Huge potential for automation in Swiss manufacturing sector

Technological innovations are likely to encourage the relocation of foreign production back to Switzerland and help create new jobs.

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There are few areas where the impact of automation is more obviously apparent than in the manufacturing sector: factories and production sites have changed dramatically in recent years and decades. Industrial robots and 3D printers are playing an increasingly important role.

How differently jobs will be affected by this over the coming years can be illustrated with probabilities of automation based on a model developed at the University of Oxford. These indicate how susceptible a job is to automation in the near future. Overall, 47% of all employees in the manufacturing sector have a probability of automation of more than 66%. These include goods production jobs such as metalworkers and related jobs or unskilled manual jobs on the one hand, and various service jobs such as general office workers or sales staff on the other. By contrast, just 32% of employees have a low probability of automation, meaning that their jobs are unlikely to be automated. These include managerial staff in various areas such as sales and marketing, or production managers in goods manufacturing.

Figure 1: Probability of automation in the manufacturing sector

Automation across the entire value chain

It is hardly surprising that the potential for automation in the manufacturing sector is relatively high and that in the future it will be possible to automate many of the current jobs. The individual steps in the value chain can already be largely automated even today. In planning, available stocks and capacities can be matched more efficiently to aggregated demand thanks to automated sales and operations planning, standardised end-to-end solutions mean the procurement process can be almost entirely digitised, 3D printers are increasingly being used in production, various tests are underway involving self-driving delivery vehicles and robots, and returns management uses software that is able to identify products at an early stage and initiate their replacement.

However, this in no way means that all these jobs will become redundant, leading to a fall in employment. In fact, the probabilities of automation merely indicate which jobs could theoretically be taken over by machines in the future on the basis of their activity profile. Whether there will be any actual change in overall employment in the manufacturing sector depends firstly on how willing companies are to implement automation. Costs and the regulatory framework play a key role in any such decisions. Secondly, employees’ roles may change as a result of automation. In this case they will not lose their job but will be deployed elsewhere or in combination with the machines. Thirdly, these probabilities of automation focus solely on the potential for job displacement. Automation can also create new jobs, however, as it boosts the productivity of employees who work with machines and reduces the prices of products. Both of these aspects increase the overall demand for products, ultimately leading to the creation of more new jobs. History shows that these effects have so far always prevailed, with Swiss employment rising significantly since the earliest days of industrialisation and the first major wave of automation.

Alternative to relocating production

Moreover, in the manufacturing sector in particular automation offers an alternative to relocating production. Given the high cost of labour in Switzerland, many companies have offshored predominantly labour-intensive production processes to other countries. The greater the progress made with automation and the more cost-effective it is to use robots and software, the more worthwhile it becomes to switch these outsourced activities back to Switzerland. This would not only boost domestic value creation and tax revenues and counteract the threat of de-industrialisation caused by the strong appreciation of the Swiss franc, it would also create new jobs. If a company were to switch production back to Switzerland because it can be largely automated, there would still be a need for interface and control functions that are performed by humans. Relocating production back to Switzerland would thus give rise to new jobs.

Companies themselves would ultimately also benefit from this effect, not only because it could enable them to save costs and shorten the physical value chain, but also because they would benefit from the other advantages Switzerland offers as a business location, such as a highly educated workforce or a high level of constitutional stability. The key factor is that a company must have a clear strategy allowing it to identify automatable processes and determine their potential and impact before any decision is taken on relocating production back to Switzerland.

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