Industrial Automation And Its Role In Generating Revenues

Research Questions

Discuss about the Industrial Automation and its Role in Generating Revenues.

Due to technological advancement, many industries have shifted from relying fully on human labour to industrial automation where human labour is not required. There are various industries that have implemented this technology. One of them is the automobile manufacturing industry such as Ford.  Apart from Ford automobile manufacturing industry, there are also other automobile manufacturing industries like General Motors, Toyota and Honda which have also implemented industrial automation in their production. Implementation of this technology has resulted in an increase in revenue generated by these industries (Noble, 2017). Increase in revenue is as a result of an increase in the production level which eventually has led to the increased sales level of these products.

Since industrial automation has helped in generating revenues in various automobile manufacturing industries like Ford, it is very essential to establish how industrial automation has helped these industries in generating revenue. The study will focus on how Ford which is an automobile industry has generated revenue due to the implementation of industrial automation in their manufacturing process. Therefore the study aims at establishing how Ford automobile industry has been able to generate revenues as a result of the implementation of industrial automation.

The objective of the study

• To establish how the implementation of industrial automation by Ford automobile manufacturing Industry has helped them in generating revenue.
• To determine how the implementation of industrial automation by Ford automobile industry has enhanced the increase in the output level of the company.
• To establish how the implementation of industrial automation by Ford automobile industry resulted in a reduction of cost of production.

Research Questions

• What is the effect of implementation of industrial automation on Ford’s revenue generation?
• What is the effect of implementation of industrial automation on Ford’s output level?
• What is the effect of implementation of industrial automation by Ford automobile on the cost of output? 

As a result of technological advancement, various industries especially automobile manufacturing industry like Ford have implemented the industrial automation in their manufacturing process which has greatly impacted their revenue generation. The idea of automation begun during the second world war in 1961 (Jammes, & Smit, 2005). It was first adopted by General Motors facilities. The robots were used to replace human and they did not perform every task. They used to perform spot welding successfully leading to an increase in output to cater for the high demand thus resulting to increase in revenue, which attracted various automobile industries including Ford to adopt this technology in their production.

 Globally, almost all the automobile industries have implemented Industrial Automation. In the United States of America (USA) for example, Ford Motors Company which came into existence in 1928 has implemented industrial automation which has resulted to increase in automobile output that caters for the high demand of this product and eventually enabling the company to generate more revenue. As a result of Industrial automation, Ford Manufacturing Company has been able to manufacture quality vehicles for several years. The output has also increased significantly and as a result, the revenue has also increased. The revenues from the sales of vehicles in the year 2017 raised from $152 billion in 2016 to $156.8billion in 2017 in the USA. There are also other companies in the USA that manufactured an automobile. Some of them include Toyota, Honda, and General Motors which has posted a very great challenge to Ford globally by reducing its market share (Groover, Weiss, Nagel, & Odrey, 1986).

Literature Review

In Asia Continent, there is also a Ford automobile company. It has also experienced a significant increase in revenue as a result of the increase in demand for the automobile. The increase in demand has been facilitated by the improved quality of the product. Both India and China have experienced the increase in revenue (Klepper, 2002). This is due to the increase in output since the robots used in car manufacturing can do a very huge amount of job in a minute which can be done by humans in an entire month or so. There are also Ford automobile companies in Africa in various countries such as Kenya and South Africa. They also experience an increase in revenue due to industrial automation.

In Australia, Ford automobile manufacturing company deals in manufacturing and distributing automobiles as well as automotive parts. The use of robots in the manufacturing process has also been implemented in Australia. The use of robots has a result to decrease in cost of production and increase in output since robots are capable of working very fast (Hounshell, 1985). 

In order to establish the effect of industrial automation by manufacturing company on the generation of revenue, a secondary method of collecting data was used; that is, articles, journals and books. In the USA, Ford automobiles introduced new robots with the capacity to do more jobs as years went by (Gereffi, 2001). This led to the reduction in a number of workers needed in the company. The less the number of workers needed in the company the less the cost of production since salary and training expenses would be cut because robots do not require salary or training like humans.  The few humans that are left to monitor the robots are left with little to do which leads to job satisfaction. Satisfied employees lead to quality work (Helper, 1991).

Since the robots have replaced human labour in automobile manufacturing, the cost of production has been reduced. This is because salary and training expenses have been reduced since robots only require maintenance which is not done on regular basis. As the cost of production has reduced, the possibility of reducing the cost of the automobile can be achieved without the risk of operating at a loss (Drucker, 2014). With the reduced cost of the vehicles, there has been an increase in demand which has led to increase in sales and eventually increase revenue. The reduction in the number of vehicles has enabled Ford automobile company to be competitively advantaged when compared to its competitors like General motor, Toyota and Honda (Chandler, 1990).

Research Methods

The output level has increased. This is due to operational efficiency since machines once set to work, are not subject to getting tired, being environmentally distracted like humans or being bored from the work given. With increased output level, Ford automobile has been able to meet the needs of its clients globally, considering that this company is a multinational organization with automobiles companies in various continents globally.  Increase in the level of output has helped the company to enjoy economies of scale. This is because the cost of producing the huge amount of products is lower than the cost of producing the very little level of any given product (Drucker, 2014).

Due to increased output and reduced cost of production, there has been an increase in the amount of revenue generated by Ford automobile company globally.  For example, in 2017, there was an increase in revenue from $152 billion in 2016 to $156billion in 2017 in the USA (Mowery, & Rosenberg, 1999). This is a clear indication that as a result of industrial automation, there has been a significant increase in revenue.

However, despite the fact that there are various advantages associated with Industrial automation enjoyed by Ford automobiles, there are various challenges that have been faced so far. They include the costs incurred in importing the robots to replace human labour. This is the case in all Ford companies globally. For example, in the USA, Ford is the leading importers of robots. By importing these robots, the company incurs an expense, both transportation and purchasing expenses. This results to increase the cost of production and eventually decrease in the revenues. Also, Ford faces stiff competition globally form other automobile industries like Toyota and Honda among others. The stiff competition has resulted in a continuous decrease in market share for this Company (Vesey, 1992).

Quality of the product is also enhanced by humans since robots cannot fully perform on their own. This makes it a challenge since the company relies on human labour to some extent, thus, incur the salary expense to pay employees and an additional expense that is incurred in importing the robots. 

It was established that as a result of industrial automation by Ford automobile company, the output level is enhanced through the automation and inventions. This is because the robots usually performed a very significant amount of task when compared to human labour. As a result, the company enjoyed economies of scale since the huge production of commodities meant that the cost of producing such commodity was reduced. With increased output level, revenue generated from the sales was enhanced.  This is because there were enough vehicles to meet the need of clients globally. The quality of the product was also enhanced. This is because the robots were able to complete the assigned task quickly thus allowing electrical engineers to focus on improving the quality of the finished product since these engineers are the ones responsible to monitor the robots as they perform the assigned task (Barrett, 1992). Output level was also increased as a result of the ability of the robots to be configured and be able to perform various tasks. This is not the case with humans since one can only perform the task that he or she is specialized in. In vehicle manufacturing, robots are capable of assembling all the dirty and hard parts of the vehicle, do welding and even painting of these vehicles.

The table below indicates the automobile produced by Ford worldwide from 2006. This is the period when the company adopted fully the use of robot and other artificial intelligent in the production in the assembling line.

Number of motor vehicle produced by Ford worldwide from 2006 to 2015(1000)

https://www.statista.com>statisti…

The figures express the number of automobiles produced per year. As indicated in the table, these numbers are very high compared to how it was when automation was not adopted. The number means approximately 1000 automobiles are produced per day.

Ford has been able to survive in the global market through wide investment on the technology and investment over the year. This has led to increase in the increase of revenues and ability to withstand global market.

Values in USD$ million

Source: https://www.stock-analysis-on.net,

As seen in the table above, the investment has been increasing drastically from 2010 to 2016. Most investment has been directed to new invention and automations. Fords limited has invested heavily on the automation of the processing line. This as explained above has led to increase in revenue and reduce the cost of productions. Increase on investment has been linked to increase on return on capital.

The data on the table is clear on the return on capital as a result of investment. The higher the investments in the automation the higher the return on capital and revenue. Revenues in 2017 was recorded highly while the investment was low. This is linked to the reduction in the cost of labor due to replacement of humans by robots and automated machines.

Sales revenue and market share of automobiles manufactures is linked to the automation adoption rates. The company like GM control the market share in terms of the revenues because it adopted automation earlier. The table below shows the revenues as in 2017 for different automobile manufacturers.

Automobile manufacturers market share/ revenues

.Source, https://www.statista.com/statistics/automobile.

Revenues has been proven to be inversely proportional to the adoption of innovation. Subaru is the least in the adoption of automation technology and as seen it is occupying the least in the market share. The same is true in the reduction of the cost as a results benefits of economies of scale linked to the automations.

The cost of production was reduced. This is because employees were reduced by over forty percent. They were replaced by robots that do not require salaries or regular training on how to get used to any new technology introduced into the company. Reduction in cost of production was also a result of economies of scale since robots performed the very huge amount of work when compared to humans. The amount of task that the robots can do in a minute can take a person a month or so to complete the same amount of task.

Revenue level was also enhanced. This is because of the high production level that met the needs of the customers. Various models of vehicles were produced which were demanded globally. Among the models produced include Ford GT, Ford Taurus, Ford Crown Victoria, Ford Flex, and Ford transit connect among others. All these models are sold at different prices depending on their quality. Unique models are demanded in various countries. For example, Ford F-series pickup is highly demanded in USA (Beynon, 1984).

It was also established that implementation of industrial automation by Ford automobile manufacturing  Industry was very necessary because other companies like General Motors had already implemented it. So, to remain relevant and to maintain their market share in the stiff competition, Ford automobile had to implement industrial automation as well. They also implemented because they realized it was a success in other automobile industries like General Motors from as early as the 1960s during the Second World War (Welch, & Nayak, 1992).

Despite the fact that industrial automation had so many benefits that were realized by Ford automobile as an increase in revenue generation and enhanced productivity, there are so many challenges associated with the implementation of industrial automation. These include the cost incurred in purchasing the robots and the transportation cost incurred since they were mostly imported.  Also, these robots require maintenance on regular basis, thus the need to set aside some cash to cater for such expenses. The fact that these robots cannot work on their own is a challenge because there must be workers present always to monitor these robots. These workers require salaries which is an expense to the company.

Below is the statistics showing the number of vehicles sold by Ford Motor Company from the fiscal year 2010 to the fiscal year 2017 by automotive segment in various continents globally (in 1000s). The productions as seen previously is linked to the automation.

https:www.statista.com>statistic 

Industrial automation began during the Second World War. The robots could not perform so many functions but as time went by, more advanced robots were manufactured. Ford automobile implemented industrial automation once they realized that it benefited General motors. Examples of these benefits include improved quality of the final product since the architects had enough time to do the final touches of the vehicles which led to improvement on its quality, new products were also designed since robots could be configured to suit the need at hand, thus, allowing the manufacturers to design new products. Increased output was also an advantage associated with industrial automation due to enhanced efficiency associated with robots. They used to do a lot of work compared to humans, in the shortest time possible. The work that robots could do in a minute was equivalent to what a human being could do in a month or so. Reduced cost of production is another advantage of industrial automation. This is achieved because the number of employees needed in these industries is reduced by over forty percent and replaced by machines that do not require salary or regular training like humans.   They also wanted to maintain their market share since competition from other automobile manufacturing industries like Toyota, Honda and General Motors was very stiff.

Industrial automation by ford automobile manufacturing industry resulted in significant increase in revenue. For instance, from $252billions in 2016 to $256.8billion in 2017 in the USA. This was a great achievement considering that competition was very stiff from other automobile manufacturing industries. However, as a result of competition from other automobile manufacturing industries like Toyota, the global market share initially enjoyed by Ford has significantly reduced. In countries such as India and China in Asia continent experienced a significant decrease in the sales level. To maximize sales, they had to reduce the cost of vehicles. This helped them to attract more buyers. However, reducing the cost of the vehicle meant that the company would lose profits as possibly operate at a loss.

Being a multinational business from the USA to Asia and Africa enabled Ford automobiles manufacturing industry to secure a wider market share globally through the share reduced due to stiff competition. Variety of model sold by Ford ranging from Ford Eco Sport, Ford Escape and Ford Mustang catered for different needs of people globally hence, guaranteeing a market for Ford automobile products. 

Conclusion

It was established that industrial automation implementation by Ford has resulted to various benefits from the improved quality of output which was as a result of enough time electrical engineers were left with when robots were left to do assembling of the vehicle parts . Engineers were left with enough time to finalize on the products, that is, the vehicles. By so doing, they finalized the vehicles in a very quality manner. Output also increased due to operational efficiency enhanced by robots.  Revenue increased due to increased sales of the vehicles of different model globally. Increased sales were facilitated by high output level of different variety of vehicles that catered to the needs of customers globally.

There were challenges faced as a result of the implementation of industrial automation by Ford automobiles manufacturing industry. Among them include the cost of purchasing the robots, cost of transporting these robots since they were imported from other countries. The cost of maintaining these robots was also to be set aside. Thus, increasing the cost of production. Increased competition from other companies was also a challenge. It led to a reduction in demand of Ford automobile vehicles in China and Asia forcing Ford automobile company to operate at a loss.

 Since there are so many advantages associated with industrial automation in various industries as evidenced by the benefits experienced by Fords automobile, there is need for various industries to adopt industrial automation so that they can increase their revenues, improve their output level, reduce the cost of production and enhance the quality of the product as a result. However, the challenges faced should be solved so that operational efficiencies can be enhanced. To solve  the issue of cost of robots, high-quality ones that last longer should be purchased. This will save on the cost of purchase and maintenance as well, thus reducing the cost of production. Advanced robots should be bought so that they can work on their own without the need of any human labor to supervise them during vehicle assembling.  To curb competition and to focus on increasing market share, the industry should sell the vehicles at an affordable price compared to that of their competitors like Toyota and Honda. By so doing, they will be able to gain competitive advantage.    

Reference

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