It might be natural to assume that a company’s investment in automation and other technology reduces the need for fewer employees.
But that’s not actually the case, according to a new report on Indiana’s Manufacturing Readiness Grants program, which has issued 212 grants totaling $17.4 million over the past two years to help Indiana companies invest in robotics, automation and other types of advanced manufacturing technologies.
The report, prepared by Conexus Indiana and Purdue University, was based in part on a survey of 75 grant recipients who reported that they had, on average, added five new jobs because of their technology investments. The average expected wage growth associated with these projects was $196,000.
By investing in technology, companies were able to grow in ways that created a need for more workers, said Ryan Henderson, director of innovation and digital transformation at Conexus. “They end up entering a new market or adding a new product.”
As advanced technology has become more prevalent in manufacturing, Henderson said, companies have maintained that the investments wouldn’t lead to widespread job cuts. The survey, he said, now provides “some good data to reconfirm that.”
Henderson said the report gives the first look at the financial impact of the grant program, which launched in the spring of 2020 to help small- and medium-sized Indiana manufacturers with technology investments. Companies can apply for up to $200,000, and recipients must agree to provide at least a 1:1 funding match.
Some companies invested significantly more than the required match amount, and the total budget for those 212 projects is $138.9 million.
In addition to job and wage growth, the grant program has also spurred other positive economic impacts, the report says.
On average, the 75 grant recipients surveyed indicated that they would see an average of $2.5 million in revenue growth as a result of their investment. And 37% of respondents said they expected revenue to grow by more than 10%.
Based upon modeling from the Indiana Economic Development Corp., the state can expect a 26% internal rate of return for the program, the report says.
Henderson said that rate of return represents the increased tax revenue the state can expect to receive from the capital investments and revenue and wage growth associated with the grant projects.
A 26% rate of return would be a solid achievement, said Mark Frohlich, an associate professor of operations management at Indiana University’s Kelley School of Business at IUPUI. “In the corporate world, that’s a very respectable number.”
Frohlich has worked with Conexus on other reports but was not involved with the creation of this one.
Frohlich acknowledged that this report’s sample size of 75 respondents is a modest sample. But he also considers the report to be “pioneering” because he is not aware of any others that examine the financial impact of manufacturing technology investments.
“There are very few studies around the world right now looking at ‘Industry 4.0,’ advanced manufacturing,” Frohlich said.
The report also shows what types of technology the grant recipients are investing in.
Production automation and next-generation production machinery known as computer-numerical control machines, or CNC machines, represent the largest category for investment: $4 million in grants, and an additional $35 million in matching funding from grant recipients, is being used for investments in this category.
Advanced robotics, general automation and 3-D printing were other popular investments—each of these categories accounted for more than $15 million of investment.
Since the Manufacturing Readiness Grants program launched in April 2020, the state has allocated a total of $24 million to be used for grant funding. Henderson said money remains left to grant, and it’s not too late for companies to participate in the program. “As long as money is available, we’ll keep accepting applications.”
The entire report can be found here.