The Making of a Manufacturing Comeback
December 17, 2018
Manufacturing in the USA has been going through a rebirth in recent years as supply chain managers have grown tired with some of the challenges of keeping tabs on supply chain partners half a world away.
But this only tells part of the story, as just some of the root causes of the American manufacturing comeback are tied into the increased efficiencies brought about by manufacturing automation at a massive scale. This development has gotten the attention of OEMs across the country, and now they are starting to focus on their industrial fabrication partners who are doing the same.
To understand where manufacturing in the U.S. is going, we need to understand where it has been. Since the turn of the century, the manufacturing segment has shed more than five million jobs. In fact, it had gotten so bad that output fell significantly in 12 of the 19 manufacturing subsectors.
Moreover, the decline gained pace during the recession. The Economic Policy Institute cites that “real manufacturing output fell 10.3 percent between 2007 and 2009” and was promptly followed up with the slowest domestic manufacturing output recovery in 60 years. To make matters worse, the trade deficit for manufactured goods has continued to balloon.
However, in the past few years the tide has started to turn. This is largely due to the need for OEMs to cut supply chain costs. Sure, manufacturing in a low-cost country might be cheaper, but the costs associated with managing geographically-diverse suppliers and keeping buffer stocks on hand outweigh the benefits. As such, OEMs and their metal fabrication partners have started to turn to automation as a way to not only reduce costs, but to bring manufacturing closer to customers.
Reshoring = Rebirth
According to a recent survey from the Boston Consulting group, companies who sell their products in the U.S. are increasingly expanding their production capabilities in the market.
Challenges remain prevalent, as the report points out four areas where manufacturing in the U.S. needs investment. These areas include boosting innovation, building an adaptive, highly-skilled workforce, strengthening supplier ecosystems, and modernizing manufacturing infrastructure.
The final point is where automation comes into play, as it can be used to increase cost competitiveness of domestic supplier-partners. Granted industrial robots have been in use for nearly 40 years, but the first-generation robots were largely single purpose, leading to issues during line changes. In addition, many of these machines forced manual processes, both upstream and downstream, to adjust in ways which were less than optimal.
The result was a combination of capital-intensive investments in robots and lower productivity resulting from other processes – which often led decision makers to seek out lower-cost labor to cure their ills.
Fast forward to today and the so-called ‘4th Industrial Revolution’ is finally starting to deliver on the promise of robots in manufacturing. The key to this promise is the emphasis on connecting processes through a combination of automation and labor. This means that automated processes can now communicate with another part of the manufacturing system, leading to higher levels of collaboration.
Automation is not only taking place on the factory floor, as OEMs and their supplier-partners have been working to integrate everything from material delivery to intralogistics – managing material flows within a facility. This results in a dramatic reduction in non-value-added management costs and is a big reason why manufacturing is returning to the U.S.
How Can a Metal Fabrication Partner Help?
As a supply chain manager, the true benefits of manufacturing automation lie in what your supplier-partners can do for you. This includes how your metal fabrication partners are using automation to reduce costs, improve quality, and cut down on lead times. In addition, you want to know how your partners can integrate their systems with yours.
With that in mind, here are a few things to look out for when reviewing the automation program of your strategic partner:
- What is the maturity of the supplier-partners automation? For example, is the system devoid of sensors and data-collection systems, or is it at or near full utilization of the infrastructure on the factory floor?
- What is the plan going forward? Does the supplier-partner have a long-term capital plan for automation (and the financial resources to back it up), or have they finished their investments for now?
- How does the supplier-partner compare to the best-in-class manufacturers in your segment? For example, are they on par with the norms in your segment or do they stand out for their innovations?
- Does the supplier-partner have access to additional capabilities that could benefit your organization? This could include new machinery or manufacturing solutions which could add significant value to an OEM, such as working with tight tolerances.
Automation is greatly contributing to the manufacturing comeback in the USA. For OEMs, this offers the opportunity to reduce supply chain costs by bringing manufacturing closer to customers. But this idea hinges on selecting the right supplier-partners who can use automation to add value over the long run.