Is Automation our best weapon against inflation?
“The increase to productivity you will see from introducing more automation to your company will drive growth and make you more competitive even long after this cost-of-living crisis is over.”
As we find ourselves in a “cost of living” crisis, politicians and economists have looked to increasing taxes and interest rates to solve inflation. However, we, the manufacturers have just the weapon in our arsenal to deal with inflation that’s much more effective than anything the banks and the government can provide: automation.
What is inflation?:
In the UK inflation is measured by the consumer price index, therefore people will tell you inflation is an increase in prices of goods and services. This is fine when describing our current dilemma as we’re seeing an increase in prices due to supply shortages caused by the historically significant times we’re living in.
In the past however, unstable inflation has been due to currencies being debased which ultimately contributed to the fall of Rome, or governments printed money at a higher rate than production allowed as seen in the Weimar Republic. It’s important to keep all of this in mind when looking at ways to tackle inflation. Trying to deal with today's soaring prices by paying people more would result in even more inflation like that of Weimar Germany which goes to show how easily inflation can become a runaway train. Whether it’s a shortage of goods, a debasing of currency, or simply printing too much, the result is a reduction in buying power. Therefore, a better definition of inflation would be a fall in the purchasing value of money.
Inflation vs Production:
A straightforward way to think about inflation is to think of it as cash vs production. Imagine your country has 100 units of production and 100 units of cash, and you can buy 1 production for 1 cash. To make the analogy like our current events, let’s pretend our country was hit by a global pandemic and then one of our key trade partners invaded by a foreign nation. As a result, we now have 50 units of production, but we still have 100 cash. Now 1 production costs us 2 cash as there is now a shortage of production. Our purchasing power has been reduced. To balance this, we could either take cash out of the system (via taxes or by forcing people to save instead of spending), or we could increase production which is where I believe automation is our best weapon.
You only need to look at your own house to see how automation and advances in technology have increased our productivity. Imagine all the housework you’d have to do 200 years ago vs today. We now have vacuum cleaners to quickly clean our carpets, washing machines that clean and dry our clothes for us, dishwashers, even inventions such as bleach and the bin bag have massively reduced the time it takes to clean our homes. What would have taken a full day to complete we can now knock out on a Sunday morning. This huge increase in free time has now allowed us to do more productive things that will earn us money.
Taking the same ideas to the work place, you can use automation to reduce your demand for labour, while increasing efficiency. A task that took six hours before may now only take half an hour, and the staff can be freed up to focus on more valuable activities or even be retrained and upskilled, further improving the productivity of your company.
How we react to inflation is important:
All manufacturers have likely dealt with inflation by increasing their prices. This can be good for business, but bad for inflation. We also have a global labour shortage to account for which all manufacturers have dealt with by increasing salaries. Good for the company, bad for inflation. Automation can help tackle both these issues without adding to the problem.
You can reduce your operational costs through automation by reducing the amount of time and money spent on a task. If you’re a company with high operational costs then you may only need to take out 10% - 20% of your operational expenses to overcome the profits inflation is costing you. By reducing your operational costs, you won’t have to increase your prices which will make you more competitive in the market and reduce your impact on inflation.
As previously mentioned, automation can make up for the labour shortage by freeing up the time to complete manual tasks, freeing up employees to focus on more important tasks. This will likely improve job satisfaction which will help keep employees and you avoid the problem of struggling to fill jobs. You won’t need to increase your salaries to be competitive in hiring staff to fill these jobs, and your operational costs won’t increase because of it. All together you will reduce your impact on inflation.
The increase to productivity you will see from introducing more automation to your company will drive growth and make you more competitive even long after this cost-of-living crisis is over. The tools for reducing inflation will also make you more resilient to recessions.
Automation is our best weapon for dealing with inflation.
As manufacturers, the tools to reduce the cost of goods are within our hands. If every company in the country would set automation targets, we could get through this cost-of-living crisis much quicker.
