Prometheus Blogs

Henry Ford's Secret Weapon

02/10/2015

“We don’t want automation, it destroys jobs, and we don’t have two or three million to spend on automation anyway.” That’s what a procurement agent told me when I suggested that automation could help her organization reduce errors and speed up procurement. It seems deeply ironic that someone charged with ensuring purchasing efficiency would choose a laborious and error laden process, without market research (the price she feared was more than ten times higher than we would have bid) or a cost/benefit analysis.

Ideally, organizations exist to deliver some kind of value. Most businesses are brought into existence to deliver value to shareholders, by selling products and services that customers value more than the amount they pay. It’s well and good for a company to benefit society as whole, and that doesn’t pay the bills: businesses need to be profitable, or die. Governmental efforts, on the other hand, are intended to provide benefits to society that leaders deem more valuable than the tax burden necessary for funding. Organizations are able to deliver more value for a given cost, or the same value at a lower cost, when the expense of delivering value is minimized.

Human labor is both expensive and error prone. For tasks that can be fully or partly automated, there is an initial cost reduction from reduced labor, and a subsequent (possibly even larger) cost reduction resulting from reduced trouble shooting and rework. Provided, of course, the automation is implemented correctly.

It therefore seems clear that from the perspective of upper management, automation ought to be embraced, provided the cost and risk of setting up the automation doesn’t outweigh the savings.

Does anyone really lament the elimination of coal mine "drawer" jobs?

Does anyone really lament the elimination of coal mine “drawer” jobs? Drawers (also called hurriers) worked 12-hour days to pull a “corf” of coal through tunnels as low as 16 inches. Drawers were often children, or assisted by children.

The effect of automation on society is less clear. Some have despised automation at least since the beginnings of the Luddite movement in 1811. Automation has been blamed for elimination of jobs, social alienation of workers, insufferable working conditions, and low wages. Some of these charges are valid. Automation has all but eliminated some job categories, such as travel agents and telephone operators. Our society certainly hasn’t imploded, and many of the eliminated jobs were not terribly desirable. Does anyone really lament the disappearance of “drawer” jobs? There are clear counter examples for some of the complaints against automation. Henry Ford was famous for paying very high wages. Of course the money to pay those high salaries didn’t appear from thin air: it was made possible by the cost savings resulting from the higher productivity of workers assisted by automation: Ford began using a large scale moving assembly line in 1913. The idea seems to have been brought to Ford by William Klann, after he observed a “disassembly line” at a slaughterhouse. Despite the higher salaries, Ford accumulated $60 million of extra capital by 1916. Ford captured half the domestic automobile market by 1920.

Ford model T

Ford’s reduction of chassis assembly time, from 12.5 hours down to 1.5 hours gave Ford a huge competitive advantage.

Others expected automation to result in liberation from drudgery and back breaking labor, and a life of luxury for everyone. John Maynard Keynes thought technology would result in shorter work weeks rather than unemployment. Henry Ford did reduce the work week to 40 hours in 1926, and the rest of the country followed when the 1938 Fair Labor Standards Act established a 40 hour work week.

Nowadays many are concerned about outsourcing to third world countries. Inexpensive labor is very attractive for any organization that wishes to become more competitive or more productive. I’ve seen several claims that people have witnessed lawns being cut with scissors in parts of China, Korea, and India. It’s hard to compete with labor that inexpensive, without automation. Of course automation doesn’t mean workers chained to an assembly line. More often than not, automation makes workers more efficient rather than making them superfluous.

Automation can often help organizations consistently track and deliver higher levels of productivity, cost effectively. Automation can also be an expensive boondoggle. That’s why Prometheus has invested heavily in automating the process of automation.


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