GRS’s Hongming Chen on the robots bringing manufacturing and logistics back home

Moving industrial and manufacturing facilities to countries with lower labour costs has long been seen as a convenient way for Western brands to keep the quality of products high while reducing costs. It has been so successful that very little of what is bought by Western consumers is produced on home turf any more.

However, even before Covid-19, a political shift was taking place in countries worldwide, particularly in the UK and US, with a growing desire to bring jobs closer to home. It’s no surprise that political leaders like former US president Donald Trump have been vocal about ‘bringing jobs back’, as nearshoring appeals to voters.

The significant supply chain disruption that has unfolded in recent years has elevated the issue beyond politics; stock shortages are bad for business and frustrating for the consumer.

This has added to the argument for moving manufacturing, packing and distribution closer to consumers. Nearshoring enables businesses to build supply chain resilience; in today’s environment, this has become more strategically important than cost. Whilst nearshoring often requires greater capital expenditure, many businesses cannot afford to do without it.

However, there are solutions at hand to help manage costs and give companies a strategic advantage. Robotics and automation are adding to the business case for nearshoring by reducing the cost differential. There are two key factors at play here.

Low-skilled, labour-intensive manufacturing and logistics work has given countries with lower labour costs an advantage, but robotics and automation mean far fewer staff are required for repetitive manual tasks. Using robotics does require highly skilled staff, creating opportunities in areas like software and management, but overall staff numbers are far lower than using more traditional manual labour.

The cost of robotics and the technology required has been steadily coming down, while wages keep going up. The cost of running a robot in China today is not vastly different from running a robot in the UK. These robots typically only require a five-minute charging break after four hours of use and their energy costs can be measured in pennies.

Robotics also allow more efficient use of space. Racking systems can be positioned closer together and items stacked higher, leading to real estate cost savings. This is a particularly strong advantage for locations where logistics and industrial space is at a premium, like the UK, or in urban, last-mile delivery sites.

Businesses adopting this tech not only reduce overall costs, but make business models more resilient to wage inflation. Suddenly, nearshoring doesn’t look as prohibitive in terms of costs compared to offshoring, while having the strategic advantage of a localised supply chain.

Politicians, meanwhile, get a good inward investment story because industrial and distribution hubs relocating to home shores create new high-skilled, high-paid jobs where they didn’t previously exist.

The trend is gathering momentum, and it is a two-way benefit stream. Robotics is accelerating much-needed nearshoring, and nearshoring is accelerating the uptake in robotics.

Businesses with higher margins and higher-skilled staff are nearshoring more quickly than low-margin, lower-skilled industries such as fashion. The barriers to adoption include the capital cost of the equipment, coupled with the need for a team skilled in the appropriate hardware and software to run it.

Big businesses are leading the way, as they have economies of scale and can afford their own teams of engineers. But for medium-sized businesses lacking the same resources or staff, adopting robotics is understandably a slower process.

There are ways to mitigate the risk and upfront costs. A new breed of robotics-as-a-service (RaaS) provider is emerging, providing turn-key robotics solutions on a subscription-based model, similar to software-as-a-service in enterprise software. These RaaS solutions can be dialled up or down depending on demand, for example, during peak periods such as Christmas or Black Friday, meaning customers can pay for additional support when they need it most and avoid unnecessary outgoings at other times.

Getting started with robotics is the most difficult step for businesses, but the effects and benefits soon snowball. Robots are leading a new home-grown industrial revolution.

Hongming Chen is chief executive of Global Robotics Solutions