With soaring factory wages making China a less attractive option, automation offers many companies a powerful argument to shift production back to the United States.
Though domestic manufacturing still cost more than doing the work in some other countries, the use of robotics and automated processes can largely offset the difference, especially when other cost savings of onshoring are taken into account. When all the elements of cost are considered, offshore costs may be only 5-10% lower — a difference that can be erased with lean manufacturing, better training, and automation, according to Harry Moser, president of the Reshoring Initiative.
Companies with less labor-intensive products such as auto parts, construction equipment, and appliances, are more likely to bring production back home since they have the most to gain from automation. For those industries, the key to competing with the Chinese is to produce more efficiently. As, Scott Melton, director of America West for the robotics firm FANUC, put it in an AeroCon 2013 speech last fall: “Productivity improvements through innovative tech can be a solution to the threat of low-cost labor.”
Advanced manufacturing technologies will further boost the onshoring movement. Average robot prices, for example, have fallen relative to the cost of labor, placing these highly sophisticated systems within reach of smaller manufacturers.
The use of automated technologies also makes the cost of labor more predictable, transferring it to an overhead expense.
Automated processes are obviously entering Chinese factorie,s as well, but as the Economist points out, robots cost the same in China as in the United States. And even though some robots have become so flexible that they can be taught by an unskilled worker, other technologies, such as 3D printing, automated guided vehicles, and automated storage solutions, demand an educated workforce more likely to be found in the United States.
These skilled workers have at their fingertips technologies that bring new efficiencies to every stop of the manufacturing process, simultaneously allowing them to turn their attention from menial to skilled tasks where their expertise is needed. The combined effect is a leveling of the playing field with China. Many US companies have even reduced their part production costs to equal or below those of Chinese firms — a trend further fueled by robots' ability to run applications around the clock.
Automation may mean there will be fewer manufacturing jobs overall, but if trends continue, those that remain will more likely be located in the United States than overseas.
What is your take on the impact of automation on onshoring?