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The Next Generation of Manufacturing in America

February 2, 2017

By Shaun Boti

The current landscape in US manufacturing is changing rapidly. US manufacturing has declined over the past few decades, as the industry shifted to more cost-effective alternatives overseas.

However, costs have risen overseas, and technology – specifically, artificial intelligence robotics and 3D commercial printing – could be a catalyst in bringing manufacturing back to the US, triggering a turning point in industry trends.

After decades of offshoring production to Asia, benefits to US companies have begun to plateau and reverse, as shipping costs, supply chain risks, and wage costs have steadily increased.

One reason for rising labor costs is that China began requiring its companies to grant a 13% average annual minimum wage increase, beginning in 2011.

This translated to a substantial increase in the average labor cost in China over the following five to ten years, reducing the labor cost advantage to US companies. Also, the ability to protect trade secrets when manufacturing overseas has become more challenging, causing implicit costs to rise for US manufacturers.

Motivated by an increase in costs abroad, and supported by an increase in technological advancements, the manufacturing industry is poised to use technology to bring production back to the US, thereby reaping the key benefits of lower shipping costs, increased lead time efficiency, and protecting valuable trade secrets.

Two technologies are growing rapidly in the manufacturing industry: robotics and 3D printing. Since 2015, Chinese factories have invested heavily in robotic technology, which uses artificial intelligence, to increase efficiency, reduce costs, and maintain their dominance in manufacturing exports globally.

The robots can learn, identify, and fix problems on their own. But the aforementioned rising labor costs in China, offsetting the benefit of this technology, make it more attractive to move manufacturing back to the US.

Already, companies like Adidas and Nike are planning to open “speed factories” in Germany and the US, respectively, that are mainly robot operated, thus shifting production from China back to the western hemisphere.

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The other technology, 3D printing, is also on the rise. Known also as the additive manufacturing industry, it is a trend that reduces the cost of human labor and ensures quick and precise manufacturing with the benefits of 24-hour production. The 3D technology market is expected to grow globally, from a forecasted $15.9 Billion in 2016 to $35.4 Billion by 2020, a trend that US companies should note.

GE Aviation is already using this technology, and anticipates that 100,000 3D-printed parts will be in service by 2020, at which point its parent, GE Co., expects to build a $1 Billion 3D-printing business. Both intelligent robotics and 3D printing are attractive advantages for US companies to bring manufacturing back to the US.

Because using technology in the manufacturing process will differentiate companies from their competitors, it is essential that companies find viable ways to institute robotics and 3D printing into their manufacturing process. 

Companies must answer the following questions: What are the cost benefits and ROI of deploying these technologies into the production process compared to the cost of human capital? What opportunities exist for efficiencies from robotics and 3D printing? What is our current talent pool, and do our workers have the technical skillset required? Can we institute these technologies in time to stay ahead of our peers? A company self-assessment is a requirement to remain competitive.

New age technology is the future of manufacturing. Incorporating new technology into the manufacturing process, and bringing manufacturing back to the US, will help companies gain efficiencies, reduce costs, and protect trade secrets. Adding technology to the manufacturing process is an “arms race” within the industry. Companies should begin planning for these changes to their manufacturing process in order to stay ahead of the curve.

 


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