How can US manufacturing gain momentum in 2015?

on Wednesday, January 14, 2015

How can US manufacturing gain momentum in 2015?

Depending on who you speak to, the United States manufacturing sector is either undergoing a second renaissance or doesn't exist at all. 

The truth of the matter is that the current state of the U.S. production economy exists somewhere in the middle of the two. While it isn't necessarily decrepit, procurement officers across the globe aren't advising their superiors to partner up with U.S. manufacturing firms. 

Technology as a major factor

The general consensus among critics is that technology is what's driving investment in U.S. manufacturing. Manufacturing Business Technology Magazine contributor John Zegers referenced a CSC Global CIO Survey, which noted that 81 percent of technology leaders at production companies believe that big data technology will have a positive effect on facility output and efficiency. On top of that, 65 percent of respondents view big data as a strategic differentiator in the space. 

Furthermore, survey participants recognized the importance of implementing systems associated with the Internet of Things. For instance, sensor technologies will support enterprises that are trying to implement smart factories, which will be remotely controlled by employees through Web browsers and enterprise applications. 

This manufacturing revolution presents a unique opportunity to U.S. manufacturing firms that are looking to expand their customer profiles. Establishing themselves as competitive partners on a global scale requires their personnel use innovative and creative ways of leveraging smart, data-driven operations. Research and development teams will be critical assets in this regard. 

Focusing on the supply chain 

Harry Moser, founder of the Reshoring Initiative, and Hal Quinn, president and CEO of the National Mining Association, wrote a piece for IndustryWeek that references the supply chain as one of the key deciding factors for purchasing management officers. 

Moser and Quinn regarded the sentiment among professionals in the National Mining Association, who noted that U.S. manufacturers are skeptical of whether mineral and metal supplies will either support or hinder domestic operations. 

However, 91 percent of executives at U.S. manufacturing firms are concerned about how supply disruptions will impact factory production. Geopolitical shifts, global conflicts and lesser obstacles can be predicted, but the accuracy of estimations are only so strong. These considerations are supporting cases for reshoring, as procurement officers would like to benefit from a shorter supply chain that isn't so asset-heavy. Concerns such as freight cost, excess inventory, risk and lead time would all be mitigated by sourcing from domestic mines. 

"According to the NMA's survey, 80 percent of manufacturing executives believe the sourcing of minerals and metals from the United States will decrease our dependence on foreign raw materials, strengthen U.S. national security, and ensure job and economic growth in America," wrote Moser and Quinn. 

Does the US have the materials needed? 

One question that is on nearly every domestic manufacturing leader's mind is whether or not U.S. mines can supply factories with the minerals needed to make electronic devices, infrastructure assets, body armor and other products. Quinn and Moser maintained that the U.S. has $6.2 trillion worth of mineral and metal reserves, but foreign companies still provide it with more than 50 percent of the materials its manufacturers require. 

Why are efforts designed to bolster the U.S. mining sector meeting so much resistance? Quinn and Moser acknowledged the importance of revising the nation's antiquated permitting system, which imposes approval times of seven to 10 years. A portion of these hindrances are created by environmental concerns - global warming and other such concerns have permeated throughout the U.S. public and impacted the way legislature is designed. 

In regard to this factor, miners will have to present lawmakers with new mineral and metal extraction methods that are significantly less harmful than practices that have been available for some time. 

1 comments:

Sandy Montalbano said...

Thanks for mentioning the Reshoring Initiative.

Rising offshore wage rates, the use of the refined metrics of total cost of ownership to uncover the hidden costs and risks of offshoring and reducing costs with sustainable strategies such as improved product design, innovation, automation, and lean strategies are the largest drivers of the reshoring trend.

Many companies are focusing on the benefits of localization in manufacturing and reducing supply chain risk through shorter, domestic supply chains.

Localization often reduces total cost and having manufacturing near customers improves flexibility to respond to customers changing needs, eliminates higher shipping expense, minimize supply chain disruptions and eliminates the larger production runs and inventories associated with long distance offshoring.

When manufacturing is moved next to design and engineering, companies can also improve design, eliminate waste, improve quality and increase productivity, many times making the product more easily and at a lower cost; thus, improving U.S. competitiveness by promoting innovation.

As companies adopt a more comprehensive total cost analysis they are finding that rising offshore labor rates combined with other “hidden costs” of offshoring often counterbalance any remaining savings from cheap price or labor abroad. These companies are reshoring and sourcing in the U.S. because it makes good economic sense for them to do so.

Getting companies to understand all of the benefits of local production and adopt a more comprehensive total cost analysis will help ensure the continued rebound of U.S. manufacturing.

The Reshoring Initiative Can Help.

The not-for-profit Reshoring Initiative’s free Total Cost of Ownership software helps corporations calculate the real P&L impact of reshoring or offshoring. In many cases, companies find that, although the production cost is lower offshore, the total cost is higher, making it a good economic decision to reshore manufacturing back to the U.S http://www.reshorenow.org/TCO_Estimator.cfm

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