You Can Rent a Robot—for Less Than Paying a Human
Automation is reaching more companies, imperiling some jobs and changing the nature of others.
POLAR MANUFACTURING has been making metal hinges, locks, and brackets in south Chicago for more than 100 years. Some of the company’s metal presses—hulking great machines that loom over a worker—date from the 1950s. Last year, to meet rising demand amid a shortage of workers, Polar hired its first robot employee.
The robot arm performs a simple, repetitive job: lifting a piece of metal into a press, which then bends the metal into a new shape. And like a person, the robot worker gets paid for the hours it works.
Robots fill labor shortage void ahead of holiday season https://t.co/1rHzL4ZqzK
— Warehouse Automation (@WarehouseAutom2) December 29, 2021
Jose Figueroa, who manages Polar’s production line, says the robot, which is leased from a company called Formic, costs the equivalent of $8 per hour, compared with a minimum wage of $15 per hour for a human employee. Deploying the robot allowed a human worker to do different work, increasing output, Figueroa says.
“Smaller companies sometimes suffer because they can’t spend the capital to invest in new technology. We’re just struggling to get by with the minimum wage increase.”
"Smaller companies sometimes suffer because they can't spend the capital to invest in new technology,” Figueroa says. “We're just struggling to get by with the minimum wage increase.”
The fact that Polar didn’t need to pay $100,000 upfront to buy the robot, and then spend more money to get it programmed, was crucial. Figueroa says that he’d like to see 25 robots on the line within five years. He doesn’t envisage replacing any of the company’s 70 employees, but says Polar may not need to hire new workers.
Formic buys standard robot arms, and leases them along with its own software. They’re among a small but growing number of robots finding their way into workplaces on a pay-as-you-go basis.
The pandemic has led to shortages of workers across numerous industries, but many smaller firms are reluctant to write big checks for automation.
“Cost declines are great for the diffusion of a technology.”
“Anything that can help reduce labor count or the need for labor is obviously a plus at this particular time,” says Steve Chmura, chief operating officer at Georgia Nut, a confectionery company in Skokie, Illinois, that has been struggling to find employees and also rents robots from Formic.
The robot-as-employee approach could help automation spread into smaller businesses more rapidly by changing the economics. Companies such as Formic see an opportunity to build large businesses by serving many small firms. Many are mining the data they collect to help refine their products and improve customers’ operations.
“Few businesses know how to use robots. “It’s going to take longer than people think.”
Shahan Farshchi, an investor in Formic, likens the state of robotics today to computing before personal computers took off, when only rich companies could afford to invest in massive computer systems that required considerable expertise to program and maintain. Personal computing was enabled by companies including Intel and Microsoft that made the technology cheap and easy to use. “We’re entering that same time now with robots,” Farshchi says.
Robots have been taking on new jobs in recent years as the technology becomes more capable as well as easier and cheaper to deploy. Some hospitals use robots to deliver supplies and some offices employ robotic security guards. The companies behind these robots often provide them on a rental basis.
Jeff Burnstein, president of the Association for Advancing Automation, an industry body, says rising demand for automation among smaller companies is driving interest in robotics as a service. The approach has seen particular traction among warehouse fulfillment firms, Burnstein says.
It might eventually become normal to pay robots to do all sorts of jobs, Burnstein says, pointing to RoboTire, a startup developing a robot capable of switching the tires on a car. “As more and more companies automate in different industries, you’re seeing more receptivity to robotics as a service,” he says.
The International Federation of Robotics, an organization that tracks robot trends globally, projected in October that the number of robots sold last year would grow 13 percent. One market analysis from 2018 projected the number of industrial robots that are leased or that rely on subscription software will grow from 4,442 units in 2016 to 1.3 million in 2026.
“Cost declines are great for the diffusion of a technology,” says Andrew McAfee, a principle research scientist at MIT who studies the economic implications of automation.
McAfee says robots themselves have become cheaper and more user friendly in recent years thanks to the falling cost of sensors and other components, a trend that he expects will continue. “They are the peace dividend of the smartphone wars,” he says.
The sky’s the limit for robots at airport operations https://t.co/27WWPSmulQ
— Warehouse Automation (@WarehouseAutom2) January 9, 2022
Dustin Pederson, CFO of Locus Robotics, a company that leases robots for use in warehouses, says his company’s revenue has grown sixfold over the past year amid rising demand for ecommerce and a shortage of workers. “To be able to step in with a subscription model makes automation a lot friendlier,” Pederson says. “And we are still early on in the overall adoption of robotics in the warehousing industry.”
It’s unclear—even to economists—what impact the growing use of robots will have on the supply of jobs. Research from Daron Acemoglu and Pascual Restrepo, economists at MIT and Boston University, respectively, suggests that the adoption of robots from 1990 to 2020 resulted in fewer jobs and lower wages overall.
But one study of robot adoption in Japanese nursing homes, from January 2021, found that the technology helped create more jobs by allowing for more flexibility in working practices. And another study, from 2019, also found that robot adoption among Canadian businesses had often affected managers more than workers by changing business processes.
Lynn Wu, an associate professor at the University of Pennsylvania's Wharton School and a coauthor on the 2019 study, says she expects robots paid by the hour to become more common. But she notes that in contrast to many information technologies, few businesses know how to use robots. “It’s going to take longer than people think,” she says.
For now, most robots found in industrial settings are relatively dumb, following precise movements repetitively. Robots are gradually becoming smarter thanks to use of artificial intelligence, but it remains very challenging for machines to respond to complex environments or uncertainty. Some researchers believe that adding AI to robots will prompt companies to reorganize in ways that have a bigger impact on jobs.
Saman Farid, CEO of Formic, says the company hopes to position itself to be able to offer more capable robots to all sorts of companies in the future. “Robots are going to be able to do a lot more tasks over the next 5 to 10 years,” Farid says. “As machine learning gets better, and you get to a higher level of reliability, then we’ll start implementing those.”
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