Dividends and Silicon Valley has an automatic answer to labor challenges

A little while ago, Elon Musk of Tesla fame announced his company was working on a robot and it similar to the crash test dummies which automobile companies use to test how people would react when a crash happens. The story was good for a the news cycle, but the reality is more and more robots are working in factories and they do not look like a crash test dummy.

In an article by Jane Lahnee Lee of Reuters, the next stage in robot production has arrived. The large manufacturers were the big adopters of robotics because they have both the money and need. (there is You Tube video on how a F-150 is made, the robots are interesting). The next stage is for the small and medium sized manufacturing companies to have robots. The small and medium sized companies could not afford the high upfront costs and the ability to have people both work and service the robots. Similar to all processes things change which makes it easier.

The new model is coming and being adopted, lease robots, charge factories by the hour or month, cut the risk and initial costs. (think about the companies which offer to rent to own a large screen TV or other household stuff).

If you think about a small or medium size manufacturing facility there were multiple reasons why a robot was not installed including up front costs, smaller production runs, few long term contracts, existing job skills, to to encourage college graduates to work at the smaller company and the list goes on. The good news is the Association for Manufacturing Technology in San Francisco is bringing manufacturers and technology together to find solutions to the small and medium sized business.

One of the companies in the lease robot is called Formic Technologies – an example is Polar Hardware Manufacturing in Chicago is a metal stamping plant. Formic’s pitch was to pay less than $10 a hour for a robot compared to $20 a hour for a person. The robot is working well according to Bob Albert.

Another company Westec Plastics Corp which is a plastic moulding factory in Livermore, California. It has 3 robots from Rapid Robotics which costs $3,750 a month per robot the first year and $2,100 in the second year. One of the robots works 24 hours a day which has replaced 3 full time operators or saving more than $60,000 a year in labor costs. Tammy Barras of the company is pleased with the robots, but do not expect the robots to replace all the 102 employees, but they help.

Linking to dividend paying companies, business model work and many times they are successful until things change, which suggest asking what the business model is is important to know in your investments. In the cases above, robots have been around for years but at what cost to buy and operate, as those costs come down the model changes, does the company?

There are more questions than answers, till the next time – to raising questions.

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