Manufacturing: How Robotics as a Service extends to whole factories

Manufacturing: How Robotics as a Service extends to whole factories

The idea of Robotics as a Service, which sees companies pay a subscription fee for robots rather than buying them upfront, is gaining ground in manufacturing and logistics, as Jessica Twentyman reports. 

Why buy a robot when you could simply pay for it by monthly subscription, based on the results it delivers on your factory floor?

The concept of Robotics as a service (RaaS) is quickly gaining ground in manufacturing, and one of its latest proponents is industrial robotics firm Kuka, which is taking the idea to a whole new level.

The German company, which was acquired by Chinese consumer products manufacturer Midea back in 2016, recently announced that it is launching a new SmartFactory as a Service initiative. Also onboard are MHP – a Porsche Group consultancy specialising in the automotive and manufacturing sectors – and insurance giant, Munich Re.

A factory in a box

Customers of this new on-demand service will get a robot-staffed automated plant based on Kuka technologies; help with implementation and integration from MHP; and risk management and financing services from Munich Re.

The idea is that the service offers an opportunity for manufacturing companies – particularly automakers – to outsource a capital-intensive part of their business, avoid upfront investment costs, and offload risk. The partners claim that SmartFactory as a Service could reduce time-to-market for some manufactured products by as much as 30 percent.

According to Kuka CEO Dr Till Reuter, “A plant’s ability to adapt is the key criterion in making manufacturing fit for the future.

“Our clients face the challenge of responding swiftly and flexibly to market needs. SmartFactory as a Service can achieve this,” he said.

The partnership with MHP and Munich Re “brings the business model of the future a great deal closer”, he added. Not that close, however: the partners acknowledge that it could still be a couple of years before they have a live implementation of SmartFactory as a Service up and running at a client site.

Robots for rent

What’s clear is that Kuka’s is an extremely ambitious vision: it’s one thing to rent out a robot and another to rent out an entire factory. In the meantime, however, there are plenty of companies working on more modest versions of a service-based approach to industrial robotics.

According to a May 2018 report from ABI Research, Robotics as a Service is an elastic concept, meaning different things to different vendors. But generally speaking, it is broadly used to describe a business model based on renting or leasing robots as a full service, rather than asking customers to pay upfront to own them.

“Though the robotics market continues to grow, ongoing pressure on robotics vendors to maintain margins means that they are looking to widen market opportunities beyond just selling robots as products,” said ABI Research analyst Rian Whitton.

Overall, ABI Research estimates that the installed base for RaaS will grow from 4,442 units in 2016 to 1.3 million in 2026, while annual revenues for RaaS providers are expected to increase from $217 million in 2016 to nearly $34 billion in 2026.

“This will make the yearly revenue of RaaS providers, including all payments for services, greater than the shipment revenues for industrial robots, which currently accounts for the lion’s share of the robotics industry in terms of revenue,” explained Whitton.

Fetch and carry

One example of this kind of provider is San Jose, California-based Fetch Robotics. Earlier this year, the company was selected by the World Economic Forum (WEF) as one of the 61 most promising technology pioneers that have the potential to “shape the Fourth Industrial Revolution”. One of its main areas of focus is automating warehouse operations for online retailers.

According to Fetch chief operating officer Carl Showalter, larger companies tend to buy robots the traditional way, with an upfront capex payment, but then pay an annual cloud service fee for predictive maintenance services, and so on. Smaller customers pay nothing upfront, but instead sign up to a monthly per-robot fee with Fetch.

Another example is Los Angeles, California-base InVia Robotics, which recently announced a $20 million funding round and provides e-commerce order fulfilment firms, such as Rakuten Super Logistics (RSL), with warehouse-based picker robots. Rakuten has recently chosen InVia’s goods-to-person-fulfilment service, a subscription-based model.

“For RSL and our broad array of clients, InVia Robotics presents an exciting opportunity to scale demand, manage costs, and improve inventory accuracy using a RaaS model,” explained RSL CEO Michael Manzione.

According to ABI Research, the RaaS installed base between 2016 and 2025 is expected to see a compound annual growth rate of 66 percent. The markets with the largest RaaS uptake are forecast to be logistics, manufacturing and hospitality.

Internet of Business says

As change consultant Sean Culey set out in his report for Internet of Business earlier this year, the manufacturing sector will experience deep-rooted change over the next few years.

The confluence of a range of technologies, including industrial robotics, robotic process automation, on-demand manufacturing, 3D printing, the Internet of Things, AI, sensors, autonomous transport, blockchain, and the sharing economy, will shift manufacturing away from monolithic processes based on the lowest labour cost and towards more personalised, automated, and localised (PAL) value chains, based on customer need.

In this way, manufacturers will be able to custom-produce, say, a single pair of sports shoes and deliver it the next day to a local customer for the same unit cost as mass-producing a million pairs in China and shipping them across the world.

Indeed, one company – Adidas – is doing exactly that with its Speedfactory programme: small, local, automated, robot-staffed facilities that can produce shoes to a customer’s personal profile.

That such facilities could be made available on demand to a client company – or to multiple clients – makes economic sense, because it not only benefits the clients and their customers, but also guarantees revenue streams to the provider.

More, by locating these facilities onshore – closest to customer needs – local ancillary employment would be boosted and the environmental impact of offshore outsourcing minimised. And following the cloud model, RaaS would see providers absorb the maintenance and upgrade cycle into their on-demand services, meaning that users are no longer stuck with fast-depreciating assets as smarter, faster, more programmable robots become available.

But the as-a-service robot factory model has employment impacts itself, of course. In 2016 alone, China bought 66,000 industrial robots. If each can do the work of 15 people (24×7, 365 days a year), then that is the approximate equivalent of one million human jobs on the shop floor – more, if one considers the lack of vacations or sick days.

The FT reports that automation has replaced the jobs of up to 40 percent of workers in some Chinese industrial companies over the past three years, according to joint research by the China Development Research Foundation and venture capital fund, Sequoia China.

China is automating faster than any other nation on Earth to retain its low-cost labour advantage. However, the combination of RaaS and Culey’s PAL value chain concept suggests that there may be no need to outsource manufacturing offshore to countries such as China at all.

Additional commentary and analysis: Chris Middleton.