June 10, 2012
With Euro financial chaos raging on, China’s industrial engines slowing, and BRIC countries feeling a decided fiscal drag, the U.S., even with its economic rebound still limping along, is looking more and more like a manufacturing renaissance unfolding…ever so slowly.
After a decade of globalization, during which the U.S. witnessed much of its manufacturing pride, prowess and jobs get exported worldwide—making such new-age business jargon as off-shoring, near-shoring and on-shoring become painfully too familiar—now comes yet another new term, only this time it is one filled not with more angst but rather with a sense of renewal: re-shoring.
Yes, the “re” as in return, is the key takeaway. Some are hailing it by another “re” word: a renaissance in American manufacturing.
The curtain begins to rise
U.S. manufacturing is beginning to come home. GE, Boeing, Caterpillar, Ford, Master Lock and Coleman have moved operations back to domestic factories over the last two years, and more could join the trend.
One of the pied pipers leading manufacturing back to its roots from China and other points Far East is none other than that scary, job-stealing hunk of metal, the robot. A nimbler, smarter, modular, multi-tasking-capable generation of robots is on the rise and learning to do all sorts of new tricks principally in manufacturing and supply chains.
Robots are even getting quite adept at toiling side-by-side with their human makers, which has catapulted their kind from the obscurity of punching out automobiles and working in foundries to all sorts of human-robot interaction (HRI). Many of the new capabilities were on display at this year’s AUTOMATICA tradeshow in Munich, Germany, but even there only the tip of the iceberg of new- and next-gen robotics was exhibited. See: Robots To Drive Era Of New Possibilities
Of course, the robot has lots of help on its side. China’s GDP is expected to grow just over 8% this year, which is the slowest growth China has seen in years. A report from the Boston Consulting Group (BCG), Made in America, Again: Why Manufacturing Will Return to the U.S., cites other mitigating factors like higher Chinese factory wages, soaring electricity costs, the increasing need to provide goods to a rising Chinese middle class, and the constraints of U.S. firms trying to coordinate operations thousands of miles from home. The report predicts that by 2015 certain kinds of production will be just as cheap in the U.S. as in China (cited were car parts, construction equipment and appliances).
The other big plus in a stateside scenario is that the finished goods will be much closer to the ultimate consumer; no longer will they need to take the time-consuming, expensive trek across the Pacific.
In their recent article U.S. Manufacturing Nears the Tipping Point, BCG’s Harold Sirkin, et al, put some heady numbers to the outflow, saying that they have identified industry groups that “account for $200 billion in goods imported from China for which rising costs in China will likely prompt manufacturing of goods consumed in the U.S. to return to the U.S.,” which they go on to say would be like “adding $20 billion to $55 billion in output annually to the domestic economy.”
Throughout the outsourcing movement, roughly from 1997 to 2008, the value of U.S. manufacturing increased by a third, to $1.65 trillion. That was largely due, suggests Gerry Dick of Indiana Business, to the troika of huge investments in information technology, the adoption of new practices like total quality management, lean manufacturing and six sigma; and the use of robotic systems. Human capital, however, he suggests is the key element: U.S. worker productivity is what kept it all together.
“Despite China’s rapid rise,” adds Susan Hockfield, president of the Massachusetts Institute of Technology (MIT), “America remains a formidable production power. Its manufacturing output in dollar terms is now about the same as China’s, but it achieves this with only 10% of the workforce deployed by China.”
Re-shoring & Productivity
Through downsizings, layoffs and economic disaster, American productivity has excelled. Until now. According to the Labor Department, productivity grew last year  at the slowest pace in nearly a quarter century, after rising sharply in 2010. USA Today suggests that the “decline in productivity could be good news for jobseekers. It could show that companies are struggling to squeeze more output from their workers and must hire to meet rising demand.”
If lagging productivity is melded together with the “reshoring” movement back from China, job seekers could be doubly happy at the employment picture that is slowly coming into focus in front of them.
The net-net for the current U.S. jobs dilemma indicated in Made in America, Again is that domestic employment will rise by 2 to 3 million new jobs, shaking off one to two points from the dismal U.S. unemployment rate. That’s if, as some suggest, that the new jobs go to humans and not to robots, which has already raised fears with many jobseekers and has been well featured in all sorts of ongoing online, broadcast and print media.
The fears are natural but unfounded, contends Henrik Christiansen , director of the Center for Robotics and Intelligent Machines at Georgia Institute of Technology. He cites the 2011 Metra Martech market research that claims that the robotics industry will create one million new jobs; robots and humans will be manufacturing things “together” for a long time to come.