Japan’s advanced automation processes have been well-known for a long time. Back when I was closely monitoring the country’s manufacturing industries in 2005, “mujin” was an industry buzz word that meant “full automation with no human workers.” Heavy machineries and autos were already highly automated. At the time, the world’s leading makers of photo copiers were planning to build mujin factories to produce ink cartridges, and expand the same automated concept to the assembly of photo copier hardware.

Aside from the obvious cost of labor savings, there are many other benefits to automation. Automation makes for easier quality control, especially for large production volumes. It also ensures stable production—theoretically mujin factories can run 24 hours a day without the need for scheduling labor shifts. In addition, it allows management to protect and keep secret their technology and knowhow when moving production lines overseas. The decision to automate fully or just partially, however, depends on several conditions such as specific quality control needs, as well as the level of demand for a product and wage expectations for industry workers.

China, which once offered the world abundant cheap labor, has been facing both a labor shortage and wage inflation. This has not only been due to its own high domestic growth, but also due to changing demographics—those aged 20 to 44 in China peaked in 2000, then declined from 2000 to 2008 by nearly 4%, according to China's Census and Economic Information Center (CEIC). More than 400 million rural migrant workers who once needed to relocate far from home to find jobs in major urban coastal centers are now able to seek job opportunities closer to home as China promotes the development of smaller urban centers throughout the country, improving living standards near rural inland areas.

Automation is one of the many possible solutions for China. There is plenty of room for China to catch up with its industrialized Japanese neighbor. China’s current level of industrial automation is comparable to that of Japan in the early 1980s, based on the percentage of computerized machine tools, the market size of the core machinery components needed for factory automation, and the level of automation in vehicle manufacturing.

In my recent trips to China, I have observed that an even wider variety of industries are now planning such automation efficiencies. For example, the head of a national noodle chain restaurant recently said during a meeting that the next big challenge is to increase the level of automation in its eat-in restaurants. The firm hopes to equip its restaurant kitchens with robot arms used to do things like set bowls, pour water, drop uncooked noodles into boiling water and place toppings into bowls of cooked noodles. While the typical worker can handle a maximum of two bowls, a robot arm can prepare up to six bowls simultaneously. This should not only help improve productivity, but also enable the noodle chain to accelerate expansion by eliminating the time needed to train employees.

At a time when many market pundits are worrying about the demise of cheap Chinese labor, these stories serve as examples of how the increase in wages is not just a challenge for companies but also a profitable opportunity for them.

 

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