Employee productivity will be at the heart of the next wave of industrial startups

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Many manufacturers have focused on increasing productivity in the past decade

In today’s environment, manufacturers are under constant cost pressure and face global competition. This is why they continuously need to optimize their processes to ensure further growth. In the last decades, this was achieved through various means such as outsourcing, temporary workers, the adoption of ERP, MES and other software systems, and more recently thanks to automation and the adoption of robots.

However, a big chunk of the P&L of a factory is still people. Globally there are around 340 million temporary and full-time manufacturing workers, it is clear that humans won’t become obsolete in factories anytime soon. This is especially true if you compare this number to only 1.7 million new industrial robots that will be deployed by 2020 according to the International Federation of Robotics.

To get a better picture of how manufacturers were able to increase their productivity, I looked at the ratio of revenue per employee (in $ or € million) of a random sample of major manufacturing companies. I calculated the value of this ratio for 2002 and 2017 to get a very rough estimate. The chart below shows my findings:

As you can see, all the companies I included (except GE) significantly increased the productivity of their workforce if you compare 2002 to 2017.

This result confirms the findings of the Economic Research Institute — RWI — which showed that productivity growth has clearly been stronger in the manufacturing sector than in the service sector in Germany (although overall productivity growth slowed down in the last years).