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Outsourcing Experiments: Baxter, the Face of Robotics

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Outsourcing isn’t a single event or a one-time activity. It’s a series of events, not always intentional, that take place over time. It may start as a minor process improvement project, or as a better way of collecting metrics or even a new type of management report. After a series of efforts to make your work environment more transparent and more logical, outsourcing may eventually play a part in your operations. After more time, when your business processes are even more defined, you may move towards automating your work. Undefined work processes become defined work processes, defined work processes become outsourced, and then outsourced processes are performed by computers or robots. That’s been the history of work in the 20th century. But now, we’re in the 21st century and a new generation of robots is on its way. Outsourcing will never be the same again!

The term robot is relatively new. It was coined in a Czech play in 1921, R.U.R., as a term for artificial people. In this labor play, the artificial people eventually stop being happy about being unpaid workers and rebel. The term robot comes from a Czech term for unpaid labor. Robots work for free, and they keep getting better and better. Outsourcing is a complex process; it sometimes it make more sense to outsource, and it sometimes it makes more sense to take the work back in house. Once work goes to a robot, it will stay there forever.

Robots are the real competition for jobs. But robots have always been… well… stupid. And dangerous. Industrial robots are incredibly strong, and lightning fast. They are so strong and fast that it’s dangerous for humans to work in the same space. In fact, in most robot heavy environments, the robot is in a steel cage to prevent it from accidentally decapitating a passing human with one of its lightening fact movement.

Robots cannot do much, at least not by human standards, but what they do they do very well and very fast. An industrial robot is also expensive, around $100,000 to $200,000 for a basic model up to $500,000 for large robots. The economics of outsourcing was forever changed by offshoring. Now, the economics of robotics is about to be forever changed by… Baxter. Baxter is the first of a new wave of smaller, slower, weaker and less precise robots. Put another way, robots that are more like humans. Industrial robots are too powerful and too dangerous to work side-by-side with humans. Instead, they are in robotic factories, where each robot sits inside of a cage so that humans are not decapitated or seriously injured by a rapidly moving robot part.

Baxter has sensors to alert him when humans are around, a cartoon-ish face to tell you what Baxter is doing (he looks at what he is working on), sensors that detect people (he slows down or stops and looks at you). By having strength and speed scaled to human levels, even if Baxter’s sensors failed to detect you, being hit by his arm results in a gentle tap, not a broken bone.

Baxter can sit next to humans, rather than in an isolated factory. Another cost of robots is their programming. The cost of programming can be higher than the robot itself. With Baxter, you just wheel him where he will sit (he has two arms, but no legs), and you then literally take him in hand to train him. You take his hands and show him what to do with them…. Pick something up, put parts together, etc. And Baxter is cheap; he costs just $22,000. The firm that makes Baxter tells us that his total cost of operation is about $5 per hour… less than the real cost of offshoring.

What does this mean for outsourcing? In the past, you might have a factory that is unproductive, with an average cost of $40 per hour for work. You might build a new offshore factory that has a cost of $20 per hour, but has additional cost of another $10 for new transportation, taxes, and other charges. Assuming the quality was the same, you have a net benefit of $10 per hour. However, offshore the inflation rate (especially for wages) is unpredictable and generally much higher than onshore rates. Where physical goods are involved, and transportation costs are a major component of price, the uncertainty of the fuel costs and weather can dramatically raise the cost to the consumer.

Post-Baxter, the same decision process might be different. The unproductive factory would be assessed for jobs that could be automated, at Baxter’s $5 per hour rate. If there are jobs that consist of simple hand motions, and there were enough of these to reduce the total cost of operation to $20 per hour (or even slightly more), this would be the “low risk” option for keeping the factory where it is.

Given the uncertainty of offshoring for manufacturing, especially the cost of fuel and new weather patterns in a world of global warming, a lower cost local factory is more predictable. Making robots “people aware” could dramatically change the definition of a factory, and bring back “Made in America.” We don’t know how quickly this trend will happen, but if Baxter and his successors work as planned, the 21st century could be the century of the Robot!

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