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OM in the News: The March of Robots into China

December 10, 2012
Welding robots at Great Wall's Tianjin plant

Welding robots at Great Wall’s Tianjin plant

Step into the factory of Chinese SUV and truck maker Great Wall Motors, writes Businessweek (Nov.30-Dec.6,2102), and it’s easy to forget you’re in China. Swiss-made robots pivot and plunge, stamping metal door frames and soldering them to the skeletal vehicle bodies of a mini-SUV. Workers in hard hats are few and far between. “With automation, we can reduce our head count and save money,” says Great Wall’s manager, who has invested $161 million (about $50,000/robot) into mechanizing 4 plants with 1,200 robots. “Within three years, this cost will be completely paid for in savings from reduced worker wages.” After the robots were added, the number of welders dropped from 1,300 to around 400.

Last year sales of industrial robots in China reached 22,577 units, up 51% over 2011. That puts China just behind Japan and S. Korea, but ahead of Germany and the U.S., in the purchase of new robots. China is on track to become the world’s largest robot market by 2014. One factor driving the switch to robots is demographics. Next year China’s labor force will peak at 1 billion before starting to shrink. Labor shortages are already common and are driving wage inflation– up around 20% annually recently.

For the textile industry, facing ever-narrower margins, automation may be the only alternative to shutting down or moving. While some factories relocated to lower-wage Cambodia and Vietnam, sweater maker Milo’s Knitwear upgraded. After spending $1.9 million for 29 Japanese stitching machines, its factory has reduced staff from 140 workers to 6. Worker protests have also sped up the automation trend. Labor unrest at Foxconn has forced shutdowns at several of its facilities. Last year the company announced the ambitious goal of adding a million robots within three years. Foxconn will have at least 30,000 robots in China by year-end.

Discussion questions:

1. Why is automation such an important OM decision in China?

2. How has automation impacted manufacturing jobs in the U.S?

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