Automation has become a big buzzword in the technology field, but now it’s seeping into mainstream labor conversation – and it’s going to change the blue-collar work force, forever.
For many, automation translates directly into “robots.” Since 2012, videos have been released from both privately-funded robotics outfits and college-based, grant-funded workshops that operate out of places such as the Massachusetts Institute of Technology showing everything from a robotic spider, to a human “look-alike” jumping up on boxes. Viewers on one side may find fascination in such advances, while others feel a distinct sense of dread – usually fans of the “Terminator” movie series. Indeed, Artificial Intelligence (Terminator’s “Skynet”) continues to make leaps and bounds every year, now with the ability to create languages.
Well, those scientists shut that one down pretty quick.
At any rate, these two innovative processes only represent a small piece of the “automation” pie. In fact, when considering automation with regard to labor, robotics plays a very small part – mostly in manufacturing – and AI is still, for now, in testing phases and doesn’t have any wide-range, consistent usefulness.
The biggest culprit in replacing human jobs is basic automation, that is, software that replaces a step – or several – in a specific logistical process for any given company. For instance, a small metal fabrication company may employ five direct-sales people, and each sales person has a dedicated accounts payable assistant to handle order input, billing, payment recordation, and collection if necessary.
The metal fabrication company, in an effort to cut costs, employs a new customer relationship management (CRM) tool, which allows the sales person to seamlessly input a client’s order, and it then creates the appropriate billing, which it e-mails and asks for online payment, records that payment, and continues to e-mail until payment is received or the account hits collections, wherein a person makes a phone call.
Now the company only has to staff one person in accounts receivable, as opposed to five, and probably gets to drop the manager in that department. Does every company employ this method? No, but is it becoming popular among large corporations?
That’s a resounding “yes.”
Those large companies are all handling the transition differently. Walmart recently employed a Washington, D.C., economics firm to study the effect automation will have on its business model, after the Arkansas company provided them with its five- and 10-year plans.
The results? Layoffs, and lots of them, which will devastate rural communities, and be not-so-great for many suburban communities in which Walmart has become the sole purveyor of most goods, including food. The irony is not lost on those who have read the piece, considering Walmart itself was the main catalyst in communities becoming heavily reliant on the company.
Now, the company says, its work force will need training and new life skills to help with the transition, preferably provided by the government. The report skirted around the idea that even with that training, Walmart probably won’t need those employees anymore. On the other end of the spectrum, PepsiCo has begun to lay off people – a lot of people. The company expects to incur nearly $2.5 billion in pre-tax restructuring costs over the next four years, with 70 percent of that coming from layoffs.
Briefly – people in the South, who usually call any soda “Coke,” probably think to themselves, “Pepsi? They’re not that big, who cares?” With regard to visible food brands, PepsiCo is the largest, owning 22 food and beverage brands that generate more than $1 billion in revenue or more, per year. Former CEO Indra Nooyi stated that her workdays were 17 hours, seven days a week just to be able to keep it all straight. The company owns more than 50 brands worldwide, generates $108 billion in sales, and dabbles in manufacturing.
That part of the company is also taking a hit.
Here’s a quote from PepsiCo’s newest CEO, who was hired in October 2018:
“Our second set of priorities ... involves becoming more capable, leaner, more agile and less bureaucratic,” CEO Ramon Laguarta said. “In doing so, we will drive down cost and that enables us to plow the savings back into the business to develop scale and sharpen core capabilities that drive even greater efficiency and effectiveness creating a virtuous cycle.”
If that last part doesn’t sound like an evil genius villain creating an army of robots to take over the world, what statement would?
The part about less bureaucratic mess makes most sing out, especially considering current issues with Duplication of Benefits in Washington, D.C., or to anyone who followed the whole Comite River Diversion Canal mess.
However, the issue here is not efficiency and sharpening the tool that is these, as Laguarta put it, “core capabilities” to better serve clients. It’s the fact that the labor market is not yet prepared to handle massive layoffs of low- and medium-skilled workers. If the replacement of labor with automation becomes commonplace where, then, would these workers go?
What of the large number of bureaucrats and paper-pushers at any level of government? Are tech companies simply going to automate them right out of a job?
The answer, in the short term, is yes. The market adjusts, as it always does, wherein new businesses will form, and new markets will emerge to handle the influx. However, the initial sting will be painful unless training is offered in the way of software and hardware development.