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Efficiency and Lower Costs: Is Automation the Solution?

Posted on June 16, 2021 by

Bryan Powrozek

Bryan Powrozek

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When it comes to automation, the future is here—and it’s getting brighter.

Across industries and across the globe, manufacturers have realized that industrial automation is one of the fastest ways to cut costs and improve efficiencies. Some manufacturers use robots to consolidate entire workforces and others use collaborative robots, referred to as cobots, that work side-by-side with people to offset the need for personnel. Robot densities continue to grow across regions, with Singapore and South Korea boasting nearly a 10% automated workforce, and many others—such as Germany, the United States, and China—hovering between 2% and 3.5%.

Companies have maintained and built upon their investments in automation over the past decade. From 2010 to 2018, the major industrial economies of the world installed nearly 2.2 million industrial robots. But, as with many other industries, the global economic downturn led to the first decline in industrial automation sales in nearly a decade. The downturn was led by the automotive and electronics sectors—the main consumers of automated robotic products —which suffered both from a global economic downturn and a trade conflict between China and the United States.

Despite the short-term challenges of 2019 and 2020, industrial automation is poised to bounce back. Companies not only gain value through a workforce made more resilient by automation, but in the U.S. they are also eligible for the R&D tax credit, a generous part of the tax code that eases the costs of innovation.

Strong Signals

Despite some flagging numbers from as early as 2019, there are signs of strength in the market. More robots were deployed than ever before—the worldwide operational stock has climbed past 2.7 million, having increased exponentially year-over-year in the past decade. Over the past three years, the growth in stock has been reflected in industries beyond just automotive and electronics, such as metal and plastic manufacturing, food, and other deployments. The sales volume of collaborative industrial robots also grew in 2019, reaching 18,000 gross sales for the first time, a 63% increase in two years.

Cementing Robotics’ Place

If there was ever a year to show just how important robotics are, 2020 was it. Although COVID-19 disrupted the robotics industry by hamstringing global supply chains, it also accelerated the global dependence on the very robots they manufacture.

Automation is now critical to the supply chain because unlike their human counterparts, they are not susceptible to the same biological or physical harms that come with viral infections and do not need to be socially distant from one another on the manufacturing floor. Absent a global pandemic, their reliability is just as durable, never having to take time off and being able to run 24-hour shifts.

The Recovery

These realizations combined with the trends that have become apparent during the pandemic are why the robotics industry should be confident that the global recovery will bring their industry roaring back. There is increased demand for automation in areas never seen before, such as healthcare and the production of personal protective equipment. As a result of this widespread disruption, companies across industries are modernizing how they do business, digitizing and automating much of what was once done manually.

The diversification of supply chains that is likely to come in the next few years is also expected to benefit the robotics market. When COVID-19 rocked China in early 2020, products and manufacturing around the globe were brought to a halt—even before the virus hit other regions—because so many materials and base products are made in China before they are shipped to other major economies like the U.S. and Europe. It was a massive failure of supply chain operations, and the result is that companies and their governments will work to bring suppliers home in the coming years. Although it will come at different times for different regions, the ultimate result will be accelerating production and stock of industrial robots.

Taking Advantage of the R&D Tax Credit

As companies in the United States ride the wave of automation that is sure to come over the next ten years, they should do so with the R&D tax credit at the top of mind. Enacted for the first time in 1981 and then made an official part of the tax code by President Obama in 2013, the credit makes up to 13% of spending on qualified expenses eligible for a federal tax credit. It’s an enormous incentive that has the potential to ease the significant costs related to automation in the 21st century.

The key is knowing what to claim as R&D and making sure it is classified correctly under the tax code. The code applies to many fields outside of robotics, but within the industry is generally relevant to any major automation expenses on the design, manufacturing, or implementation side. Manufacturers can claim resources allocated to designing new machinery or manufacturing the tech, and digital systems fall under the same code as well. This means that software, process control, programmable logic controller (PLC), radio-frequency identification (RFID), and dozens of other digital systems manufactured and used in industrial automation are also eligible for the credit. Automated control systems for companies that have a need to coordinate machinery remotely or from a mobile device are eligible too. The possible applications are robust.

Industrial automation is a proven commodity. Although the growth in 2019 was weaker overall than years prior and fell more in 2020, industrial robotics is poised to come back stronger than ever in the years to come. In fact, global shipments are forecasted to rise over nine percent this year, and a 4.6 percent CAGR is anticipated between 2021 and 2024. With the added advantage of the R&D tax credit, it is an opportunity that 21st century companies can’t afford to turn down.

Contact Us

If you would like to learn more about the acceleration of industrial automation and how it can help you cut costs and improve efficiencies in your business, we can help. Contact us today to learn more. We look forward to speaking with you soon.

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Bryan Powrozek

Senior Manager, Industrial Automation

As the leader of the firm's industrial automation group and host of The Sound of Automation podcast, Bryan helps owners free up cash flow and scale their businesses.

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