The fuzz and maybe even fear about robotics taking over jobs that used to be done by people is still growing. I came along an article about Nike, a company that’s always trying to be ahead of the curve in the sports market.
Probably everyone of you reading this knows what a Fitbit is, what some of you might not know is that Nike, already back in 2015, started working together with Flex, the high-tech manufacturing company that produces the Fitbit, among other products. Nike’s purpose of this partnership is to reduce the need for human labour, which is a great cost in the labour-intensive process of making a running shoe. In fact the required labour is as big as the 493000 line workers, working in 15 different countries. All involved in the production of just the Nike footwear. For all the products sold by Nike, its contracted factories employ 1.02 million workers.
Flex’s facility in Mexico has become one of Nike’s most important factories. Not only because of its increasing part in Nike’s total production, but also, maybe even more importantly, because of the developed innovations from there. Such as laser-cutting an automated gluing. Analysts from Citibank estimate that if all Nike’s 2017 Air Max would be produced by the Flex manufacturing process labour costs would be cut in half and material costs would be reduced by 20%. If almost one third of Nike’s footwear, sold in North America would come from Flex’ facilities, savings of 400 million USD would be possible based on labour and material cost reductions, increasing the earnings per share by 5%.
And although Nike said: “We don’t expect there to be any displaced workers. We are going to need just as many manufacturing jobs in our source base.”, they are also saying that production facilities will move closer to its key customers in North America.
This makes me wonder what will happen to the debate about abusing low-paid workers in developing countries after many of their jobs will be displaced.
Article can be found here: https://www.ft.com/content/585866fc-a841-11e7-ab55-27219df83c97
Hello nathan,
Interesting article. I wrote a blog that relates to this one. It is about robotics in the adidas factory. They may lead to radical insourcing, meaning that cheap labor abroad will be replaced by robotics (at home) in the future. Do you think this decision of nike will produce negative outcomes for the developing countries?
The trade-off between an increase in the use of technology and the decrease in need of labor, is ethically challenging. As stated in our literature, virtual activities do not eliminate the need for physical activities, but often amplify their importance. This is due to three reasons:
1. Virtual activities in one place often place greater demand on physical activities elsewhere in the value chain
2. Using internet in one activity can have systemic consequences
3. The internet can have some shortcomings (e.g. not able to physically examine goods etc.)
I believe that the third reason, “the internet can have some shortcomings”, is applicable to this case. Although the technology partially replaces human labor, there is still a need for human labor that physically examines the goods as the robotics cannot be trusted a 100%.
That is indeed a development that entails advantages and disadvantages. However, the underlying question is whether the jobs that these technologies replace are actually worthwhile to sustain, as many people work under almost inhumane circumstances. I personally think that Nike ́s statement is simply not true and that machines will replace these workers. However, this does not mean that no new opportunities will emerge. Not only do the machines used for the automated processes need to be produced, but also is the entire supply chain extremely long. Hence many jobs are created along this supply chain. While it may be a bit too idealistic, it may even be a big opportunity for the future, as knowledge, rather than manual work, becomes a scarce input that can only be utilized by educating the same people that are currently stitching shoes.
First of all, interesting article on robotics in factories. You end your blogpost with the question whether low paid factory workers will be displaced by robotics in the future. I think this question should be answered with yes but with a side note. First of all yes since the ethical aspect of production is becoming more and more important over the years. People want to have a transparent supply chain and not feel guilty on the products they have bought. So the pressure to move from low cost labor to more expensive labor in Europe or the USA would make sense. However the willingness to pay more for people is hard to predict. Because if only Nike would make a shift, maybe people would rather switch to another brand first. So therefore it should be a collective decision of multiple brands to do it. However, robotics would be able to lower the production cost on the long term as mentioned in your post. The side note I wanted to make refers to the fact that it is definitely a long term strategy that comes with a very high investment upfront. So If nike is going to switch from low cost labor to robotics, it would probably happen in stages rather than just at once but the switch to robotics is in inevitable since machine learning and AI are coming closer and closer to beating the human brain in all aspects.