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Smart Factories and its Viability in India

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A recent study from Capgemini Research Institute suggests that smart factories hold the potential of contributing at least $1.5 trillion to the global economy over the next four years through benefits such as productivity gains, improvements in quality and market share and customer services.

The research report, published by wire agency IANS further goes on to suggest that smart factories, leveraging digital technology, transformed 30 per cent of factories over the past two years. It said that 33 per cent of the organizations that planned to covert in 2017 have done so now. The report goes on to add that China, Germany and Japan were the top three countries adopting smart factories followed by South Korea, United States and France.

The list of countries adopting such technology and the fact that two-thirds of enterprises that committed to change in 2017 haven’t done so till date is quite suggestive. For starters, barring China, all the other countries mentioned in the list have little concern over unemployment. Now, juxtapose this Oxford Economics report against the Capgemini one and take a look again…

The Oxford Economics report published in says growth in AI, ML and robotics will lead to manufacturing job losses of up to 20 million over the next decade. It says approximately 1.7 million manufacturing jobs were lost since the turn of the millennium with the major chunk being in the US (260,000), followed by Europe (400,000) and China (550,000).

Given these numbers, it appears quite obvious that smart factories do take a tool on employment and with India facing the worst job creation record in close to half a century, such a move would be political suicide, not to speak of the economic hardship that it could bring forth – unless the enterprises that are going smart focus on reskilling and reinstating those that lose the jobs in parallel.

Viability of Smart Factories

The Capgemini report says that only one-third of the companies that sought to digital their operations ended up doing so in India. Quite obviously, the challenges would have related to labor trouble of some sort or the politicization of economic viability. Among those that recently went for automation was Schneider Electric that launched its second smart factory late last month.

During the launch event, Mourad Tamoud, Executive Vice President, Global Supply Chain at Schneider Electric said the company was deploying technology that could ease the jobs of humans and add more value so that the people can be used for jobs that added more value. At a time when manufacturing and IT jobs are in peril, such a comment does deserve some praise.

Of course, the company hasn’t given any details of how the smart factory would enhance productivity and what they intend to do to ensure that re-skilling and re-deployment happen at the same pace. Because, if job losses are the result of such automation, the time isn’t far when organizations would once again unionize and cause industrial unrest, demanding that the cost of their survival be borne by the company.

The Oxford Economics report says it as it must be said. It suggests that there are twice as many robotics-based activities in industry now as there was in 2010. If things move at about the current pace, there would be at least an 8.5 per cent reduction in the global manufacturing workforce by 2030. The report highlights that such displacement would affect the poorest in the under-developed regions. It says jobs that will be more prone to the robotization or automation include repetitive functions such as the work of warehouse.

The question now is whether one situation is preferable over the other. Enhancing productivity and profitability is what enterprises continuously seek, given that profit growth is all that their stakeholders care for. Continuing to employ a large labor force and making the process sluggish and inefficient cannot be the solution too.

There needs to be a middle path. And every such path leads to reskilling and redeployment, thus giving a human face to development. The government has several initiatives going on skill development, but without private sector participation, all these come to naught.

So, the answer to the problem likes in a PPP (public-private-partnership) whereby the latter define the skills of the future and the former goes about conducting and managing the training of people.

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