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Onshoring the Robots

For robots, there's no place like home!

For years, we've watched much of the US manufacturing base move to other countries, especially China. This has been especially noticeable in high-tech, where first televisions and then personal computers and smartphones moved to lower-cost manufacturing. This also happened in the European Union (EU).

In the last couple of years, the economic pendulum has swung back towards US manufacturing. This is a result of inflating labor rates in China, coupled with high unemployment in the US and Europe due to the recession. Low US energy costs, a result of fracking, also impact the equation. Off-shore manufacturing is no longer the bargain it used to be.

Long pipelines and the resulting increase in risk and inventory costs are also strong factors. Add to this some saber-rattling in Asia and a less than friendly climate for outside investment, and prudent mega-enterprises are hedging their bets.

In many ways, this is a bit reminiscent of the Japanese bubble of 40 years ago. The US finally out-performed Japan on costs and matched quality, while leading on innovation. Japan resolved many issues by on-shoring car production, for example.

With the loss of China's cost leadership, what is likely to happen to the manufacturing base? We are somewhat at a crossroads. The cost equation has been getting smarter with time, and now considers the costs and risks of overseas sourcing, so a scurry to find the next “China” is unlikely. In fact, the whole Asia area has increased base costs to the point that there is no obvious strong candidate as a low-cost manufacturer.

Foxconn, maker of all things Apple, and employer of over 1 million workers, is taking this issue seriously. They are looking at a robotic future, where the repetitive assembly work is done by new generation robots. A plan to replace most of those workers is already under way, but one has to ask where the best place to place the robots is. Foxconn is planning to build US factories and is already manufacturing in Texas and Indiana.

Robots require people to run, but these are engineers and technicians, not laborers. The cost of these, though, is small when amortized over a lot of robots, so the over-arching issue is a supply of trained or trainable people. This suggests the US as a better base for the effort.

Couple this with the much shorter logistics chain that US manufacture enables and the benefits of placing robots in the US are strong. It's worth noting that this is already happening, specifically in the auto industry, where tax incentives are added to business prudence.

New technologies are potentiating the on-shore flow. “Just-in-time” has been a mantra in manufacturing for decades, though the rush to cheap assembly in China pushed it to the sidelines. 3D printing, plasma metal cutting, and even cooperative logistics all address this issue in the US arena, with the result that short efficient pipelines are possible again.

There are discernable impacts of on-shoring already. The freight industry is seeing reductions in Asia trade attributable to business moving back. Looking back a couple of years, the editorial language has stiffened, going from tentative signs of a trend to much more bullish statements.

Increasing costs in China, better robots (which are already much cheaper than older generations), and a welcoming US environment will accelerate the trend over the next few years. The direct jobs impact of the on-shoring will be relatively small since most workers ill be robots, but the snowball effect through the logistics chain will be substantial.

The government has an important role in this. Proposed by the Obama Administration, a tax incentive program similar to the auto industry's for a broader range of products would make this all happen sooner rather than later. Additional leverage could be as simple as encouraging the Apples of the world to repatriate off-shore profit as US plant investment. This would reduce unemployment, and increase the taxpayer base, so it would indirectly benefit the general fund, while being a win for the manufacturers and communities.

20 comments on “Onshoring the Robots

  1. SunitaT
    May 25, 2014

    For a huge laborer population to be replaced by robots, things won't go smoothly. Many people would lose their jobs, and I mean millions. Most people are not educated enough to do any other job than laboring, so the displacement would cost companies much. Mitigation of strikes and laborer dissatisfaction would have to be handled carefully by the company.

  2. JimOReilly
    May 25, 2014

    The social disruption from labor-intensive factories going robot could be notable. Foxconn as an example has around 1 million workers. That's a major social impact.

    I think the impact in say the US will be much less, with new businesses now economic with robots (Foxconn might onshore a lot of assembly) and older business working a coexistence just as the auto industry has.

  3. Adeniji Kayode
    May 25, 2014

    @tirlapur,

    you are right on that. Hopefully, people would find other areas of their profession to go into by the time robots start to replace a lot of human labour force.

  4. ITempire
    May 26, 2014

    Society where people earn their living through 10 to 12 hours of labor, it will be difficult to replace them with robots. Robots might work faster and reduce the cost of labor but implementing such kind of plans require a lot of budget and make many people unemployed which will create hustle for the companies.

  5. Hailey Lynne McKeefry
    May 26, 2014

    @tiriapur, what would you expect or want the OEM to do to make a smooth transition? Do you think that manufacturers have a repsonsability to avoid roboticization of thier manufacturing in order to maintain jobs?

  6. itguyphil
    May 27, 2014

    I think it depends on what their organizational charter is. For some, it may be to maximize profits for shareholders. In this case, jobs are not the main focus. On the other hand, if it's to maximize the potential of the employees, then it's a lot different.

  7. Eldredge
    May 28, 2014

    Perhaps someone should consider unionizing robots, and striking for better woreking conditions.

  8. ahdand
    May 28, 2014

    @Eldridge: As long as there is less power towards the machines / robots its fine. Always make sure to give less control towards the robots because if it runs out of hand then will be very difficult to control

  9. JimOReilly
    May 29, 2014

    New generations of robots are being designed with smarts to protest humans working nearby. It's needed – my first encounter with a robot was a unit that went out of control (mechanical failure) and threw a 50kg casting the length of the factory floor!

  10. Eldredge
    May 29, 2014

    @Jim O'Reilly – Nothing worse than a robot with anger issues!

  11. JimOReilly
    May 30, 2014

    With the US Army trying to develop kiler robots, it may be time to invoke Asimov's 3 Laws of Robotics!

  12. Hailey Lynne McKeefry
    May 30, 2014

    @Jim, was the problem with the robot or do you just bring that out in mechanical stuff?

  13. JimOReilly
    May 30, 2014

    It was the robot. A limit switch failed and the hydrulics went hard over in one direction.

  14. JimOReilly
    May 30, 2014

    THere was a lot of publicity a year ago about Google's Mototorla opening a factory in Texas to make phones.

    This is now closing. It isn't an onshoring issue…the phone had terrible sales and there were no follow-on products.

  15. Hailey Lynne McKeefry
    May 30, 2014

    @Jim, that's too bad. It's always more complicated than any one thing, isn't it?

    I wonder if some other comany will take over the factory..

  16. Eldredge
    May 30, 2014

    @Jim – I suspect that Asimov's 3 laws won't serve the purposes of the military very well – likely to be modified!

  17. Adeniji Kayode
    June 3, 2014

    @wasqasAltaf, 

    If you notice, the price of a device is not stable, its always fall significantly every year. The use of robots is

    becoming cheaper by the  years. So cost will eventually not be a problem but measuring performance against time and this is where robots comes in.

  18. Adeniji Kayode
    June 3, 2014

    Good idea, but our present age is yearning for “full automation” virtually in everything. 

  19. Ariella
    June 3, 2014

    @Adenji that's true, for the most part. 

  20. ITempire
    June 28, 2014

    Adeniji, but the human element also plays its role. I have seen how the workers and their unions react when mass-level unemployment is created within the company. 

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