Could the US be at the helm of the next industrial revolution?

Given the advent of the Internet of Things, personalization and an overall need to reduce distribution risk, procurement officers aren't necessarily crossing off reshoring as an option. 

In fact, many analysts would assert that the U.S. and the global manufacturing industry as a whole is due for an industrial revolution. To some, what the new age of production will look like is somewhat of a mystery. Will factories be completely devoid of human labor? Is a new form of "raw" materials to be established? How can artificial intelligence contribute to future development? 

A need for ascension 

There's no doubt that globalization transformed the conventional supply chain model. Instead of purchasing materials produced at factories distributed across North America, sourcing specialists were obligated to set up logistics models that included overseas manufacturing facilities, oceanic shipping companies and hundreds of partners.

These types of operations have made spend management and other tasks associated with procurement much more complex. They inherently carry risks that can obstruct or delay shipments and even result in criminal investigations. 

MAPI Director of Economic Studies Cliff Waldman wrote a piece detailing what the "new factory" will look like in the near future and beyond. He maintained the aforementioned factors, in addition to the ubiquitous need to lower the costs with which goods are produced, have incited a need for an industrial revolution. It's more convenient for a U.S. company to source items that are produced domestically for a few reasons, such as:

  • It's easier to build relationships with suppliers. Just because airlines provide professionals with the ability to fly across the Pacific, doesn't mean doing so is convenient. 
  • Maintaining quality control isn't as arduous. Apple is one company that's known for putting a lot of effort into R&D, but needs to send personnel overseas to ensure its production partners are making devices up to pre-established standards.
  • It costs less to distribute goods across a continent than it does to transport them halfway around the globe. The longer a logistics chain, the more vulnerable it is to sustaining disruptions. 

Technology to be a main driver

In order for reshoring to become a reality, U.S. manufacturers will not only have integrate technology into existing processes, but make it the basis of the way in which goods are fabricated. While advanced machinery and robotics is certainly a part of this revolution, professionals such as Accenture Strategy Managing Director and IndustryWeek contributor Cv Ramachandran maintained that software is going to be essential for the success of U.S. manufacturing.

Although there are many dimensions to production's use of applications, there are two ways in which digital assets will be leveraged to further the industry's progression:

  1. Reliability and performance: Using data analysis software to deduce how well implementations are performing will show managers ways in which processes can be adjusted or transformed to improve their functionality. Predictive maintenance is a popular topic among industrialists, as it allows them to fix issues before they exacerbate. 
  2. Centralized administration: Being able to control the way in which dozens of factories behave from a single location is a powerful capability. Imagine receiving a sales forecast for January 2015 and programing facilities to either scale back or increase production based on those statistics. 

What's preventing the U.S. manufacturing economy from jumping feet first into this digital environment? A skills shortage. Ramachandran noted a survey conducted by The Manufacturing Institute, which found 60 percent of the 300 surveyed U.S. fabrication leaders asserted trying to find the appropriate people to fill essential positions was difficult. 

To allay the severity of this situation, it's possible that U.S. production companies may find the required talent through vendors, but a need for permanent personnel will persist nonetheless. As such, industrialists should increase efforts to attract college students and recent graduates. 

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  1. We agree that technology, product design and lean processes will have a positive impact on reshoring U.S. manufacturing.

    Many companies are investing in the U.S. and reshoring because it makes good economic sense to do so.

    Companies are finding that having manufacturing near customers gives them better 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.

    Automation, Lean processes and Cloud-based ERP are tools that can boost productivity and competitiveness.

    When productivity is increased, it reduces the Total Cost vs. offshore and boosts competitiveness.

    In order to help companies decide objectively to reshore manufacturing back to the U.S. or offshore, the not-for-profit Reshoring Initiative’s free Total Cost of Ownership Estimator can help corporations calculate the real P&L impact of reshoring. or offshoring.