, by which time instal- lations will surpass 4 million. (See Exhibit 1.) Annual shipments of robots will leap from around 200,000 units in 2014 to more than 500,000 by 2025 according to our baseline projection, and to more than 700,000 in a more aggressive scenario. Even so, we project that, by 2025, those installations will repre- sent only about one-quarter of all manufac- turing tasks and far less than that amount in other industries and major manufacturing economies. The growth potential over the long term, therefore, should remain immense.
  • 9. The Boston Consulting Group | 7 Three major trends are speeding global in- dustries toward an inflection point at which advanced industrial robots will become much more commonplace. That point will be char- acterized by greater cost-effectiveness for ro- bots when compared with human labor, tech- nological advances that are wiping out barriers to adoption in key sectors, and the arrival of systems that smaller manufacturers can afford and easily use. Cost and Performance For many organizations, the biggest reason for not replacing manual labor with robots is purely economic. We believe that most orga- nizations begin to ramp up their investment in automation when the cost of employing hu- man labor rises high enough above the cost of owning and operating robotics systems to make human labor less cost-effective. We have assumed conservatively that this point is reached when the cost of human labor be- comes 15 percent higher than the cost of ro- botics labor. Yet even with the relentless rise in wages around the world, the gap remains wide enough to prevent mass deployment. The economics of advanced robotics are im- proving rapidly, however. For example, the to- tal cost of purchasing and deploying a robotics system for spot welding in the U.S. automotive industry plunged from an average of $182,000 in 2005 to $133,000 in 2014 (not adjusted for inflation). By 2025, the total cost is projected to drop by approximately another 22 percent, to around $103,000. The prices of robotics hard- ware and software, which account for only one-quarter of that total cost, are around 40 percent lower than they were a decade ago. The cost of systems engineering—which in- cludes installing, programming, and integrat- ing a robotics system into a factory—has de- clined even more. Ten years ago, the average systems-engineering costs of a spot-welding ro- bot amounted to $81,000. Those costs are now down to around $46,000, on average, and are likely to keep dropping for the rest of the de- cade. The costs of peripheral equipment— such as sensors, displays, and expensive safety structures that protect workers and that to- gether typically cost more than the robots themselves—are plunging as well. (See Exhibit 2.) In fact, safety barriers may not be required at all for many next-generation robots. 0 2 4 6 8 2007 2010 2013 2016 2019 2022 2025 GLOBAL STOCK OF OPERATIONAL ROBOTS, BY INDUSTRY Actual global operational stock Aggressive projection Low projectionBaseline projection Actual Projected Units (millions) Sources: International Federation of Robotics; BCG analysis. Note: Market size is estimated from an evaluation of jobs within U.S. industries that may be automated, and the estimate is then extended to global manufacturing output by industry. Exhibit 1 | Global Robotics Installations Will Increase by About 10 Percent Annually Over the Coming Decade
  • 10. 8 | The Robotics Revolution At the same time that costs have been declin- ing, the performance of robotics systems has been improving by around 5 percent per year. Taken together, the changes in price and per- formance for spot welding, for example, have been translating into an annual 8 percent im- provement in the cost of robotics. To put this into perspective: an investment of $100,000 today buys a robotics system that is capable of performing more than twice as much work as a robotics system costing the same amount a decade ago. This pace of improvement in price and performance is expected to be sus- tained for the foreseeable future. Robotics systems are thus becoming an eco- nomically viable alternative to human labor in more and more industries. A human weld- er today earns around $25 per hour (includ- ing benefits), while the equivalent operating cost per hour for a robot is around $8 when installation, maintenance, and the operating costs of all hardware, software, and peripher- als are amortized over a five-year deprecia- tion period. In 15 years, that gap will widen even more dramatically. The operating cost per hour for a robot doing similar welding tasks could plunge to as little as $2 when im- provements in its performance are factored in. (See Exhibit 3.) Other industries are quickly approaching inflection points. The U.S. electronics and electrical-equipment manufacturing industries currently deploy about 3,300 industrial robots, many of them relatively basic and designed to perform simple tasks. But manufacturers are in the process of adding more versatile—and more expensive—robots to take on increasingly complex tasks. Today, the cost of a “generic” robotics system—which has a high degree of flexibility and thus can take on many different types of work—is around $28 per hour. By 2020, this cost is projected to fall to less than $20 per hour, which would be below the average human worker’s wage. This will enable a significant increase in the number of tasks that can be automated. We estimate that, as a result, the percentage of tasks Project management Has consistently been 5–10 percent of total system costs; absolute costs are expected to decline Systems engineering (such as programming, installation) Cost reductions are expected to slow because possible gains in offline programming have mostly been achieved Peripherals (such as safety barriers, sensors) Costs will continue to drop as a result of the removal of safety barriers Robot (including soware) Minimal declines are expected because pricing is close to material costs, and production volume for the auto industry is already high 55 43 33 30 28 33 40 45 40 36 81 62 46 39 33 13 11 9 0 50 100 150 200 2010 155 2005 103 7 2020 117 8 2014 133 Cost ($thousands)1 –22% 2025 Projected TOTAL SYSTEM COSTS OF A TYPICAL SPOT-WELDING ROBOT IN THE U.S. AUTOMOTIVE INDUSTRY 182 FUTURE COST TRENDS Sources: ABB, Economic Justification for Industrial Robotic Systems, 2007; International Federation of Robotics, World Robotics: Industrial Robots; expert interviews; BCG analysis. Note: Because of rounding, not all numbers add up to the totals shown. 1 Values are in nominal U.S. dollars. Exhibit 2 | While the Costs of Advanced Industrial Robots Fall, Their Performance Is Steadily Improving
  • 11. The Boston Consulting Group | 9 handled by advanced robots will rise from 8 percent today to 26 percent by the end of the decade. Some industries will be slower to adopt. In furniture manufacturing, where tasks remain more difficult to automate, the economic pay- off of using robots is still a number of years away. Based on our estimates, the adoption of robots in that industry won’t begin in earnest until 2020; and it will be near the end of the next decade before even 10 percent of tasks are automated. Technological Advances The technical capabilities of most industrial robots today are still quite limited. Tradition- al robots are rigid: they are fixed in the same location and can handle only objects that are of a uniform size, oriented in a predictable way, and moving at a determined speed. Most can process images and detect features on ob- jects, but they lack the logic capabilities to make decisions about those objects. What’s more, heavy and expensive safety de- vices have been required to protect workers from robots in operation. Robots are typically found isolated in the corner of a work envi- ronment, performing tasks that are highly re- petitive and require consistency and accuracy or tasks that are hazardous to humans. If the robots are mobile, collision avoidance sys- tems are often necessary as well. Such imped- iments have greatly narrowed robots’ useful- ness for many industrial applications. Thanks to leaps in technology, however, ad- vanced robotics systems can now perform tasks and work in environments that are far less structured. As costs drop, companies can afford to buy robots with arms that rotate freely, giving them more flexibility to handle objects and enabling them to deal with ob- jects whose dimensions, features, and proper- ties vary. Robots also have more sophisticated sensors to see and feel objects and can be more quickly and easily reprogrammed to perform different tasks. Advanced robots are more “intelligent” as well. They can apply 0 10 20 30 40 Wages and operating costs adjusted for price and performance ($/hour) 2030202520202015 2023 AUTOMOTIVE FURNITURE3 ELECTRICAL EQUIPMENT Robot (generic)2 Electrical wages Robot (automotive)1 Southern U.S. auto wages 2013 industrial-robot shipments (units) 10,320 2013 industrial-robot shipments (units) 3,328 2013 industrial-robot shipments (units) 23 2018 0 10 20 30 40 2030202520202015 Wages and operating costs adjusted for price and performance ($/hour) 0 10 20 30 40 2030202520202015 Wages and operating costs adjusted for price and performance ($/hour) Robot (generic)2 Furniture wages Sources: U.S. Bureau of Labor Statistics; Industrial Federation of Robotics, World Robotics: Industrial Robots; expert interviews; BCG analysis. Note: Assumes an 8 percent rate of improvement in price and performance. Hourly rates for labor include benefits and overhead, an increase of about 50 percent over base hourly pay. All values shown in nominal 2014 U.S. dollars. 1 The cost is for a typical spot-welding robot system in the U.S. automotive industry. 2 An example of a generic robotics system is ABB’s IRB 2400. 3 Includes other wood products. Exhibit 3 | Robotics Are Already an Economically Viable Alternative to Human Labor in Many U.S. Industries
  • 12. 10 | The Robotics Revolution logic to make decisions about objects, judge quality, and receive and provide feedback to other parts of a production system through information technology. Special safety barri- cades are not required for many advanced ro- bots, which means that they can work side- by-side with humans. Even some very low- cost robots can work together with humans to complete their collective tasks. Improvements are driving wider adoption by small and midsize manufacturers. These capabilities have greatly expanded the utility of robots in a range of industries. Meat processing is one good example. Cutting and trimming meat is very challenging for tradi- tional robots because the pieces of meat come in different shapes, and their properties can vary significantly. One German company has solved this problem with a 3D visual- inspection system that enables advanced ro- bots to trim and cut. One traditional obstacle to wider robotics use in the fabricated-metals industry has been the difficulty of translating computer-aided- design drawings for complex jobs, such as grinding a gear to remove burrs and other de- fects, into instructions for a robot. Computer- aided-manufacturing software tools such as Robotmaster, by Jabez Technologies—which integrates robot programming, simulation, and code generation—make doing so much easier. Electronics manufacturing has presented spe- cial challenges for automation. Robots are of- ten used to place components onto flat sur- faces, such as circuit boards, for example. But it has been difficult to design a robot that can install very small parts, such as connectors, at odd angles with high degrees of precision and at very high speeds—the abilities necessary to build an automotive battery, for instance. As a result, the industry remains quite labor intensive. But there is progress: Japanese ro- botics giant Fanuc has demonstrated a high- speed robot that rotates along six axes and has the dexterity to perform such tasks. Most advanced robots can be quickly repro- grammed for new jobs, giving manufacturers the flexibility to produce small batches of customized products without additional capi- tal investment. Wiring accessory manufactur- er ABB Elektro-Praga, for example, needed to increase throughput at its factory in the Czech Republic. The company wanted ma- chines that could pick parts from a bin and orient them properly for assembly, a task that conventional robots could not perform at high speed and with precision. It also wanted robots that could work on different product configurations with minimal adjustment. ABB Elektro-Praga installed several of ABB’s IRB 140 robots on a new assembly line linked to a vision system equipped with digital cam- eras. The vision system enables the robots to orient parts and place them at a cycle time of 2.3 seconds per electrical socket, for example. It takes only 10 minutes to adjust the system to pick and place parts for different products, which are often changed up to 30 times each week. As a result of the new system, ABB Elektro-Praga says that it has boosted throughput of each shift by a factor of about nine. Only one worker is required to oversee the entire robotics assembly line. Accessibility for Small Manufacturers The steady improvements in cost, perfor- mance, and functionality of robotics systems are driving another force in the next manu- facturing revolution: the wider adoption of robots by small and midsize manufacturers. Until recently, such systems have been pro- hibitively expensive and overly complex for enterprises with limited capital budgets and engineering resources. The new generation of innovative systems is putting robots within the financial reach of small enterprises. Universal Robots, for exam- ple, markets the UR5, an industrial robot that is designed for material handling and assem- bly and has a base price of $34,000. Its two arms rotate along six axes, resulting in re- markable flexibility for a machine of that price. By our analysis, the total cost of install- ing such low-cost generic robots can range from $50,000 to $100,000 when accounting for associated costs and the project manage-
  • 13. The Boston Consulting Group | 11 ment required to make it all come together. Universal says that the average cost of install- ing the UR5 is around $50,000. Two of Re- think Robotics’ robots—Baxter and the com- pany’s high-performance robot, Sawyer—are designed for precision applications, such as machine tending and circuit board testing. Each costs around $40,000, including accesso- ries, warranties, and installation. Because they can be redeployed quickly and easily across multiple product lines, the Rethink ro- bots can be used in high-mix environments that are impractical for conventional industri- al robots. In addition to their low cost, the UR5 and Re- think robots can easily be moved by hand and repurposed by workers with no program- ming experience. They can safely work next to humans on the same production line with- out expensive barricades or other protective equipment, eliminating a major cost associat- ed with conventional industrial robots. RSS Manufacturing & Phylrich—a Costa Mesa, California, manufacturer of high-end plumbing fixtures and faucets with 72 em- ployees—illustrates how such machines can pay off for even small and midsize manufac- turers. The company wanted an inexpensive automation solution that could easily be moved to perform different production tasks in the factory, so it purchased a UR5. One of the robot’s first jobs was to help fill an order to make 700 valves a month. With its existing computer-numerical-control milling machine, the company could produce only 400 valves a month with two work shifts. By using the UR5 robotic arm to feed parts into and re- move them from the milling machine around the clock, RSS was able to fill the order in 11 days while increasing production capacity by 30 percent. By using the UR5 for another job—to feed tubes into a bending machine— the company was able to produce 1,500 piec- es in four hours, a task that otherwise would have taken two to three days. The company estimates that it achieved a return on its in- vestment in a few months. As economic and technical barriers continue to fall, robots are becoming accessible for more companies. The production efficiencies will spread beyond individual factories through entire supply chains, industries, and national economies.
  • 14. 12 | The Robotics Revolution Industries and Economies Leading the Robotics Revolution For the past few decades, the scramble for competitive advantage in manufactur- ing has largely revolved around finding new and abundant sources of low-cost labor. Rapidly rising wages in most big emerging markets are bringing the era of easy gains from labor cost arbitrage to a close. A little more than a decade ago, for example, Chi- nese labor costs were around one-twentieth of those in the U.S. Today—after accounting for productivity, logistics, and other costs— the manufacturing cost gap between China and the U.S. has nearly disappeared for many products that are sold in the U.S. (See U.S. Manufacturing Nears the Tipping Point: Which Industries, Why, and How Much?, BCG Focus, March 2012.) As a result, manufacturers the world over are under intensifying pressure to gain advantage the old-fashioned way: by improving their productivity. This imperative came through loud and clear in our 2014 BCG Global Manu- facturing Cost-Competitiveness Index, which revealed changes in direct manufacturing costs of the world’s 25 leading manufacturing export economies from 2004 to 2014. In the economies where cost competitiveness im- proved or held steady during that period— such as Mexico, the Netherlands, the UK, and the U.S.—productivity growth largely offset increases in such direct costs as wages and energy. Economies whose productivity did not keep pace with rising costs—including Australia, Brazil, China, and most countries of Western Europe—either lost ground in man- ufacturing cost competitiveness or faced in- creasing pressure. (See The Shifting Economics of Global Manufacturing: How Cost Competitive- ness Is Changing Worldwide, BCG report, Au- gust 2014.) Even though the shift toward automation has been a driver of productivity improvement for decades, advanced robots will help to ac- celerate this trend and will boost productivity even further in a number of ways. Robots can complete many manufacturing tasks more efficiently, effectively, and consistently than human workers, leading to higher output with the same number of workers, better quality, and less waste. Robots will free up skilled workers to focus more of their time on higher-value tasks. Because advanced robots often can perform many tasks autonomously, moreover, they can keep working through the night as human workers sleep, in effect serv- ing as a third production shift. To estimate the potential productivity gains from wider adoption of robots, we calculated the savings in total manufacturing labor costs over the next decade under the conservative assumption that machines will perform at least one-quarter of the manufacturing tasks that can be automated, compared with a global average of around 11 percent today. We adjusted our model for differences in ro-
  • 15. The Boston Consulting Group | 13 botics adoption rates by economies and in- dustries, as well as projected increases in fac- tory wages. We estimate that, as a direct result of install- ing advanced robots, and depending on the location, output per worker in manufacturing industries will be 10 to 30 percent higher in 2025 than it is today. This increase will be over and above the productivity gains that can be expected to come from other mea- sures, such as lean production practices and better supply-chain management. The impact on cost is likely to be just as dramatic. We es- timate that, because of wider robotics use, the total cost of manufacturing labor in 2025 could be 16 percent lower, on average, in the world’s 25 largest goods-exporting economies than they would be otherwise. All manufacturers and economies will not share these benefits equally, however, be- cause adoption rates of advanced robotics will vary sharply. The basic economic trade- off between the cost of labor and the cost of automation will continue to be a primary consideration. So will the technical capabili- ties of machines to replace manual labor. La- bor laws, cultural barriers to substituting ma- chines for humans, the availability of capital, the foreign-investment-policy environment, and the age and skill levels of workers are also important considerations. To get a fuller picture of advanced robotics’ potential to boost productivity, therefore, it is important to assess the opportunities and challenges industry by industry and economy by economy. The Impact on Industries Two key considerations will heavily influence how widely robots are deployed in industries. How cost-effective is it to substitute machines for human labor? And how easy is it to auto- mate production tasks? (See Exhibit 4.) Manufacturing industries in which labor ac- counts for the highest portion of costs are gen- erally the most likely candidates for automa- tion, although it will be more challenging for some industries than others. Labor costs range from around 15 percent of production costs in typical chemical, food-product, and steel plants to approximately 30 percent in ap- –40 – 20 0 20 40 Textile products Yarns and fabrics Beverage and tobacco products Food Wood products Electrical equipment, appliances, and components Computer and electronic products Machinery Fabricated metals Primary metals Nonmetallic mineral products Plastics and rubber products Chemicals Printing PaperLeather Apparel Deviation from global average manufacturing wage (%) Miscellaneous Furniture Transportation equipment Most likely to lead global adoption Laggards Technologically limited Highly automatable1 Limited ability to automate Adoption in high-wage economies only Ability to automate based on currently available technology Sources: U.S. Bureau of Labor Statistics, “International Labor Comparison of Hourly Compensation Costs in Manufacturing Industries, 2012”; BCG analysis. Note: Petroleum and coal manufacturing are not depicted because of a high and variable wage premium, consistent with immovable, resource- intensive industries. 1 These are defined as occupational tasks that have the potential to be replaced with advanced robotics. Exhibit 4 | Some Industries Are More Likely to Benefit from Robotics Because of High Wages and Automatable Tasks
  • 16. 14 | The Robotics Revolution parel, furniture, fabricated-metals, electronics, and printing facilities. Location is also import- ant, of course. Industries concentrated in a low-cost economy—such as India, where man- ufacturing wages adjusted for productivity averaged $5.25 per hour, with benefits, in 2014—will be less likely to adopt automa- tion than those based in a high-cost economy, such as Australia, where hourly productivity- adjusted labor costs average $55.70. But there are also major cost differences among indus- tries. Whether manufacturing for the petro- leum and coal production industries takes place in a high-cost economy or a low-cost one, for example, the median wage is about double that for all manufacturing industries. In the apparel industry, wages are 32 percent lower, on average. Some industries have tasks that simply are not robot friendly. The technical limits of wider robotics use will also vary by industry. Each industry has its own set of job roles—such as material handlers, welders, assemblers, and quality inspectors—and each role has its own set of tasks. Some of these tasks are potentially automatable, while others are not. Further- more, different production tasks call for different robotics functions—some of which will require more expensive robotics systems than others. A machine that simply lifts materials of the same shape and size from one place and moves them to another may be far less costly than one able to visualize and feel nonuniform materials. What’s more, some industries have tasks, such as picking up pieces of cloth to be sewn into apparel, that simply are not robot friendly and there- fore will likely be done, for the most part, by workers in low-cost locations for at least the near to medium term. The growth potential of robots in these industries is more limited. If a way could be found to automate such processes, however, robotics could transform the clothing industry from one in which manufacturing is done globally to one that is more local. We calculated the costs of robotics for 21 in- dustries by aggregating all of the production tasks and types of robots required by those industries. We then adjusted those costs for expected improvements in performance and projected them over ten years. Finally, we amortized the investment in robotics systems over five years to arrive at a cost per hour in U.S. dollars and compared that amount with the projected labor costs in each economy. On the basis of these cost-performance pro- jections and automatable tasks, we developed estimates for robot adoption for the next de- cade in each of the 21 industries. The four industry groups that currently ac- count for the vast majority of global robot use will remain in the vanguard: computers and electronic products; electrical equipment, appliances, and components; transportation equipment; and machinery. (See Exhibit 5.) According to our projections, these four in- dustry groups will account for around 75 per- cent of robot installations globally through 2025. (See Exhibit 6.) Currently, at least 85 percent of the production tasks in these in- dustries are automatable. Most tasks involv- ing assembly and the tending of machines, for example, are highly repetitive and involve rigid materials, so they can be performed by relatively basic robots. Wages in these indus- tries are also relatively high because many tasks require highly skilled workers. Global wages in the transportation and computer in- dustries, for example, are roughly 20 percent higher than average global manufacturing wages. As a result, in many economies, investments in robotics systems in these industries are likely to generate a return on investment in the near term. Robotics systems currently cost around $10 to $20 per hour, on average, to own and operate in the U.S. in these sec- tors—already below the cost of human la- bor—and will decline further over the next decade. We project, therefore, that robots will perform 40 to 45 percent of production tasks in each of these industries by that time, com- pared with fewer than 10 percent today. In another cluster of industry groups, robots will most likely be adopted in high-wage econ- omies in the near term, and wider adoption
  • 17. The Boston Consulting Group | 15 INDUSTRY RATIONALE AND IMPLICATIONS Computers and electronic products Electrical equipment, appliances, and components Transportation equipment Machinery Plastics and rubber products Miscellaneous Petroleum and coal products Primary metals Chemicals Nonmetallic mineral products Wood products Paper Fabricated metals Food Textile mill products • More than 85 percent of production tasks within the industry are identified as potentially automatable • High manufacturing wages in the industry will lead to economical adoption in most economies • Will reach near saturation in the late 2020s • Limited penetration today; high percentage of automatable tasks • Moderate factory wages • Likely to be adopted only in high-wage economies in the near term; future decreases in the cost of robotics will drive further adoption • Materials are typically ill suited for manipulation by robots; current technology limits robots to a few tasks • Low manufacturing wages • Significant future adoption will require low-cost solutions or technological breakthroughs Actual Projected 100 80 60 40 20 0 20252024202320222021202020192018201720162015201420132012 GLOBAL STOCK OF OPERATIONAL ROBOTS, BY INDUSTRY1 Plastics and rubber products Other Food Chemicals Miscellaneous Petroleum and coal products Primary metals Computers and electronic products Machinery Electrical equipment, appliances, and components Transportation equipment % Industry leaders in adopting robotics Sources: OECD STAN Bilateral Trade Database; BCG analysis. Sources: International Federation of Robotics; BCG analysis. 1 Includes the current stock of robots and changes by shipment volume that add to the operational stock of robots. Historical trends indicate that around 60 percent of all shipments add to operational stock while the remainder are replacement purchases. The analysis assumes that the fraction adding to the operational stock will remain constant through the next decade. Exhibit 5 | Four Industries Will Lead the Adoption of Advanced Industrial Robots Exhibit 6 | Four Industries Will Account for About 75 Percent of Robotics Installations by 2025
  • 18. 16 | The Robotics Revolution will occur as the costs and performance of sys- tems improve. These groups include plastics and rubber products; petroleum and coal products; and primary metals. We project that robots will perform 10 to 20 percent of tasks in these industries globally by 2025. Econom- ics will be the main limitation. Although around 86 percent of tasks in plastics and rub- ber-products plants can be automated—such as material handling, assembly, welding, and machine operation—manufacturing wages are expected to remain relatively lower. This will limit the financial benefits of automation, especially in low-wage emerging markets. A number of industries will remain a poor fit for robots in the near term. Chemicals, wood products, paper, fabricated metals, food pro- cessing, and textile products are prominent examples. We project that robots will per- form only about 1 to 5 percent of tasks in these industries a decade from now. Global manufacturing wages in these industries are low because they tend to have a smaller por- tion of automatable jobs and because the economic trade-offs don’t justify broad robot- ics adoption, at least for now. Over the next decade, five countries will account for 80 percent of robot shipments. Technical impediments to widespread robot use also exist in certain industries. As men- tioned previously, the biggest hurdles for ma- chines in apparel manufacturing are the abili- ties to pick up single pieces of cloth and then align them so that they can be cut and fed through a sewing machine—tasks that are still better done by humans. As a result, the hourly cost of owning and operating a robot in a U.S. apparel, textile, chemical, or paper plant ranges from around $40 to $47. By 2025, that cost is projected to drop to around $20 to $25 per hour, which would still not be com- petitive with labor in apparel factories in many countries. In other industries, many of the tasks that can be automated—such as handling heavy or hazardous materials—are already performed by machines. The Impact on Economies Robotics will penetrate the manufacturing sector to different degrees in different econo- mies as well. The mix of industries in each economy will be one of the variables in as- sessing robot penetration. Another will be regulations that make it difficult and very ex- pensive for companies to replace workers; economies with such regulations will proba- bly adopt robotics at lower rates. Other vari- ables include the cost, supply, and flexibility of labor and the availability of investment capital. On the basis of these factors and current trends, our projections show that five coun- tries—China, the U.S., Japan, Germany, and South Korea—will account for around 80 per- cent of robot shipments over the next decade; China and the U.S. alone will account for around half of those shipments. (See Exhibit 7.) We found that industries in certain econo- mies are embracing robots much more ener- getically than we would expect, given the un- derlying economic factors. In other econo- mies, robotics adoption is lagging even though the economic rationale for automa- tion seems compelling. To get a sense of who is in the vanguard, we analyzed the world’s 25 biggest manufactur- ing export economies. These economies, which account for around 90 percent of goods exports, are included in the 2014 BCG Global Manufacturing Cost-Competitiveness Index. We grouped these economies into four cate- gories of robotics adopters: aggressive, fast, moderate, and slow. (See Exhibit 8.) Aggressive Adopters. Indonesia, South Korea, Taiwan, and Thailand have been installing more robots than would be expected given these economies’ productivity-adjusted labor costs. South Korea, for example, is installing robots at a pace that is about four times the global average. As a result, robots in South Korea are projected to perform around 20 percent of tasks—considered the takeoff point for adoption—by 2020 and 40 percent of tasks by 2025. Thailand’s manufacturing sector is installing robots at around the same pace, while companies in Taiwan and Indone- sia are installing them at about twice the rate
  • 19. The Boston Consulting Group | 17 0 20 40 60 80 100 Total robot shipments (%) 2025202420232022202120202019201820172016201520142013201220112010 PredictedActual Mexico Other Taiwan Australia Brazil Thailand France Italy Canada Russia UK South Korea Germany Japan U.S. China TOP FIVE (%) 79 77 76 78 80 81 83 83 84 84 84 83 83 81 80 77 112 151 146 163 200 250 300 350 400 450 500 550 550 500 500 450 UNITS (THOUSANDS) ADOPTION CATEGORIES ECONOMIES Japan U.S.UKChinaCanada Russia South Korea Taiwan ThailandIndonesia Italy SwitzerlandSwedenNetherlandsFranceBelgiumAustria Brazil India Spain GermanyAustralia Czech Republic Mexico Poland FAST MODERATE SLOW AGGRESSIVE Sources: International Federation of Robotics; BCG analysis. Sources: The Economist Intelligence Unit; Organisation for Economic Co-operation and Development; The Fraser Institute; ETUI’s website www.worker-participation.eu; Ius Laboris; L&E Global; Thomson Reuters Practical Law; BCG analysis. Exhibit 7 | Five Economies Will Account for Nearly 80 Percent of Robot Shipments Through 2025 Exhibit 8 | Major Goods-Exporting Economies Follow Four General Patterns of Robotics Adoption
  • 20. 18 | The Robotics Revolution of average economies. In developing econo- mies, such as Indonesia, one motive for installing robots faster than might seem warranted is to help factories achieve the same quality standards as those in developed economies. If these trends continue, robots in some developing economies will perform around 50 percent of tasks by 2025, and adoption will reach the traditional market- saturation point for technology—approxi- mately 60 percent—in 15 to 20 years. Robots in some developing economies will perform 50 percent of tasks by 2025. The high adoption rate is partly explained by the fact that all four economies are experienc- ing higher-than-average wage growth, have some of the lowest unemployment rates in the world, and have workforces that are aging fast. South Korea has even launched a new five-year plan to expand its intelligent-robot industry and promote widespread adoption. The plan calls for $2.6 billion in public and private investment; a tripling of annual reve- nues, to $7 billion; and $2.5 billion in annual exports by 2018. Forward-looking businesses, therefore, are investing in robots when they build new capacity. What’s more, workers can be dismissed with relatively little severance pay under current labor regulations, making it easy to replace humans with robots in these aggressive-adopter economies. Fast Adopters. Canada, China, Japan, Russia, the UK, and the U.S. are all witnessing rapid adoption that is in line with their economic outlook. As mentioned earlier, industries generally ramp up automation when using robots becomes 15 percent cheaper per hour than employing humans. We project that robots in some of these economies will perform 30 to 45 percent of tasks by 2025 and that adoption will reach the saturation point in 20 to 25 years. Manufacturers in the fast-adopter economies often incur limited costs when dismissing em- ployees. Government approval typically is not required for layoffs, although some econo- mies, such as China, are starting to toughen their policies. Severance benefits, if required at all, usually range from two days to one month per year of service. Most fast-adopter economies also have relatively high labor costs, when adjusted for productivity, and sev- eral economies have rapidly aging workforces. Nevertheless, companies in China are install- ing robots in new factories even though wag- es in most of China remain relatively low. This may be because companies anticipate that the rapid rise in Chinese wages over the past decade will continue for the foreseeable future. They could also be anticipating that skill shortages in several provinces will wors- en. In fact, robot purchases in China rose par- ticularly sharply in 2013, when it more close- ly fit the pattern of an aggressive adopter. In that year, robot shipments increased by 59 percent—to 37,000 units—far outpacing China’s 11 percent expansion in manufactur- ing output and 6 percent growth in hourly productivity-adjusted wages. If China contin- ues on this more aggressive adoption path, average total labor costs in manufacturing could be 30 percent lower in 2025. If it re- mains a fast adopter, however, costs are ex- pected to be 24 percent lower. Moderate Adopters. Australia, the Czech Republic, Germany, Mexico, and Poland are installing robots at a measured pace that is in line with those countries’ economic growth. Industries are ramping up automa- tion investment more moderately than fast adopters when they reach the inflection point of 15 percent cost savings over workers. Robots are expected to perform 30 to 35 percent of tasks by 2025, and adoption is not likely to reach market saturation before 2035, at the earliest. Labor regulations that require employers to justify work dismissals and disburse severance pay slow down robot adoption. Restrictions on foreign ownership and government control over market interest rates in several econo- mies also deter investment in automation. Slow Adopters. Austria, Belgium, Brazil, France, India, Italy, the Netherlands, Sweden, Spain, and Switzerland are installing robots
  • 21. The Boston Consulting Group | 19 at the slowest rate among the top 25 manu- facturing export economies. This is despite the fact that, with the exception of India, these nations have some of the highest labor costs, when adjusted for productivity. They also have aging workforces and are expected to face serious skill shortages. If this trend continues, robots will perform at most 15 percent of tasks by 2025, and it will take several decades to reach market saturation. This will make it harder for the slow adopters to compete with the faster ones. Regulations in some economies that prohibit replacing workers with robots are among the biggest barriers to automation. Companies must often negotiate with governments to dismiss workers and then must pay high sev- erance packages to those former employees— in some cases equal to more than two years of wages. In India, for example, companies with more than 100 employees require per- mission from the ministry of labor and em- ployment to fire someone. This lack of flexi- bility not only hinders the automation of existing factories, it also discourages new long-term capital investment in production facilities. In other economies, heavy govern- ment control of interest rates and restrictions on foreign ownership and investment are ad- ditional deterrents to slow adopters. These differences in robotics adoption may seem small and less noticeable now. But over time they are likely to lead to significant gaps in productivity gains and manufacturing costs among leading export economies—es- pecially as more and more industries reach the inflection point and investment in robots accelerates. Indeed, we believe that as wage gaps between low-cost and high-cost econo- mies continue to narrow, robot adoption could emerge as an important new factor that will contribute to redrawing the compet- itive balance among economies in global manufacturing.
  • 22. 20 | The Robotics Revolution HOW ROBOTS WILL REDEFINE COMPETITIVENESS To understand the likely winners and losers in the robotics revolution, we estimated the impact that projected robotics- adoption rates would have on productivity and labor costs in each of the 25 leading manufacturing export economies, given their mix of industries. (See Exhibit 9.) In many cases, the impact on cost competitive- ness will be dramatic. According to our projections, the biggest beneficiaries will be manufacturers in South Korea, where the combined cost of human labor and robotics in 2025 will be an estimated 33 percent lower than it would be without greater robotics adoption. That is double the average cost reduction estimated across all 25 economies— and should give South Korea a real advantage. We estimate that labor costs will be around 25 percent lower in Japan, 24 percent lower in Canada, 22 percent lower in the U.S., 21 percent lower in Germany and the UK, 20 percent lower in Australia, and 18 percent lower in China and the Czech Republic. Economies that are expected to adopt robot- ics relatively slowly will see far less impres- sive cost reductions. We project that robots will lower costs by just 3 percent in Mexico and will have negligible influence on labor costs in India and Indonesia, where manufac- turing wages are expected to remain very low through 2025. The savings from advanced robots will also be modest in a number of developed econo- mies that already suffer from a combination of relatively high wages, low productivity, tight labor markets, and labor restrictions. In France, Switzerland, Belgium, Italy, Russia, Sweden, Austria, the Netherlands, Brazil, and Spain, labor cost reductions will range from about 9 percent to 6 percent. This translates into losses in competitiveness of as much as 4 points for a host of economies, when indexed against the U.S. (See Exhibit 10.) In economies such as India and Mexico, losing ground will have little tangible impact. Be- cause labor rates are projected to remain low in those economies for the next ten years, they will still likely have very competitive cost structures a decade from now—and will, there- fore, remain attractive locations for the many industries in which automation is difficult. Several high-cost economies, however, stand to fall further behind. Cost increases that have exceeded productivity growth have eroded the competitiveness of, for example, Belgium, Brazil, France, and Italy over the past decade. We expect these economies to be slow to in- vest in automation, despite the strong eco- nomic case for doing so and the urgent need to accelerate productivity, because of a host of economic, cultural, and social barriers. Such tardiness will likely lead to further deteriora- tion of these economies’ competitiveness.
  • 23. The Boston Consulting Group | 21 0 10 20 30 40 0 10 20 30 40 Labor-cost savings from advanced robotics in 2025 (%) Tasks performed by advanced robots in 2025 (%) South Korea Canada Taiwan Germany China1 Thailand France Belgium Russia Nether- lands Austria Mexico Indonesia Japan U.S. UK Australia Czech Republic Global total Poland Switzer- land Italy Sweden Brazil Spain India Sources: OECD STAN Bilateral Trade Database; U.S. Bureau of Labor Statistics; BCG analysis. 1 The China figures are based on labor data for the Yangtze River Delta region. Exhibit 9 | Greater Adoption of Robots Could Lead to Global Labor-Cost Savings of About 16 Percent by 2025 THE POTENTIAL CHANGE IN BCG’S MANUFACTURING COST-COMPETITIVENESS INDEX AS A RESULT OF ROBOTICS, 2014–20251 Conservative Aggressive SCENARIOS 4444 333 2222222 1110 –1–1–1 –2 –4 –6 –10 0 10 Gain ground versus the U.S. Lose ground versus the U.S. –11 –12 –3 –5 –4 –2 0 0 –6 1 –5 1 1 –2 –2 2 –0 0 0 1 2 6 6 7 7 –4 –0 –1 –0 0 –1 0 –0 –0 –0 –0 1 1 0 0 1 0 0 1 1 1 1 1 2 2 South Korea Canada Czech Republic U.S. France Italy Australia Switzer- land Sweden Austria Spain Mexico Indo- nesia Germany China Japan UK Taiwan Poland Belgium Thailand Nether- lands Brazil Russia India Sources: OECD STAN Bilateral Trade Database; U.S. Bureau of Labor Statistics; BCG analysis. Note: Each economy is measured relative to the U.S., thus a one-point gain versus the U.S. means that the direct manufacturing costs of the economy in question will become one percentage point cheaper relative to the U.S. by 2025. 1 BCG’s Global Manufacturing Cost-Competitiveness Index tracks changes in direct manufacturing costs in the world’s top 25 export economies. For further information, see The Shifting Economics of Global Manufacturing: How Cost Competitiveness Is Changing Worldwide, BCG report, August 2014. Exhibit 10 | Robots Could Shift the Economics of Global Manufacturing
  • 24. 22 | The Robotics Revolution PREPARING FOR THE ROBOTICS REVOLUTION Few manufacturing companies will be left untouched by the new robotics revolution. But getting the timing, cost, and location right will be critical. Investing in expensive robotics systems too early, too late, or in the wrong location could put manufac- turers at a serious cost disadvantage against global competitors. To gain competitive advantage, companies need to adopt a holistic approach to the robotics transition. We recommend that companies take the following actions: •• Understand the global landscape. First, companies need a clear picture of the trends in robot adoption around the world and in their industries. They need to know how the price and performance of robots are likely to change in comparison with the total cost of labor in each economy where they manufacture—and how this compari- son is likely to change in the years ahead. They must also factor in other consider- ations, such as the flexibility of labor rules and the future availability of workers, that support or hinder wider robotics adoption in a given economy. It is important to keep in mind that these are moving targets. •• Benchmark the competition. Companies need to be well aware of what their competitors are currently doing and understand what they will do in the future. If robotics adoption is expected to rapidly increase in their industry, they should assume that the total cost of systems will fall. This knowledge will help companies more accurately estimate the cost and timing of investments as well as make decisions about where to locate new capacity. •• Stay technologically current. Rapid advances in technology mean that companies must stay abreast of the evolving capabilities of advanced robotics systems. They should have a clear view of whether and how quickly innovation is resolving technical barriers that so far have inhibited the use of robots, such as the ability to manipulate flexible or oddly shaped materials or to operate safely alongside workers. Just as important, when will these new applica- tions be cost-effective? As they take stock of the new capabilities and the improve- ments in price and performance, many companies—even small and midsize manufacturers—may discover that installing robotics is more cost-effective than they once thought. In some cases, having a view on the evolution of robotics and automation can help a company determine whether it is better to wait for a better technology to emerge or to imple- ment a new process that allows them to upgrade technology without having to duplicate what they have already done. In many ways, timing is crucial.
  • 25. The Boston Consulting Group | 23 •• Prepare the workforce. As more factories convert to robotics, the availability of skilled labor will become a more import- ant factor in the decision about where to locate production. Tasks that still require manual labor will become more complex, and the ability of local workforces to master new skills will become more critical. The availability of programming and automation talent will also grow in importance. Companies and economies must prepare their workforces for the robotics revolution and should work with schools and governments to expand training in such high-compensation professions as mechanical engineering and computer programming. •• Prepare the organization. Even if the economics don’t yet favor major capital investment, companies should start preparing their global manufacturing operations now for the age of robotics. They should make sure that their net- works are flexible enough to realize the benefits of robotics as installations become economically justified in different economies and as suppliers automate. They should get themselves up to speed on new advanced-manufacturing technol- ogies and think about how they will transform their current production processes so that these technologies can achieve their potential. For many manu- facturers, adapting to the age of robotics will require a transformation of their operations. Manufacturers do not have the luxury of waiting to act until the economic conditions for robotics adoption are ripe. Our projec- tions show that when the cost inflection point arrives, robotics installation rates are likely to accelerate rapidly. This will provide the op- portunity to create a substantial competitive advantage. Companies and economies that are ready to capitalize on the opportunity will be in a position to seize global advantage in manufacturing.
  • 26. 24 | The Robotics Revolution The Boston Consulting Group publishes many reports and articles on global manufacturing that may be of interest to senior executives. Examples include the following. The Rise of Robotics An article by The Boston Consulting Group, August 2014 The Shifting Economics of Global Manufacturing: How Cost Competitiveness Is Changing Worldwide A report by The Boston Consulting Group, August 2014 Prepare for Impact: 3D Printing Will Change the Game An article by The Boston Consulting Group, September 2013 Behind the American Export Surge: The U.S. as One of the Developed World’s Lowest-Cost Manufacturers A Focus by The Boston Consulting Group, August 2013 The U.S. Manufacturing Renaissance: How Shifting Global Economics Are Creating an American Comeback An e-book, knowledge@Wharton, November 2012 U.S. Manufacturing Nears the Tipping Point: Which Industries, Why, and How Much? A Focus by The Boston Consulting Group, March 2012 for further reading note to the reader About the Authors Harold L. Sirkin is a senior partner in the Chicago office of The Boston Consulting Group. He is a coauthor of The U.S. Manufacturing Renaissance: How Shifting Global Economics Are Creating an American Comeback. Michael Zinser is a senior partner in the firm’s Los Angeles office and is a coleader of BCG’s Manufactur- ing practice. He is a coauthor of The U.S. Manufacturing Renaissance: How Shifting Global Economics Are Creating an American Comeback. Justin Ryan Rose is a partner in BCG’s Chicago office and the leader of the firm’s green energy topic in the Americas. He is a coauthor of The U.S. Manufacturing Renaissance: How Shifting Global Economics Are Creating an American Comeback. Acknowledgments This report would not have been possible without the efforts of Jenna Beletic, Matt Gambler, Tunuka Grey, Amy Helenbrook, Joel King, Stephanie Kuo, Chris Prochak, Brian Quist, and Lee Talbert. The authors would also like to thank Dave Fondiller, Lexie Corriveau, Madelaine Desmond, Beth Gillett, and Michael Petkewich for their guidance and interactions with the media, as well as Pete Engardio for his writing assistance. Finally, the authors would like to thank Katherine Andrews, Gary Callahan, Angela DiBattista, Lilith Fondulas, Kim Friedman, Abby Garland, and Sara Strassenreiter for their help with editing, design, and production. For Further Contact If you would like to discuss this report, please contact one of the authors. Harold L. Sirkin Senior Partner and Managing Director BCG Chicago +1 312 993 3300 sirkin.hal@bcg.com Michael Zinser Senior Partner and Managing Director BCG Los Angeles +1 213 621 2772 zinser.michael@bcg.com Justin Ryan Rose Partner and Managing Director BCG Chicago +1 312 993 3300 rose.justin@bcg.com
  • 27. © The Boston Consulting Group, Inc. 2015. All rights reserved. For information or permission to reprint, please contact BCG at: E-mail: bcg-info@bcg.com Fax: +1 617 850 3901, attention BCG/Permissions Mail: BCG/Permissions The Boston Consulting Group, Inc. One Beacon Street Boston, MA 02108 USA To find the latest BCG content and register to receive e-alerts on this topic or others, please visit bcgperspectives.com. Follow bcg.perspectives on Facebook and Twitter. 9/15
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