Call the criticism of the offshoring of manufacturing nowadays a backlash if you will, but that might be an oversimplification that raises suspicions of jingoism. The fact is, there is a growing body of evidence that keeping or bringing back manufacturing in the United States is a more cost-effective strategy, at least in some cases where automation is utilized.Robotic out sourcing
A recent Harvard Business Review presents a counterpoint to an Oxford study about the future of automation that predicted a pessimistic future scenario of robots taking jobs away from humans. On the contrary, according to Colin Lewis a Behavioral Economist, robotics are actually creating jobs and reshoring jobs in some cases—a development dubbed “botsourcing” bringing production back home through robotics and flexible automation.
The factor in automation that makes it such a strong antidote to the natural tendency to offshore production is cost. According to the HBR, Sutherland Global Services, a Rochester, N.Y.-based outsourcing company, reports that it can reduce costs by up to 70 percent if it combines automation and its U.S.-based employees to complete tasks involving high volumes of structured data. The blog post points out that offshoring can be a short-term strategy for increasing productivity and thus profitability. In contrast, automation is a more reliable way to increase productivity for the long term. As a result, manufacturing executives must adjust their thinking away from finding the cheapest locations for producing goods and toward which pieces can be automated and how human and robotic expertise can best be combined.
Rethinking offshoring with Baxter
Rethink Robotics, developer of “Baxter”—an adaptive, collaborative manufacturing robot equipped with cameras, sensors and sophisticated software that enable it to “see” objects, “feel” forces and “understand” tasks—tells visitors to its website to “rethink offshoring.” Using Baxter’s technology, companies can compete with manufacturers that rely on low-cost labor, reducing the need for offshoring, according to the company. The result of automating, according to Rethink Robotics, is lower U.S. labor costs, lower transportation costs, shorter and more responsive supply chains and intellectual property protection.
Lincoln Electric robotic automation
Labor not the only factor to consider
Lincoln Electric, a leading designer and manufacturer of arc welding products, robotic welding systems and plasma and oxyfuel cutting systems, posted an article by Rick Schneider, president & CEO of FANUC Robotics Americas, titled “Robotics and Automation Can Save Your Factory.” The article points out that moving manufacturing operations overseas is not the only means to competitiveness. Automation and robotics are often more cost-effective and profitable alternatives that also allow companies to improve quality.
According to the article, offshoring may provide low-cost labor, but there are other profitability factors to consider. Some reshoring advantages include factory efficiency, inventory requirements, labor quality, government support and stability, supply chain strength and intellectual property protection. Many view China as a profitability panacea, but moving production there adds the risk of currency fluctuations, longer lead times, shipping delays, and loss of control of both the manufacturing process and intellectual property. Another problem is counterfeiting, which costs the U.S. automotive parts industry $3 billion annually. A report by The Boston Consulting Group further points out that lead time, delivery performance and product quality varies a great deal for products manufactured in China.
The Boston Consulting Group recommends outsourcing some products or manufacturing processes, such as those that require extensive hand labor. However, it makes more sense to onshore highly automated manufacturing processes, products that require a final finishing step and heavy products in which labor savings cannot compensate for freight costs.
Reshoring is the fastest and most effective way to strengthen the U.S. economy and machine assembly automation or “Botsourcing” is the way to reduce cost of a product. Groups have been started like the Reshoring Initiative that is an industry-led effort to bring manufacturing jobs back to the United States. According to Harry Moser, founder of the Reshoring Initiative; it’s estimated 50,000 jobs have come back to the USA in the past three years. Among the companies are Tesla Motors, one of the most advanced robotic manufacturing facilities in the world that builds its electric cars entirely in the US, some others are Ford, GE, Union Pacific, Otis Elevator, Buck Knifes, Coleman and Apple will start making the Mac in the US later this year. Boston Consulting Group (BCG) projected that production reshored from China and higher exports due to improved U.S. competitiveness in manufacturing could create 2.5 million to 5 million American factory and related service jobs by 2020. “Over the past couple of years, we’ve projected an improvement in U.S. manufacturing competitiveness by 2015 that would help drive an American manufacturing revival,” said Harold L. Sirkin, a BCG senior partner.
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- Harvard Business Review, “Robots Are Starting to Make Offshoring Less Attractive”
by Colin Lewis May 12, 2014 www.hbr.org/2014/05/robots-are-starting-to-make-offshoring-less-attractive
- Lincolnelectric.com, “Robotics and Automation Can Save Your Factory
by Rick Schneider www.lincolnelectric.com/de-de/support/process-and-theory/Pages/robotics-automation-detail.aspx
- The Reshoring Initiative, founded by Harry Moser in 2010. www.reshorenow.org
- Boston Consulting Group (BCG) is a global management consulting firm,” Majority of Large Manufacturers Are Now Planning or Considering ‘Reshoring’ from China to the U.S.” by www.bcg.com/media/pressreleasedetails.aspx?id=tcm:12-144944