Reshoring Manufacturing: Making Supply Chains More Resilient

Can manufacturing in the US ever make a resurgence? US competency in the area of manufacturing has declined significantly over the past decades.

Scott Davis, CEO of Melius Research, wrote in the Wall Street Journal that “U.S. manufacturing lost its mojo some time ago. Lack of sustained investment, noncompetitive labor rates and degrading infrastructure opened the door for low-cost countries, notably China, to take the lead as manufacturers shifted production overseas. The end result was an industrial sector that leaked jobs, fell behind in technology and lost investor support. In 2000, U.S. industrial companies were 15% of the S&P 500 index by market capitalization. That number has fallen to less than 9%, with the massive U.S. aerospace industry leading a two-point drop in the past year alone.”

Advances in automation may be the key that can help begin the turn around and begin to bring off-shored manufacturing back to the US. Technologies like IoT, advanced Robotics, AI and edge computing can potentially reshore manufacturing while keeping costs low. Advanced manufacturing employs far fewer workers than in the past, but the jobs that are created are good paying, and the goods that are produced are available locally so that logistic bottlenecks are minimized.

Jarrod Ball, chief economist at the Committee for the Economic Development of Australia (CEDA), told In the Black that “in the past, there were no incentives for creating resilience in new supply chains; it was really about cost and efficiency. COVID-19 has illustrated the fact that we are starting to see more shocks in the global economy – all sorts of geopolitical shocks, trade shocks, major weather events, etc., as well as economic shocks. Supply people within organizations have to be on top of the resilience issue.”

Paul Wellener, a vice chairman at Deloitte, said that “reshoring is bringing production back into your country. But as things come back to the U.S., it is not coming back in the same way as it’s being done in another part of the world. There is technology being added to help continue to drive the cost targets, quality targets, and safety targets that manufacturers have.”

Harry Moser, founder and president of the Reshoring Initiative, told AutomationWorld that “if we don’t invest in automation, we don’t increase our competitiveness. Some people are afraid of automation because they’ll lose their jobs. But, throw away that statement, because the U.S. will lose more jobs to Chinese automation if we don’t automate than we will to U.S. automation if we do. Since we are competing, you have to automate the best you can just to stay even.”