America’s Coming Manufacturing Revolution

(via Moises Naim of The Atlantic)

According to Moises Naim’s article, despite the many stories predicting, lamenting, or celebrating the country’s decline, there are still ways in which America is gaining global influence, namely the manufacturing sector. According to the author, “The combination of lower energy prices, innovative information technologies, and advances in robotics and materials science are powering a manufacturing revolution that will reinvigorate the U.S. economy and make many of its industrial sectors the most competitive in the world.”

Information from Martin Baily and Barry Bosworth of the Brookings Institution suggests that U.S. industrial production has grown at the same rate, if not faster, than the overall economy for the past 50 years, and manufacturing has not lost importance in this growth. Naim believes there is a perceived industry decline due to great strides that have been made in productivity and efficiency not generating a proportional job increase in return.

“Most of the expansion of U.S. manufacturing has taken place in one specific sector: computers and electronics, while the 90 percent of manufacturing outside this branch -automobiles, aviation, appliances or chemicals, for example- is showing slower growth,” said Naim. While it is true that not everything is going as smoothly as desired in the United States economy and other areas, it is also true the country is not in a complete decline in the global realm.

To read the entire article from The Atlantic, please click here

 

America’s offshoring debacle: Accounting for what happened

According to John Biagioni, president of Dynsico, the reason that domestic production is on the rise is quite simple: “Manufacturers are reinvesting here to more efficiently serve the world’s largest free market.”

There is a lot of truth behind that statement. Biagioni points out that unlike when companies left, they’re now measuring why they should return production. They’re taking into account the Total Cost of Ownership (TCO), and realizing the benefits outweigh the costs of offshoring. The TCO Estimator, provided by the Reshoring Initiative, has proved to be a valuable resource when assessing the supply chain. Biagioni explains that Viatran, a company of Dynisco, which is a “worldwide maker of pressure and level transmitters for oil and gas services, steel production, injection molding, die casting, and chemical production industries, is using TCO aggressively.” They currently have a “Build Where You Sell” approach. And it all boils down to the numbers.

Using this approach, Viatran is able to reduce its overall lead time to increase operating profit, which allows them to be the most responsive business in their markets. They benchmark the business process using TCO and benchmark the product creation process using Design for Manufacture and Assembly (DFMA). DFMA has aided them in simplifying everything that has a measured benefit, including TCO. When they utilize these tools, they are able to reduce part-count, and a reduced part-count means not having to chase after cheap labor.

To access the full article, click here.

U.S. Manufacturers Find Value in Bringing Jobs Back Home

In the article “U.S. Manufacturers Find Value in Bringing Jobs Back Home”, the main focus is the current and anticipated reshoring trend present in the U.S. manufacturing industry.  The once common practice of sourcing to China for a supply chain cost advantage is losing its appeal and practicality.

The gap in savings from manufacturing in China is quickly closing.  According to Harold Sirkin of the Boston Consulting Group (BCG), “Improvements in Chinese productivity simply are not making up for rising wages and the devaluation of the currency.”  BCG predicts that by 2015 the costs to manufacture in China will only be 10 percent lower than in the U.S.  That 10%, however, will be chipped away at by other factors. (It is important to note that the 10% lower manufacturing cost figure does not include all goods, especially clothing and shoes, but it does account for a wide range of other products.)  BCG explains, “companies may find that any cost savings to be gained from sourcing in China may not be worth the time and myriad risks and headaches.”

Sirkin believes that these economic changes will translate into two million to three million jobs being reshored to the U.S. in the next 10 years, adding $100 billion in economic growth to the country’s economy. While reshoring is not the right decision for every company in the manufacturing industry, it is definitely an idea to at least be looked into further.

Machine Tools Give Competitive Edge to Reshore

Recently ThomasNet, a supplier discovery and product sourcing website, published an article on how machine tools may be a factor in driving the reshoring trend. The article explains that the surging labor costs in China may not be the only reason companies are choosing to reshore. Companies are now finding that automation by robots can play a key role in preserving the bottom line when it comes to manufacturing domestically, as mentioned from the ThomasNet News Machining Journal.

With the latest generation of manufacturing technology, the efficiency benefits allow companies to be more competitive on cost. Rethink Robotics, an American firm, recently came up with a new generation of robot, known as Baxter, which does just that. The Economist stated that Baxter is “so safe and simple that it can be taught by an unskilled worker and operate right next to real people.” Harry Moser, founder of the Reshoring Initiative, claimed Baxter was an example of innovative technology that’s allowing companies to reshore.

The article explains that these precision machine tools can “help improve production quality at lower or comparable costs to overseas production.” Harry Moser states that “’by having advanced manufacturing, in which the setup cost is minimized, you further differentiate the ability to deliver just-in-time.’” At GF AgieCharmilles, Moser’s former company, they produce electric discharge machining (EDM) tools which regulate the manufacturing process for better consistency. Moser believes this is the competitive edge for American machining.

To read the full article, click here.

States In Recovery: Manufacturing

Pamela M. Prah from Stateline, a nonpartisan, nonprofit news service of the Pew Charitable Trusts that provides daily reporting and analysis on trends in state policy, wrote an article on how manufacturing is making a comeback in terms of manufacturing jobs lost, especially those hit hardest by the recession. Manufacturing and construction were reduced the most after the recession, but there have been a million manufacturing jobs created in the U.S. since 2009.

To build on that momentum, President Barack Obama wants to initiate a network of “manufacturing innovation institutes” to help manufacturers capitalize on cutting-edge technologies.  The administration would eventually like to create 15 manufacturing institutes. Both Ohio and Pennsylvania are already realizing the gains of these endeavors.  Pennsylvania Governor Tom Corbett said, “we are seeing nothing less than the beginnings of a new Industrial Revolution.” The new Youngstown center boasts a 3-D printing lab that can create a three-dimensional model of an object using metal, plastic or ceramic powder. The head of Ohio’s Department of Development called it “the next generation of manufacturing methods.”

Other states are pursuing similar opportunities. Illinois teamed up with the University of Illinois and the National Center for Supercomputing Applications to create an advanced manufacturing hub. Large and small companies can come there to learn about “the world’s most sophisticated tools and software,” said Democratic Governor Pat Quinn.

Some critics, however, say the federal government is ill-equipped in choosing which technologies to invest in. Harry Moser, founder of the Reshoring Initiative, said “the risk is, especially if the government picks them, that they are picked for political reasons, rather than economic reasons.”

South Carolina claimed they don’t need assistance from D.C., touting themselves as the “new superstar of American manufacturing,” having manufacturers of cars, planes, tires, ATVs, and more.  Though what may attract these companies is South Carolina’s union-free policy, many of these companies are foreign.

“Nationwide, some 2 million Americans are employed in manufacturing by the U.S. subsidiaries of global companies, accounting for more than 17 percent of the U.S. manufacturing workforce, according to the Organization for International Investment, a trade group. The manufacturing sector is the top sector for global companies investing in the United States.”

For more information please read the full article at pewstates.org.

Made in the USA: More consumers buying American

NBC News published an article on a new trend happening among consumers: checking labels for ‘Made in the USA.’ Consumers are willing to pay a premium price knowing that they are receiving higher quality products and supporting domestic jobs. The co-founder of California-based Green Toys, Robert von Goeben, explains this phenomena that nowadays it’s more about the quality of the product, not the cheapest product.

Sarah Wagner, a blogger with a passion for domestically-made goods, founded USA Love List, a website devoted to sourcing American-made products and where to buy them. Wagner frequents big retailers in search of these products to feature on her site. Since its launch in November 2011, traffic to the site has soared. In the article, Wagner explains that “’There’s clearly a hunger for this sort of information…Companies have no idea how much Americans want to support American companies. They want to get behind their neighbors and communities to make sure those jobs stay there. It’s struck a nerve with a lot of people,’ she said.”

Green Toys, the 12-employee company, recognizes this and their downstream effect on jobs, which includes supporting local drivers, shipping and packaging companies and testing labs. The article states that “Later this year, Green Toys will ship its first batch of toys from northern California to China. Said von Goeben, ‘It’s the irony of all ironies.’”

To learn more about the increased consumerism of American-made goods, read the article at nbcnews.com.

Is the U.S. the Next Low-Cost Manufacturing Country?

At IMT, or Industry Market Trends, the Industrial News Room at ThomasNet News, David Sims delves into a discussion on the emerging possibility that foreign companies are starting to view America as an attractive alternative for manufacturing.  Not only are U.S. companies reshoring as they realize the benefits of moving operations back home, but foreign businesses are finding value as well. This is largely due to the lower energy costs resulting from the increase in shale gas production.

Sath Rao, Vice President of Industrial Automation and Process Control at Frost & Sullivan told IMT that “Shale gas has become a game-changer for the U.S. manufacturing renaissance.”  This is not only true for the energy-intensive industries like steel and chemicals, but also high-tech industries. Both Apple and GE have reshored some production.

With natural gas prices now a quarter of what they are in Europe, it is fueling a manufacturing boom in the U.S. Just in chemical manufacturing alone, companies are planning to invest $95 billion in building plants in the U.S.

Last April, BASF, a German chemicals manufacturer announced plans to expand in the U.S. “The Washington Post noted that since 2009, ‘BASF has channeled more than $5.7 billion into new investments in North America, including a formic acid plant under construction in Louisiana.’”

Read more at ThomasNet Industrial News Room, IMT.

What are the True Costs of Offshoring?

On ThomasNet News, the article, “What Are the True Costs of Offshoring?” touches upon the trend of manufacturing and what costs need to be factored in. Before, companies were basing their offshoring decisions off unit price alone; to return, they’re basing it off of total cost. Michelle Nash-Hoff, author of the book “Can American Manufacturing be Saved?” lists a few of the major factors that are considered when bringing work back to the U.S.: Inventory, cash flow, and travel.

Nash-Hoff elaborates that “businesses are being forced to buy larger lots to get the best China price.” Additionally, lower-volume businesses are being forced “to pay for parts before they’re shipped… Only the major companies are getting favorable terms.” Lastly she explains that if “the qualities of parts are sub-par and the manufacturing has to be reworked,” this will increase costs when “traveling to Asia becomes necessary or frequent.”

Harry Moser contributes his perspective that often times companies forget to factor in “costs associated with shipping, inventory time, quality issues, and exchange-rate risks.” Harry Moser’s Reshoring Initiative provides a Total Cost of Ownership Estimator (TCO) which estimates both direct and indirect costs of the entire manufacturing process.

For more hidden costs of offshoring, visit the article at thomasnet.com.

Tiny Missouri Town Entices Manufacturers

In an article by Susan Thomson, “Plentiful Green Space along Interstate Drives Economy of Tiny Missouri Town” the town of St. James, Missouri went through a process to attract manufacturers in order to bring in jobs and improve their economy. Sitting next to a major interstate, Interstate 44, St. James realized that its land near the interstate had great potential.

Securing state and federal grants, issuing its own grants, and giving land incentives for businesses that bring in jobs, not only did St. James bring in a Wal-Mart distribution center but even attracted a Tacony Corp. vacuum cleaner manufacturing plant that had previously been located in Taiwan.

Tacony Corp. was, “unhappy with the quality of the vacuum cleaners it was making in Taiwan and with the engineering expertise there for product development.” In order to help the vacuum cleaner manufacturer the city secured $153,240 in state/federal grants and an additional $50,000 of its own money to upgrade and improve conditions allowing for the business. Since they came in in 1997, Tacony Corp’s plant grew from 30 to 150 employees.

While Wal-Mart and Tacony Corp were the primary businesses brought in by St. James’ effort, they now say that similar cases are unlikely to occur “given the current international business climate.”

For more information find the full story here.

Lean Sourcing and Supply Chain Management is a Strategy of the Past

On MFG.com a blog was posted by founder Mitch Free entitled “Lean Sourcing and Supply Chain Management is a Strategy of the Past” that shows how “with tools available today, global connectivity and the digitalization of design software and machine tools you have more flexibility to create disruptive supply chain and sourcing strategies that will leave your laggard thinking competitors in the dust.”

Free refers to an article he wrote in the Business Xpansion Journal, “Disruptive Supply Chain – Re-Thinking Your Strategy.”  There he reports that, according to MFG.com, supply chain disruptions are on the decline. His reasons for why this is happening lies in the development of disruptive supply chain strategies. These strategies include using computer-aided design (CAD), computer numerical control (CNC), and local manufacturing in order to increase profit and enter new markets.

“A perfect example of a company doing this in America is Great Lakes Case & Cabinet Co. Inc. in Edinboro, Pa. The company is in what could arguably be called a commodity market, yet they have figured out how to let their customers configure their cases and cabinets to their exact needs and specifications. Their supply chain reacts quickly and delivers a custom configured cabinet faster than their competitors can deliver a one-size-fits-all cabinet.”

According to Free, this sort of customization allows manufacturers to get away from thin profit margins.

“When companies morph from a one-size-fits-all product to one that is more tailored to individual customer needs, it means you can no longer mass produce in a factory on the other side of the world.  Perhaps you can mass produce components or sub-assemblies, but the configurable part will need to be produced quickly and ideally as close to the customer’s needs as possible.”

This is where reshoring comes into play. When companies locate their manufacturing centers closer to the customers not only do they make it possible for such tailor fit products, but they can “take advantage of local economies and reduce logistics costs.” In addition to this, as opposed to the old lean sourcing strategy companies can use the Internet, CAD, and CNC to utilize all possible local suppliers in the event of a disruption or unforeseen event that may affect their supply chain.

“An analogy would be printing a picture on your printer. Think of the digital photo as a design file and your printer as the production tool. If you sent that design file to your friends they could all print an exact copy locally and on demand. This is the same type of progress that has been made in the manufacturing industry and is making disruptive supply chains possible…This is an exciting time for sourcing and supply chain professionals who are willing to challenge the status quo and develop disruptive supply chain strategies.”

For a complete reading of Mitch Free’s blog, you can find it here.