Manufacturing industries are becoming more automated and efficient
Automation and artificial intelligence, long the stuff of science fiction, have become an undeniable reality in the current global economy. The United States, in particular, is at the forefront of leveraging factory automation, artificial intelligence, and machine learning to make manufacturing, transportation, and food production, among a range of other industries, smarter, safer, and more efficient.
A report from Markets and Markets estimates the global industrial automation market will grow to $153b by 2022, translating to a 5% compound annual growth rate (CAGR). The report highlighted distributed control systems (DCS) as the largest segment, driven by increased demand among the electric power generation and oil & gas industries. It further noted that the manufacturing execution system (MES) and manufacturing operations management (MOM) segment is expected to grow the fastest in the near-term as manufacturers are focused on cutting cots, improving operations, and optimizing asset utilization. The opportunity created by automation for American businesses appears to be substantial as the U.S. looks to incentivize manufacturing.
A McKinsey study estimates that approximately half of all activities people are paid to do in the Global workforce could be automated through current technologies, amounting to approximately $15 trillion in wages. While automation may cause a change in the nature of work for many, automation will not necessarily displace workers on a mass scale, as people will be critical in working alongside machines as automation is deployed across a range of industries. In fact, some argue that the overall increase in productivity and wages created will stimulate the economy to the point that increased demand will necessitate new job creation.
Investors have taken notice, with the Global Robotics and Automation Index ETF (Nasdaq GM:ROBO) outpacing the S&P 500 over the past year. Globally, investors are anticipating the need for increased automation services across a range of industries.
Manufacturers of everything from cars to kitchen appliances, as well as all links of the global supply chain, will need to invest in automation to remain competitive. One such case in point is Ford’s recent $1b investment in Argo AI, a Pittsburgh-based startup focused on autonomous vehicles. Old-line manufacturers are likely to look to M&A and corporate venture capital investments as a means of increasing their automation IQ and remaining competitive.
Automation provides an opportunity for private equity firms to partner with engineers, systems integrators, and consultants with automation expertise to better understand inefficiencies during due diligence and increase post-acquisition ROI within their portfolio companies. Our automated future is now a reality and companies that can be innovative, nimble, and leverage technology to enhance their core competencies stand to come out as winners.
Neil Churman, director, 7 Mile Advisors. This article originally appeared on 7 Mile Advisors’ blog. 7 Mile Advisors is a CFE Media content partner. Edited by Chris Vavra, production editor, Control Engineering, CFE Media, firstname.lastname@example.org.