Does reshoring make sense for discrete manufacturers? Of course, it’s a nuanced question, but with advances in industrial automation, reshoring has become a realistic possibility for many different manufacturers.
If your company is considering reshoring some (or many) of your components, there are a few considerations. Here’s what you should know about the benefits of reshoring with industrial automation systems and innovations.
The Growing Trend of Reshoring
Outsourcing parts and components has long been a necessary choice for discrete manufacturers in North America. Lately, the question of reshoring has become the subject of serious discernment for American companies.
Reshoring is the practice of bringing back manufacturing of components to the U.S. from overseas. Historically, offshore labor was a savvy option for lower-cost parts and labor on various elements of the building process. However, with that offshoring came a loss of oversight and certain product quality issues. Supply-chain concerns exacerbated the costs and time delays.
Many discrete manufacturers have recognized that industrial automation advancements and digital technologies have made reshoring production lines a more realistic and even cost-saving option. Automation helps to bring low-cost labor to the factory floor, creating new opportunities. Factory automation can fill open manufacturing jobs and bring a new level of efficiency to the industrial environment. One of the biggest questions many manufacturers face is how to incorporate industrial automation into reshoring strategies strategically.
To help with this question, let’s examine the reshoring trend, the increasing number of reasons that manufacturing companies are reshoring, and why reshoring with industrial automation technology is often an option that makes good money sense for discrete manufacturers.
Experts Weigh in on Reshoring in Manufacturing
A recent article in Assembly Magazine discusses how the trend of reshoring is fueling a boom in factory construction across the country. Harry Moser, president of the Reshoring Initiative, says, “The growth is being driven by a U.S. policy push to boost domestic clean-energy manufacturing, by global supply chain risk, and by the total cost of ownership (TCO) equation.”
According to the article, the U.S. Treasury Department has noted that this growth is unique in the U.S., as other developed countries haven’t seen a similar rise in manufacturing construction. In April and May of 2023, manufacturing construction spending reached its highest level in 30 years. It has increased more than twofold in the past year, from $90 billion in June 2022 to nearly $190 billion in April.
Moser explains this growth is partly due to U.S. government policies such as the “Infrastructure Investment and Jobs Act, Inflation Reduction Act, and CHIPS and Science Act. Each provides funding and tax incentives to spur on U.S. manufacturing where the U.S. has an excess dependency on imports.” These incentives can offset labor costs and help companies meet customer demand. They can also help shore up gaps due to labor shortages.
The article explains that the computer and electronics segment is the dominant component of the U.S. manufacturing boom, but other manufacturing segments and industry sectors are holding their own. Smart technologies offer innovative ways to lower total costs, improve lead time, and streamline production operations. Advanced automation can lead to new jobs and more efficient ways of manufacturing.
Offshore manufacturing is always at risk for supply-chain disruptions that could affect their operations and profitability. Because of numerous potential supply chain risks—including geopolitical uncertainties, transportation delays, and environmental regulations—reshoring production facilities and relying more on local production has become an increasingly attractive option for many companies.
Given favorable supply-chain and government-policy benefits for reshoring, Moser suggests that companies perform a total cost of ownership estimate to explore whether they should reshore their manufacturing operations to lower production costs. Numerous financial factors contribute to whether companies should reshore their manufacturing, including: “overhead, balance sheet, risks, corporate strategy, and other external and internal business considerations.”
Wes-Tech Supports Automation Solutions for Reshoring
Here at Wes-Tech, we follow reshoring trends and global supply-chain risks carefully. From nearly five decades of integration experience, we also know that deciding on capital investments, such as industrial automation, aren’t small decisions.
However, we’ve observed that companies with nimble-minded corporate strategies, who use innovation and automation, can reshore profitably and effectively with the right support. Keeping in mind McKinsey & Company’s tried-and-true practices for managing capital investments, automation can help discrete manufacturers increase their supply-chain resilience and keep up with growing demand.
And demand is in no short supply! According to a 2022 report by Fortune Business Insights, the global industrial automation market size is projected to grow to $395.09 billion by 2029 at a Compound Annual Growth Rate (CAGR) of 9.8%. In particular, the report identifies the discrete automation industry as the major holder of the market share.
Furthermore, under the broad umbrella of discrete manufacturing, we see that because of this anticipated growth, the “automotive and heavy manufacturing industries are likely to surge the demand for automation solutions.”
In sum, the combination of these aspects—supply-chain risks, government benefits, sound corporate strategies, and predicted growth—lend themselves well to the adoption of automation as more and more companies bring their manufacturing back to America.
If you are weighing the benefits and costs of reshoring your discrete manufacturing, contact us today to learn more about positive ROI for automation solutions.