Driverless Vehicles Designed for Small Manufacturers

(c) 2017 Vecna Logistics

Today’s AGVs (automated guided vehicles) are more advanced than a decade ago. The machines are now faster, safer, easier to program, more precise and less expensive. Better throughput, productivity, and cost-effective technology are now available to even the smallest manufacturer or distributor who have been ignored for far too long.

With e-commerce exploding and customer expectations on the rise, distribution and fulfillment centers as well as third party logistics (3PLs) providers need an innovative way to reduce costs and increase throughput. Low-infrastructure solutions to automate material handling needs includes case picking, each picking, goods-to-person, person-to-goods, and robot-conveyor hybrid systems.

Globally manufacturing accounts for more than 12 percent of GDP in the economy. For every $1.00 spent in manufacturing, another $1.81 is added to the economy. That is the highest multiplier effect of any economic sector. In addition, for every worker in manufacturing, there is another four employees hired elsewhere. There is new research according to the National Association of Manufacturers (NAM), suggesting that manufacturing’s impacts on the economy are even larger when considering the entire manufacturing value chain plus manufacturing for other industries’ supply chains. That approach estimates that manufacturing could account for one-third of GDP and employment. It also estimated the total multiplier effect for manufacturing to be $3.60 for every $1.00 of value-added output, with one manufacturing employee generating another 3.4 workers elsewhere. During the stubborn recession, it was more difficult to cost-justify purchasing AGVs. Manufacturers could legitimately argue that despite the efficacy of automation, labor was inexpensive and widely available. All of that has changed. 

Adding to the complexity of the workforce is the aging-out of skilled labor. While the unemployment rate is low there are over six million unfulfilled manufacturing jobs. There is a mismatch of skills possessed versus skills needed. Robotics solutions are going to make up a larger and larger share of jobs that go unfulfilled.

The average manufacturing worker in the United States earned $81,289 annually, including pay and benefits. The average worker in all nonfarm industries earned $63,830. Looking specifically at wages, the average manufacturing worker earned nearly $26.00 per hour, according to the latest figures, not including benefits. (Source: Bureau of Economic Analysis and Bureau of Labor Statistics)

Manufacturers have one of the highest percentages of workers who are eligible for health benefits provided by their employer. Indeed, 92 percent of manufacturing employees were eligible for health insurance benefits, according to the Kaiser Family Foundation. This is significantly higher than the 79 percent average for all firms.

Manufacturers have experienced tremendous growth over the past couple decades, making them more “lean” and helping them become more competitive globally. Output per hour for all workers in the manufacturing sector has increased by more than 2.5 times since 1987. In contrast, productivity is roughly 1.7 times greater for all nonfarm businesses. Note that durable goods manufacturers have seen even greater growth, almost tripling its labor productivity over that time frame.

Over the next decade, nearly 3.5 million manufacturing jobs will likely be needed, and 2 million are expected to go unfilled due to the skills gap. Moreover, according to a recent report, 80 percent of manufacturers report a moderate or serious shortage of qualified applicants for skilled and highly-skilled production positions. (Source: Deloitte and the Manufacturing Institute)

Exports support higher-paying jobs for an increasingly educated and diverse workforce. Jobs supported by exports pay, on average, 18 percent more than other jobs. Employees in the “most trade-intensive industries” earn an average compensation of nearly $94,000, or more than 56 percent more than those in manufacturing companies that were less engaged in trade. (Source: MAPI Foundation, using data from the Bureau of Economic Analysis)

Over the past 25 years, U.S. manufactured goods exports have quadrupled. In 1990, for example, U.S. manufacturers exported $329.5 billion in goods. By 2000, that number had more than doubled to $708.0 billion. In 2014, it reached an all-time high, for the fifth consecutive year, of $1.403 trillion, despite slowing global growth. With that said, several economic headwinds have dampened export demand since then, with U.S. manufactured goods exports down 6.1 percent in 2015 to $1.317 trillion.    

World trade in manufactured goods has more than doubled between 2000 and 2014—from $4.8 trillion to $12.2 trillion. World trade in manufactured goods greatly exceeds that of the U.S. market for those same goods. U.S. consumption of manufactured goods (domestic shipments and imports) equaled $4.1 trillion in 2014, equaling about 34 percent of global trade in manufactured goods. (Source: World Trade Organization)

Taken alone, manufacturing in the United States would be the ninth-largest economy in the world. With $2.1 trillion in value added from manufacturing in 2014, only eight other nations (including the U.S.) would rank higher in terms of their gross domestic product. (Source: Bureau of Economic Analysis, International Monetary Fund)

Foreign direct investment in manufacturing exceeded $1.2 trillion for the first time ever in 2015. Across the past decade, foreign direct investment has more than doubled, up from $499.9 billion in 2005 to $1,222.9 billion in 2015. Moreover, that figure is likely to continue growing, especially when we consider the number of announced ventures that have yet to come online. (Source: Bureau of Economic Analysis)

Even the Smallest Manufacturers Now have an AGV Option

Manufacturers are investing in AGVs to improve plant-floor efficiency and reduce operating cost. Due to the high cost of entry, automated guided vehicles were only found in warehouses, automotive assembly plants, and other operations with large amounts of floor space. Low unemployment combined with recent advancements have made the machines more appealing to small- and mid-sized manufacturers in a wide variety of industries. 

As the flexible technology is now more affordable and easier to use on assembly lines, many smaller manufacturers and single location distribution centers are deploying driverless carts, robotic parts bins, and autonomous tuggers. Manufacturing engineers have best-practice lean manufacturing solutions which are driving prices down making these solutions available to everyone.

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John Hayes, Vice-President, Sales & Logistics, Vecna Logistics

John Hayes, Vice-President of Sales and Logistics for Vecna Logistics, is a widely-respected thought leader for the manufacturing, distribution, and materials handling industries. For more than twenty years he has been evaluating, designing, developing, and implementing innovative software and hardware solutions, with a particular focus in the AGV (automated guided vehicle) space. Hayes is a Supply & Demand Chain Executive "Pros to Know" recipient.  Contact Hayes at This email address is being protected from spambots. You need JavaScript enabled to view it.. Follow on Twitter @VecnaLogistics

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