Net Net: Promoting innovation and managing change
Net Net: Promoting innovation and managing change

An egg-handling robot touches a delicate question about jobs of the future

This wholesaler processes 201,600 eggs per hour with robots

In many respects, what's happening at CMC Food today is already a thing of automation's past. When the Fanwood, New Jersey-based farm-fresh egg manufacturer built a new production facility, it made a big investment in automation, placing robotic egg workers on the line with humans.

Food industry experts say, in what is typically a low-margin business like food manufacturing, volume is everything and CMC Food's move isn't unique — it's the only way to keep up with competitors. "I've seen robots picking croissants off the line and imagine how delicate that is, but they do it without any need for humans," said Marc Wulfraat, president and founder MWPVL International, a specialized supply chain and logistics consulting firm.

Wulfraat isn't shy about explaining why what he calls the first wave of automation has been so successful in industries like food manufacturing. "You need sophisticated logistics to minimize head count. Everyone is trying to minimize head count. This is not evil." But he also thinks it's a wave of automation that's ending, and what's coming next will be much more complicated in terms of the jobs split between man and machine.

Any food manufacturer that sets up a warehouse tomorrow may have robots representing around 70 percent of the head count. Take Symbotic, a robotics company now owned by grocery conglomerate C&S Wholesale. The kind of food operations that Symbotics supports might have required 300 people at one time, but now only 30 percent of the jobs or, say, 90 people, are needed. Wulfraat noted that the CEO of CNS, Rich Cohen, has put his move in kill-or-be-killed terms: If he didn't invest in this type of automation, a competitor would, and within five years be ahead. "They don't want to be watching someone steal market share."

This anthropomorphic robot is able to palletize at a speed of 144,000 eggs per hour.
Sophie Bearman | CNBC

The automation investment rationale is simple: When building a plant to produce food, automation is just an extension of a huge amount being invested and its return on investment can be measured through core production metrics.

"That's not a gamble. It's the normal process for a modern production plant," Wulfraat said. "They want to build these production plants as massively automated as possible. They make money by producing as much volume as possible. The common metric is how many cases per man-hour. Whether we're talking about production of milk or eggs or cheese, a lot of it now is machinery," he said.

Martial Herbert, a professor with the Robotics Institute at Carnegie Mellon University, said repeated operations of a single product are the environment in which automation is a no-brainer. "An egg is very fragile, and it is still of course a challenge to manipulate those kinds of things, but other than that, this is where one would want to automate," Herbert said. The more control a company has over an environment, and the less variables at play, the more an investment in automation becomes supported. "Where you can invest in all that control upfront, then it makes sense," Herbert said.

The first wave of automation is ending

For CMC Food, the move has paid off in production volume.

CMC Food invested in the SANOVO Egg Palletizer, a robot able to palletize at a speed of 144,000 eggs per hour. Another machine, the SANOVO Egg Depalletizer, gently handles plastic trays at a capacity of up to 216,000 eggs per hour. "In the past, the workers would have to feed 10 dozen eggs at a time into the machine and also stack the finished boxes at the end. Now the robots handle the heavy parts," said Michael Culley, CMC Food president.

And for now, the investment has also led to jobs being created as a result of the productivity gains.

"We have to order materials from our suppliers, which adds additional jobs for them. We have to hire people to maintain the machines. We have to hire more production workers to pack the product that is produced. We have to hire people to stock the additional inventory," Culley said. "Warehouse personnel. Forklift drivers. We have to hire workers to truck the inventory to the stores. The stores have to hire more workers to receive the goods and stock the shelves."

Culley told CNBC that CMC Food has never fired an employee and is adding jobs. He said adding robots was in no way an attempt to replace workers, but about being able to compete with other companies on a higher level. "The workers were a little nervous at first, and some expressed concern about their jobs. But after a few weeks, they got used to the robots," Culley said.

But Herbert said robots that do one thing in a controlled environment can go only so far. And the story behind the delicate task of egg-handling points to two of the most important questions as automation's second wave overtakes the workplace.

In the food business, automation has been going on for between 30 and 40 years, and the first wave of automation was clearly as the unions would tell it — companies reducing head count as a labor strategy to minimize the threat of a union strike. Wulfraat pointed to a Los Angeles grocery strike in 2001 led by the Teamsters. "A number of those companies said 'that won't ever happen again. We will automate everything going forward. ... We won't be held hostage by the union.'"

But the man vs. machine narrative is not only simplistic but becoming outdated.

Looking at labor force predictions for 2030, a 5 percent reduction in the U.S. workforce is expected as an aging population drives a massive shift in demographics.

"We're already at the point where many clients we work with in blue-collar distribution are suffering from the ability to hire people, who are leaving for higher-paying jobs or don't want to work in a noisy distribution job or 'third shift' or weekend," Wulfraat said. "There will be 20 million less people working in 2030 than will be needed, and that will be painful for anyone with a labor-intensive business."

"There will be a much more significant reduction in blue-collar labor in general than we have ever seen before," Wulfraat said. And that will mean an unprecedented investment in automation, but not because food companies want to eliminate jobs, but because "they're terrified they won't be able to get product out the door," he said.

Unions don't agree.

"The whole 'nobody wants to do this work' argument ... pure spin for corporations to justify extracting every last little bit of profit they can to give to the top of the economic food chain," said Steve Vairma, secretary general of the Teamsters Local 455 in Denver, Colorado, and a Teamsters expert on warehouse operations.

"Automation is an immediate threat to working families because of the loss of good middle class jobs. Long-term it threatens everyone: If we eliminate middle-class jobs so companies can pad their profit margins (no matter how small the increase in a low-margin business), we eliminate the ability for working families to buy, in this case, eggs," Vairma said.

They are handling the eggs much gentler; they are very consistent. ... It doesn't mean they don't break eggs, because they do throw cases around and drop cases here and there, but we think it's less.
Michael Culley
president of CMC Food
President of CMC Food, Michael Culley helps out in the factory by placing coupons in egg cartons.
Sophie Bearman | CNBC

Carnegie Mellon's Herbert said that as long as it is similar product being produced and the production doesn't change very often, the investment in automation is going to be the norm. But that is also soon going to be the past of robotics in the workplace and human workers' interaction with machines.

"There is lots of work today on flexible and adaptable systems," Herbert said. That evolving model is one in which robots work with workers, and it poses more interesting questions about the future of manufacturing than the low-hanging fruit of automation that has already overtaken industries like food manufacturing.

"As automation moves to more flexible production, more calibration with people becomes important," Herbert said.

The robotics professor said humans will be tasked to do what they do well — and what robots are not good at — which is making decisions.

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"The key is the distribution of skills between man and machine. People always think of machines replacing man, but the right way to think about it is once we have more capabilities with machines, we can start thinking about rebalancing skills and having humans do what humans are good at," Herbert said. "The model won't be how many people do we need to do X, but what is the role of people in X and role of machine in X," he said. "And that's the more interesting question and, in the long term, the more provocative one."

Investments in automation being made by food manufacturers like CMC Food will continue to point the most obvious benefit of the first wave of automation: increasing productivity. "The old model is gain productivity by replacing people," Herbert said. But the second wave of automation, if successful, will increase the number of new skills human workers can offer.

"Most industries are looking at this model in one form or another," Herbert said. At the national level, it's a major thrust of what's being done in robotics, but the robotics professor said most of the work is still at the stage of research. "There's strong proof and momentum to make it happen, but in the short term, it still makes more sense to simply replace people," he said.

Vairma said the argument "we'll be creating the jobs of the future someday" is just more spin that can be filed among all the corporate sound bites designed to make "automation sound lovely."

Net/Net takeaways

In industries like food manufacturing, characterized by low margins and high volume, automation is critical to industry survival.

Firms that do not automate tasks that lead to increased production volume can fall years behind competitors who automate — and may never catch up.

Automation is still a gamble in many sectors. Where robots have really proved themselves is with simple, repetitive tasks in tightly controlled environments. The more variables, the more troubles for bots.

The first wave of automation in industries like food manufacturing has decades of history, and — make no mistake — a big part of the attraction for companies was eliminating human jobs.

A central question to the future of automation in the manufacturing space is not which human jobs will be eliminated, but the new distinctly human skill sets that will emerge — working in collaboration with robots.