As one of Sarasin & Partners’ five themes, automation is a trend in which we see huge potential for growth. However, to some, the idea of automation can feel rather threatening, with concerns about labour displacement increasingly commonplace. Far from being a threat, in our view, automation is already transforming our lives for the better.
Many of us rely on it to make our lives easier, whether that be doorbells that also monitor a presence at your front door, robot vacuum cleaners, or voice-activated software. Nightmare scenarios of robots taking over belong to science fiction, not reality, and the reality is that automation is being used in collaboration with humans, to make difficult, tedious or dangerous processes safer and more efficient. Underlying all this is the fact that we need to produce more, to accommodate our growing population, yet do so in a way that is sustainable.
One of the most promising areas for automation is agriculture. Agriculture faces immense pressure to raise output. By 2050, the world’s population will reach 9 billion people, up from 7 billion in 2016. In order to feed our growing world, agricultural production will need to increase by 50% by 20501. However, land and water are constrained. What’s more, climate change threatens to compromise what land and water we do have, adding another layer of complexity to an already challenging problem. Meanwhile, the quality of our soil is deteriorating due to overuse, making it increasingly difficult for farmers to increase the yield from their crops. In order to meet the world’s needs, no less than another agricultural revolution is necessary.
In order to feed our growing world, agricultural production will need to increase by 50% by 20501
Enter automation, in the form of AgTech, a term that refers to the emerging constellation of technologies in the agricultural space. AgTech seeks to make agriculture more digitalised and efficient by transforming agricultural processes and technology, ultimately reducing costs and improving productivity.
Some of the most promising trends in AgTech are precision agriculture and sensors. To some extent, part of this technology has already been adopted – farmers are increasingly using sensors, drones and GPS guidance to provide them with vital information to help them increase productivity. Sensors, which can be embedded in the ground or attached to machines, are able to monitor the health of plants and their soil, while drones supply aerial images of land, making it easy for farmers to understand which crops need watering, which need weeding, and which are ready to harvest – a far easier option than manually inspecting fields. This set-up is what enables precision agriculture, an approach which uses technology to help farmers easily direct their attention to the specific crops that need help. For example, a drone might provide an aerial image of crops and in doing so, enable the farmer to detect the specific areas that require pest control. The farmer’s ability to spot weeds at an early stage is likely to result in a greater crop yield. It is also more cost-efficient and environmentally friendly to apply herbicide or pesticide to precise areas rather than indiscriminately.
Farmers are increasingly using sensors, drones and GPS guidance to provide them with vital information to help them increase productivity
Swiss start-up ecoRobotox has created a spot-spraying robot, which targets individual weeds that have survived an initial spraying treatment. The device is solar-powered and is able to find and destroy up to 95% of weeds, all the while using far less herbicide than a traditional spraying treatment would use2. Precision agriculture doesn’t just help farmers apply herbicide and pesticide more accurately – it can also help determine when crops need to be watered and how much water they need, again not only freeing up time but also facilitating more responsible use of water.
In the public equity arena, we are a long-term stakeholder in Deere, a global manufacturer and distributor of a comprehensive range of agricultural machinery, which has been adding similar digital and automation capabilities to its portfolio. Its open architect software ecosystem keeps it at the cutting edge of technology whilst simultaneously building loyalty with its growing customer base. Customers enjoy improved productivity whilst we all benefit from a more considered impact on the environment.
The farm of the future is likely to look different to the farms of today – with autonomous electric tractors, drones, and precision planters and sprayers all potentially able to be controlled remotely. And while an automated, digitalised farm will no doubt be more cost-effective and easier to run, its greatest benefit will be its ability to dramatically increase output, ushering in a new standard for productivity at a time when the demand on agriculture has never been higher.
The benefits of AgTech are not confined to the farm itself. Once food has been produced, it needs to be stored and distributed. This is an area in which robots are increasingly at play, managing warehouse and retail distribution tasks, which frees humans to focus on tasks that require more complex work. More and more, automation also has a role in the world of online grocery shopping. It is time-consuming, costly and complex to fulfil online orders because it requires a 24/7 workforce to accurately select items from an extensive range, collate and store in the appropriately temperature-controlled environments and manage multiple delivery locations.
Ocado is a company that is using automated solutions to help facilitate orders, with a robot warehouse system that deploys robots to collect groceries and deposit them at a station for packing. At a packing station, a cobot – a robot that is designed to work with humans – is able to pack the goods for individual orders, with enough sensitivity to detect the kind of grip necessary – a lighter touch for delicate items and a tighter grip for more robust, heavier products.
Whilst there exist a growing number of niches, often private companies which specialise in linear motors, optics, and sensors, we believe greater value is starting to build within platform providers. These are larger, often public companies who are able to integrate hardware within an open architecture software ecosystem. Schneider and Siemens are both companies who have built up leading positions in asset and production automation. This not only improves the efficiency and productivity of their customers but also, through the introduction of software as a subscription service, establishes a regular cashflow from an ever-growing and loyal customer base.
The automation of storage and distribution is only possible with smart logistics and tracking, which itself is undergoing an automation revolution.
The automation of storage and distribution is only possible with smart logistics and tracking, which itself is undergoing an automation revolution. We have all become accustomed to tracking our online purchases as they journey from manufacturer to distributor and finally to our doorstep. Extending that concept into supply chain management means that manufacturers are now able to track inventory, the provenance of parts, and critically, the quality, of an assembly process. This offers more than timely delivery – it’s about being able to audit the entire supply chain. While this level of audit isn’t necessary for everyday online purchases, it’s easy to see how it could be mission-critical for Rolls Royce in their construction of an engine using 3,000 suppliers of over 20,000 parts. All this data demands automated solutions – ordering when stocks are low or raising alerts for factors that could impinge on product quality. Additionally, it plays an important role in ESG issues, with verifying the source of components becoming increasingly important.
Zebra is the market leader in QR coding, scanners and hand-held devices, all umbrellaed under a software suite that enables the track, trace and analysis of complex supply chains. We see this as an opportunity that is fast becoming a necessity for almost all areas of our economy, not just manufacturing. As more industries embrace automated supply chain management practices we see Zebra as a thematic beneficiary to this multi-decade adoption trend.
Whether it be at the farm, in storage, distribution and manufacturing, or in our homes, automation has the ability not only to make processes quicker and cheaper, but safer and more productive. This makes it a vital tool in our efforts to produce more, more responsibly.
1Source: FAO, The future of food and agriculture, 2017
2Source: Agfunder
If you are a private investor, you should not act or rely on this document but should contact your professional adviser.
This promotion has been approved by Sarasin & Partners LLP of Juxon House, 100 St Paul’s Churchyard, London, EC4M 8BU, a limited liability partnership registered in England & Wales with registered number OC329859 which is authorised and regulated by the Financial Conduct Authority with firm reference number 47511.
The value of the investments of the funds and the income from them can fall as well as rise and investors may not get back the amount originally invested.
All details in this document are provided for marketing and information purposes only and should not be misinterpreted as investment advice or taxation advice. This document is not an offer or recommendation to buy or sell shares in the fund. You should not act or rely on this document but should seek independent advice and verification in relation to its contents. Neither Sarasin & Partners LLP nor any other member of the Bank J. Safra Sarasin group accepts any liability or responsibility whatsoever for any consequential loss of any kind arising out of the use of this document or any part of its contents. The views expressed in this document are those of Sarasin & Partners LLP and these are subject to change without notice.
Where the data in this document comes partially from third party sources the accuracy, completeness or correctness of the information contained in this publication is not guaranteed, and third party data is provided without any warranties of any kind. Sarasin & Partners LLP shall have no liability in connection with third party data.
© 2021 Sarasin & Partners LLP – all rights reserved. This document can only be distributed or reproduced with permission from Sarasin & Partners LLP. Please contact [email protected].