All Financial Wisdom
Robots in the Clothing factory: The West is Winning Companies Back from Developing Countries
The relocation of business processes from developed countries has been occurring for decades and has allowed millions of people to escape poverty. Critics, however, point out that the working conditions of these employees are regrettable, and that there is a long way to go until they match those of their counterparts in the first world. Others, in response, argue that it is better to have a job, however painful it may be.
This is a known dilemma to which is added a new variable – automation, which threatens employment in less developed countries by reducing the cost advantage they enjoy today. This automation affects important sectors such as heavy machinery or the automotive industry, and it is coming to the textile sector.
On March 11, 1811 a group of weavers entered a textile factory in Nottingham (United Kingdom) and destroyed pieces of 63 mechanical looms, in what is considered the first disturbance caused by the Luddite movement. It is not strange that the machines affected were looms, because the textile sector was one of the first to suffer the effects of industrialization.
The Luddites were artisans who opposed the introduction of machines, fearing that they would reduce their salaries by requiring less qualified workers to carry out the task they had been doing until then. Experience tells us that the Luddite fallacy, the idea that technological innovation harms the level of employment in the long term, is not true. Who would have a job after two centuries of productivity growth? If anything, technology leads to a redistribution of jobs to other sectors and new activities.
And yet it is a recurring idea since the industrial revolution and has gained followers in recent times with the wave of automation in which we find ourselves and the developments based on artificial intelligence. Will the auguries be fulfilled on this occasion?
The truth is that the automation processes are repeated periodically, affecting new tasks with more or less profound effects depending on the intensity of the innovation applied.
The internationalization of textiles
Despite the early introduction of machinery in the manufacture of fabrics and garments, the cost of labor has always been a key variable in the business. As a result, we have witnessed, in the last few decades, a relocation of manufacturing from developed countries to others with lower labor costs, mainly in Asia. In addition, as these destinations ceased to be competitive due to the rise in the standard of living, new factories were opening up in nations with cheaper labor.
Thus, progressively we have seen how factories were installed in countries such as South Korea, Taiwan, China, Vietnam, Indonesia or, more recently, Bangladesh. In fact, in this race, there are companies that are beginning to look towards Africa as a new manufacturing destination, although this transition could be limited.
Automation and its problems
Indeed, the process of delocalising production, jumping from one country to another, could slow down and even reverse. The reason is increasing automation in the industry, which reduces the advantages of producing far from the market in which the product is sold.
Textile production is composed of a variety of tasks that are being automated little by little: weaving, cutting, sewing, assembly, etc. While the mechanization of the sector began centuries ago, the work is not as simple to automate as it might seem, since the fabric is a flexible material that stretches and wrinkles, which until now has made the presence of human operators necessary in order to make continuous adjustments. Something easy for one person, but not for a machine.
But all that can be a thing of the past shortly. Softwear Automation, for example, is a US based company that manufactures autonomous production lines for the manufacture of various types of garments. One of these sewbots is capable of making as many shirts as 17 manual workers in an eight-hour shift, with minimal supervision.
Adidas, for its part, has opened two Speedfactory plants, one in Germany and the other in the USA. It is a new manufacturing concept, highly automated and designed to produce custom footwear. The goal is to shorten supply chain deadlines, which are very high in sports shoes, that help to bring production closer to the market where the product is sold.
This growing automation has, logically, consequences for employees in the industry, that harms it in several ways:
By cutting out the necessary personnel in the manufacturing process, many are condemned to seek life elsewhere. There is also the circumstance that these workers have little qualification, so it is much more difficult for them to relocate to other sectors with equal or higher salaries. Nor does it help that this happens in less developed countries.
On the other hand, automation harms workers in the sector without needing to be applied. The existence of technology that replaces human work strengthens the negotiating position of employers, who can thus impose more favorable conditions on the company.
The pressure on the employee, however, has its limits. The textile factories have a bad historical reputation, from the birth of the infamous sweatshops at the beginning of the 19th century. The abusive practices used then were gradually abolished in the developed countries to be applied in the new manufacturing destinations, which have looser labor and security policies.
Slowly, working conditions in these countries are also improving, thanks in large part to the supply policies implemented by the main customers, large companies in the sector in the first world.Companies such as Gap, H & M, Target or Walmart perform periodic audits of the facilities of their suppliers and demand guarantees for workers.
And, while this improvement in employee conditions is a good thing, at the same time, it raises the wage cost of labor, creating incentives for automation for local companies. Moreover, many entrepreneurs in the sector see this process as a solution to labor unrest and use automation as a negotiating tool with local unions.
Stay tuned for part 2 tomorrow…