What is about to happen could be a tsunami of reshoring critical manufacturing. Numerous supply chains have been interrupted by the COVID-19 virus pandemic. But, more important, many people at all levels of the business world have realized that our critical supply chains are at risk. In some cases, the U.S. is (and can be) held hostage by these weak links in our global supply chains. Thus, we had better smarten up about how we manufacture our products and rethink many of our old manufacturing rules of thumb.
Decades ago, the “business mindset” was to reduce labor cost by manufacturing overseas. At that time the low wage, low labor cost countries were China and India. Many, many American businesses began migrating high cost, high volume, high labor content components to these countries to maintain their profitability. At that time, it seemed like the right thing to do.
The risks (challenges and unintended consequences) of offshore manufacturing included inconsistent product quality, long-lead times, higher shipping cost and longer time in transit, the need for domestic warehousing and distribution centers, plus the scourge of counterfeit products. These risks of offshoring U.S. manufacturing were tolerable to a point.
Unfortunately, more and more domestic-made products and components were competing head to head with the offshore suppliers, but they held their own. Eventually, the offshore suppliers responded by improving quality. Soon, they addressed worker demands and began increasing wages and social benefits. Skills shortages also hampered these offshore manufacturers. At some point foreign currency manipulation entered the supply chain cost-of-goods-sold equation to the point that our once competitive manufacturers were undercut by offshore suppliers. Some of our plants were mothballed or shut down entirely.
LEARNING FROM COVID-19
Aside from new health risks, learning about “Social distance,” and experiencing empty grocery store shelves, this COVID-19 pandemic offers huge lessons yet to be learned. While the global supply chain made sense in the past, it also put our nation at risk by interrupting the manufacturing supply chain and the availability of products that we depend upon.
Reshoring of U.S. manufacturing has been occurring on a small scale for a decade or so for the very reasons cited above. Our nation’s foods, pharmaceuticals, medical devices, strategic metals, and electronics, to name a few, are at risk of being tainted, under supplied, and costing more than ever before. But now that we see how our Nation is truly at risk with the interruptions in the global supply chain, we are likely to see a tsunami of reshoring critical supply chain manufacturing.
Today, supply chain globalization for our domestic market has failed. But we’re not alone in that realization. France, Germany, and Japan, to name a few, are aggressively searching for their own solutions to their global supply chains.
But what is failure? As Henry Ford put it, “Failure is simply the opportunity to begin again, this time more intelligently.” He also said, “The only real mistake is the one from which we learn nothing.”
What should we learn and pay close attention to now?
The reasons for offshoring probably have not changed that much. Businesses still need to show a profit. Labor costs in America are still high. Manufacturing labor and skills shortages still exist and have gotten much worse. The capacity was not here to meet the market needs so it was moved offshore.
NOW IS THE TIME TO CHANGE
Mark Twain offers another of my favorite quotes: “If you always do what you’ve always done, you’ll always get what you always got.”
If (and when) we accelerate the reshoring of critical manufacturing, we should not, cannot ignore the previous incentives for offshoring as they can now be barriers to reshoring. In a nutshell, we must be SMARTER about manufacturing’s recovery and reshoring manufacturing.
♦ We will continue to have labor shortages largely due to the misperceptions of manufacturing jobs.
♦ We will continue to have technical, hands-on skills shortages due to generations of college education at the expense of trade and technical education in our schools, from middle school through college and university programs.
♦ Businesses, both large and small, and all of those in between still must show an acceptable profit, a return on their investments.
♦ While U.S. labor costs are among the highest in the world it is our workforce that is the most productive in the world.
WHAT S.M.A.R.T. MANUFACTURING WOULD LOOK LIKE
♦ SUSTAINABLE: Small manufacturing businesses play a HUGE role. Over 98% of all manufacturing businesses in the U.S. are small businesses. And a majority (75%) of our nation’s manufacturing companies have fewer than 20 employees. More than 58% are sole proprietorships and technically have NO employees. Regardless, the human aptitudes and skill sets match the needs of the equipment and work processes.
♦ MAINTAINABLE, MANAGEABLE: Their manufacturing processes are suited to the flow of their supply chain. Their equipment and processes are easily maintained but require significantly less maintenance than before. Their technology does not outpace the abilities of those who operate and maintain it.
♦ AGILE: They anticipate market changes and new opportunities and respond quickly and effectively to the needs of their stakeholders and customers. Highly skilled and experienced retired employees serve as adjunct mentors and coaches to assist with on-demand employee training and qualification.
♦ RELIABLE: Everything they do, every critical machine must be predictable, dependable, stable, and safe. Applicable condition-based maintenance, responsible operation, coupled with root cause analysis problem solving is a way of life.
♦ TIMELY: Their critical work processes are standardized, up to date, continuously improved, and immediately deployed. Closely focused on-job-training and coaching is standardized, procedure-based, and available on demand.
THE WEAK LINK IN OUR DOMESTIC SUPPLY CHAIN
One could be easily led to believe that when we re-shore the critical manufacturing supply chain all will return to our pre-offshore normal in a few short years (or less). Plants will be humming and churning out the critical components and supplies we need. Not so fast!
The weakest links are PEOPLE: production workers, operators, and maintainers. We have nearly three generations of citizens here in the U.S. that have been conditioned by society, their parents, their peers, their teachers, and politicians that “factory work is nasty dirty.” Their grandparents often cited the turmoil when the mill shut down, their jobs were lost, and their retirement pensions along with it.
Couple that with the mantra “go to college and get your degree” for those three generations and we have largely decimated the vocational-technical education infrastructure that grew out of WWII and the post-war 1950s. Three generations that only heard of the old manufacturing plants’ disrespect for workers.
The Baby Boom generation (post WWII) took manufacturing to new levels with their learned skill sets through the 1980s, 1990, and 2000s. Now, that generation is rapidly retiring, or aging out of the workplace. Now, new technology in combination with legacy machines has become very practical.
We must get smarter about the people-side of manufacturing if we are going to survive, to maintain and thrive as the world’s largest manufactured goods exporter.
We must learn that without skilled people on the front lines and at the helm of SMALL manufacturing businesses we will not succeed. All the robots, internet of things, big data and algorithms combined will not be able maintain or repair that high-speed conveyor or that welding robot when they need attention.
Small manufacturers must get smarter about growing their own employees for today and well into the future. They will benefit from relationships with their public and private schools, local community, and technical colleges. They will dispel the misconceptions of manufacturing by becoming a great place to work – and sell that very image to the community.
Small is good. While it’s the BIG manufacturing companies, i.e., automobiles, aerospace-defense, pharmaceuticals, petrochemical plants, technologies, that seem to get all the press (good and bad), it’s the small enterprises that pave the way for our local, state, and national economic prosperity.
So, to sum up the situation, now is the time for governmental policy makers and elected officials to address small business tax credits for employee training, research and development, public-private collaboration, and reducing the red-tape of compliance with old rules in a new world of manufacturing.TRR
ABOUT THE AUTHOR
Bob Williamson is a long-time contributor to the people-side of the world-class-maintenance and manufacturing body of knowledge across dozens of industry types. His background in maintenance, machine and tool design, and teaching has positioned his work with over 500 companies and plants, facilities, and equipment-oriented organizations. Contact him directly at 512-800-6031 or firstname.lastname@example.org.
Tags: reliability, availability, maintenance, RAM, manufacturing, workforce issues, skilled trades, supply chain