When Reshoring, Automation is Fundamental for Success
By Bill Lydon, Editor
The term reshoring is being used to describe the act of companies bringing back desirable jobs to the United States – those jobs that have been lost to decades of offshoring. The difference between the total cost of production in China (or other countries) compared to production in the United States is becoming insignificant. When companies include the cost of shipping, customs duties, and other fees, production costs in the U.S. are now lower or equal to production costs in the Asian countries. In addition, reshoring can improve quality, protect trade secrets and simplify supply chains. It has also become popular for companies to publicize anything that looks like reshoring to improve their image.
A major factor encouraging reshoring is that wages in low-cost countries have soared. According to the International Labour Organisation, real wages in Asia between 2000 and 2008 rose by 7.1-7.8% per year. The pay and benefits for the average Chinese factory worker rose by 10% per year between 2000 and 2005, and the rate increased to 19% per year between 2005 and 2010. The Chinese government has set a target for annual increases in the minimum wage of 13% until 2015.
Reshoring is an efficient way to reduce imports, increase exports and regain manufacturing jobs in the United States. It's also one of the fastest and most efficient ways to strengthen the U.S. economy.
Reshoring is desirable, but we cannot assume that the “low labor” countries are going to continue manufacturing with low-cost labor as their key success factor. The Reshoring Initiative Organization assists companies in accurately assessing their total cost of offshoring. In addition, the organization wants to shift the collective thinking of manufacturers from “offshoring is cheaper,” to “local production reduces the total cost of ownership.” The ultimate mission of the Reshoring Initiative is to bring good, well-paying manufacturing jobs back to the United States. This is all well and good, but U.S. companies should not lose sight of the fact that automation is the key to increased productivity and quality.
Other countries are not standing still. Based on International Federation of Robotics (IFR) data, between 2005 and 2012, sales of industrial robots to China have increased by about 25% on average per year and reached 23,000 units in 2012. This supply does not include the sales of local Chinese robot manufacturers within China. The IFR estimates the total number of robots installed in China in 2012 was between 28,000 and 35,000 units, making China the largest robot market in 2012. China will continue to have a substantial economic growth rate in the coming years. Strong investments in automation will continue to increase productivity and establish more eco-friendly production processes.
The ARC Advisory Group predicts that in 2016 Asia will become the largest Programmable Logic Controller (PLC) Market Worldwide. While attending trade events, I have talked with users from around the world, and anecdotal information indicates that China is automating in many other ways. Mexico has a huge advantage of bordering the United States, and by taking advantage of automation, it can become a world-class player.
The energy revolution caused by shale gas in the United States is cited as another success factor, but this may be transient. According to the U.S. Energy Information Administration (EIA) report, Technically Recoverable Shale Oil and Shale Gas Resources: An Assessment of 137 Shale Formations in 41Countries Outside the United States June 2013, China has the world’s third-largest shale oil reserves and the world’s largest shale gas reserves. In January 2014, Bloomberg reported that shale gas production in China surged by more than five times in 2013 to 200 million cubic meters. In comparison, the United States produced more than 100 times that amount in 2013. According to Global Risk Insights, China’s current 5-year plan aims to produce 60-100 billion cubic meters by 2020.
Automation investments will level the manufacturing playing field worldwide, so it is critical that U.S. companies leverage technology to be competitive. The government could help by providing tax credit incentives for companies who invest in automation.
Is automation a reshoring show stopper? The answer is, only if you don’t take the initiative to automate.
Off the Record: The Truth About Data Integrity in Pharma
By Lee Sullivan, COPA-DATA UK
This article explores three data integrity pitfalls to which pharmaceutical manufacturers are most vulnerable, and...
Google for Industry: Taming Big Data
By Bert Baeck, TrendMiner
This article discusses multiple ways to both stay afloat and take advantage of the ocean of data that is flooding the...
Internet of Things Market: IoT Continues to Makeover Many Industries; Adoption of IoT to Increase...
Internet of Things’ (IoT) Promise of Operational Efficiency to Stir up Sizeable Demand from Industrial Sector
Six Steps to Using the IoT to Deliver Maintenance Efficiency
By Kevin Terwilliger, Dell
This article discusses ways to utilize advanced IoT technology to enable successful predictive maintenance models for...
True Cost of Ownership for Linear Position Sensors- Part 2
By Harold Schaevitz, Alliance Sensors Group
The second article, of a three part series, examines the strengths and weaknesses of industrial...
Honeywell to automate remote offshore North Sea drilling platform
When drilling operations are completed, Statoil’s Valemon platform, located on the Norwegian Continental Shelf, will become a periodically-manned...
Northeast Tool chooses Epicor ERP to improve resource management
One of the biggest drivers that prompted a search for a new ERP system was the need to interact with other systems across the company, in addition...
Werum's PAS-X MES turns Turkish pharma manufacturer digital
Mustafa Nevzat Pharmaceuticals has successfully taken Werum’s PAS-X Weighing & Dispensing into operation at their main manufacturing site in...
Emerson's Unidrive 600M boosts sugar delivery at Thai plant
Mitr Phol Sugar Corp is the largest sugar producer in Thailand today, the biggest in Asia and the world’s fourth largest, producing 2 million...
Honeywell’ Users Conference to highlight digital transformation for industrial controls
Turning Industrial Internet of Things (IIoT) concepts into reality for manufacturing enterprises will be a key topic at Honeywell Process...