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Automated manufacturing helps Northern California firms do more with shallow labor pool

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The world of work increasingly will be automated, from the “internet of things” interconnecting management with production equipment such as industrial robots. Here’s a look inside a local company that is incorporating advances in such bots to expand sales without losing its workforce.

“When automation comes in, people are nervous,” said Jim Happ, president of Labcon North America, based in Petaluma. “And you just have to keep reassuring them until they see that it makes their life better, that they actually have the potential to make more money because they’re doing higher-value work.”

Labcon makes research consumables such as pipettes used to transfer test fluids for medical research and increasingly in food industry labs.

Some worker fears of automation are similar to trust issues with working alongside a human co-worker, whether the system can do the job correctly and safely, according to the National Safety Council’s Safety and Health magazine. Others concerns are over job security.

While only about 5% of U.S. jobs could be fully replaced by automatic processes, almost 40% of Americans are in occupational categories — namely, office support, foodservice, production, transportation and logistics, and customer service — that could see opportunities shrink to varying degrees by the end of this decade because of automation, per McKinsey Global Reseach’s July report “The Future of Work in America.”

For California, automation is crucial, because of housing costs, which are driving labor shortages as workers can’t live here anymore.Gene Russell, CEO, Manex

But with record-low unemployment — hovering around 2%-3% in most North Bay counties — bringing in industrial robots can be key for local manufacturers to stay competitive statewide and nationwide while continuing to produce locally.

“For California, automation is crucial, because of housing costs, which are driving labor shortages as workers can’t live here anymore,” said Gene Russell, CEO of The Corporation for Manufacturing Excellence, a San Ramon-based manufacturing consulting group commonly known as Manex. “As older workers leave or as skilled workers get lured away for another $1 an hour, it’s very, very hard for manufacturers to replace them.”

For Labcon, automation is among several necessary tactics to lower the cost of doing business in Sonoma County enough to keep manufacturing local.

“When you reach a certain point, you’re either automating or you’re forced to go offshore,” Happ said. Competition with foreign manufacturer pricing, based on lower wage scales there, puts the onus on U.S. manufacturers to continually increase productivity of their workforces, particularly in higher-wage areas such as the San Francisco Bay Area.

Before Labcon spent $40 million on production and assembly robots in recent years, the Petaluma plant was producing 1 million parts per day. The company also built a 30,000-square-foot semiautomated warehouse about a quarter-mile away from the factory. Robots take up more floor space than a worker’s station, but it can do the work of four to six employees, Happ said. The company also freed up some workers by adding a loading dock conveyor at the Steris facility across the parking lot from the warehouse, allowing containers of finished laboratory pipettes, vials and other products to be moved to the sterilization unit with less labor needed.

After the automation, output at Labcon has jumped to 5 million a day, all with the same 240 employees as before the transition.

“If we hadn’t started automating, we’d have to have 200 more people, but we wouldn’t be in business because I don’t think I could find 200 more people right now,” Happ said.

‘TURNOVER IS DEADLY’

Having so much robotics on the factory floor has shifted Labcon’s needs from its workforce from repetitive assembly to programming the equipment. The company has worked with its machinery suppliers to develop programmable logic controllers to control the bots via standardized operator interfaces, so the supervisors can adjust the learning curve for the equipment to the skills of the worker, Happ said.

Operators can program jobs in the newer robots simply by physically moving the robot arm to a desired location to set a movement point then move the arm to the next point.

“You would like to hire the most skilled workforce you can, but with unemployment at 3% that’s nearly impossible,” he said. “Turnover is deadly right now because you can’t replace people quickly.”

All the advanced machinery also increases the need for maintenance staff that’s adept in working on computerized machinery, Happ said.

And keeping production onshore can have another competitive advantage when the global supply chain is disrupted by tariffs, embargoes or epidemics. Labcon’s competitors largely manufacture in Mexico and in the area of China currently idled under government efforts to stop the spread of a feared new type of coronavirus.

“We can manufacture on demand and have our products on a (lab) benchtop in San Francisco in a day, while it can take weeks to arrive normally from China,” Happ said.

MEET YOUR ‘COBOT’ COWORKER

Cameras, sensors and artificial intelligence increasingly are allowing robots to handle varying task situations that had made humans more adept, such as packaging multiple products from the same production line and spotting imperfections.

“Anything that is repetitive and easily standardized can be close to automated,” said Russell of Manex. The group’s consultants use a value stream map system to analyze each part of a client’s production flow to identify unnecessary steps or other waste, to find out which tasks can be streamlined via automation or enhanced procedures.

And advanced programming and sensors for industrial bots have helped spur the growing adoption of collaborative robots, or cobots. These machines and their controlling software are designed to allow people to work with them on the same tasks in the same work area, rather than largely cordoned off.

“We have three cobots that have minimal guarding around them, because they have touch sensors that make it stop if it runs into something,” Happ said.

By using cobots, Labcon saves about $20,000 in not having to set up guards around the robot and put special sensors on them.

COUNTING THE COST

But a challenge for manufacturers interested in increasing production and decreasing costs while casting for recruits in a shallow pool of workers is having enough sales volume to justify the capital investment, according to Happ.

“We can’t automate for a new product if it is only selling 20 cases the first year or 100 cases the second year,” he said. “You need some critical mass to spend $100,000 to $200,000 on automation. Any enterprise before you even plan on automating, you need to do some projections on what your costs will be if you automate. You need to know if the product will gain enough traction.”

That’s why Labcon is currently hand-assembling a new product of which sales are only five cases a month. Happ said sales would have to hit 50 cases a month before the combined cost — robotic assemblers plus hundreds of thousands of dollars in efficiency automation and safety systems around them — makes sense.

Also key to Labcon’s robotics breakeven analysis for a product are real estate and energy costs.

“If you don’t own your real estate in Sonoma County, eventually you get priced out,” Happ said. And owning the plant property makes it easier to add solar energy to it to offset the large power consumption of the robotics, he said.

On the Petaluma buildings, Labcon has 3,000 panels, producing 870 kilowatt-hours and offsetting one-third of the factory’s electricity consumption.

Jeff Quackenbush covers wine, construction and real estate. Contact him at jquackenbush@busjrnl.com or 707-521-4256.

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