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Is Reshoring Increasing or Declining?

Is Reshoring Increasing or Declining?

Jan 21, 2016

By Michele Nash-Hoff, Saving U.S. Manufacturing In December, two conflicting reports were released, one by A.T. Kearney and one by the Boston Consulting Group. The A. T. Kearney report states that reshoring may be “over before it began”, and the Boston Consulting Group report states that it is increasing. Why the difference in opinion and who is right? This was the second report by A. T. Kearney, in which their “U.S. Reshoring Index shows that, for the fourth consecutive year, reshoring of manufacturing activities to the United States has once again failed to keep up with offshoring. This time the index has dropped to -115, down from -30 in 2014, and it represents the largest year-over-year decrease in the past 10 years.” In fact, they conclude that “the rate of reshoring actually lagged that of offshoring between 2009 and 2013, as the growth of overall domestic U.S. manufacturing activity failed to keep pace with the import of offshore manufactured goods over the five-year period. The one exception was 2011.” The authors of the A. T. Kearney report identify the two main factors contributing to the drop in the reshoring index to be “lackluster domestic manufacturing growth and the resilience of the offshore manufacturing sector.” With regard to the lackluster domestic manufacturing, the report states that data from the U. S. Bureau of Economic Analysis predicted that U. S. manufacturing gross output would shrink by 3.6% through the end of 2015 based on data through November [December data not available.] On the other hand, the Boston Consulting Group survey results showed that “Thirty-one percent of respondents to BCG’s fourth annual survey of senior U.S.-based manufacturing executives at companies with at least $1 billion in annual revenues said that their companies are most likely to add production capacity in the U.S. within five years for goods sold in the U.S., while 20% said they are most likely to add capacity in China…The share of executives saying that their companies are actively reshoring production increased by 9% since 2014 and by about 250% since 2012. This suggests that companies that were considering reshoring in the past three years are now taking action. By a two-to-one margin, executives...

Top 3 U.S. Manufacturing Challenges (and Opportunities)…

Top 3 U.S. Manufacturing Challenges (and Opportunities)…

Jan 20, 2016

“Top 3 U.S. Manufacturing Challenges (and Opportunities) in 2016” By Scott Stone, ThomasNet Is the glass half empty or half full? It’s an age old question, and there’s no right answer; it’s all about perspective. How about this question: Does the U.S. manufacturing industry have challenges or opportunities? Once again, there’s no right answer; it’s all about perspective. American manufacturing stands at a critical point in its long history – and how industry leaders view the changing landscape will influence its future. As technology, demographics, and economic climate shift, manufacturers must innovate in order to stay competitive. Manufacturing in particular is positioned for domestic growth and, more than ever, industry leaders must guide their organizations strategically. Let’s take a look at some of the issues facing the industry through the lens of both challenges and opportunities: Manufacturing Skills Gap Challenge:Over the past several years, the skills gap has been top of mind for U.S. manufacturers. In Accenture’s 2014 Manufacturing Skills and Training Study, more than 75 percent of manufacturing respondents reported a shortage of skilled workers, particularly in positions requiring more than a high school diploma, but less than a four-year college degree. This issue isn’t going anywhere—it’s probably going to get worse over the next decade. Research from the Manufacturing Institute and Deloitte predicts there could be as many as 2 million unfilled manufacturing jobs by 2025, up from initial estimates of 600,000. Baby Boomers are aging and retiring and there are simply not enough skilled workers to fill the positions they’re leaving. Manufacturers are challenged to find a solution to keep up with demand and are turning to automation, developing partnerships with local trade schools and colleges, and implementing in-house mentoring and internship programs. Opportunity: One thing is for certain: Manufacturers can no longer afford to think about their systems, processes, and labor force in the same way. It’s time to innovate and figure out new (better!) ways of getting the job done. Whether it’s optimizing the production line, balancing work flows and labor, or incorporating new technology, it’s an opportunity to build the future of not only an organization, but the industry as a whole. As individuals and as a collective, there is the prospect...

U.S. Proposes Spending $4 Billion to Encourage Driverless Cars

U.S. Proposes Spending $4 Billion to Encourage Driverless Cars

Jan 19, 2016

By Mike Spector and Mike Ramsey, Wall Street Journal Obama administration aims to remove hurdles to making autonomous cars more widespread The Obama administration is proposing to spend nearly $4 billion in a decade to accelerate the acceptance of driverless cars on U.S. roads and curb traffic fatalities and travel delays. The proposal, which would require congressional approval, aims to have federal regulators work with auto makers and others to craft policies and rules for vehicles that can move without a driver at the wheel. It also would set up pilot programs for testing “connected vehicles” that talk to one another to avoid crashes under the $3.9 billion budget proposal. It isn’t clear whether or when any new regulations might be adopted. Regulators said they plan to issue guidance within six months on preferred performance characteristics and testing methods for driverless cars and collaborate with state officials on policies. A lack of clear guidance from regulators is among the barriers auto makers cite to allowing driverless cars to proliferate. Car makers prefer to have a clear national road map for approving autonomous vehicles rather than a state-by-state patchwork of rules. In Europe, the lack of a consensus has frustrated executives at Volvo Car Corp. and others developing the technologies. In Japan, industry officials are hoping for swift adoption by the government. U.S. regulators say they want to encourage technologies that can improve vehicle safety and reduce the nation’s more than 32,000 annual road fatalities. Driverless cars also hold out the hope of reducing pollution and more-efficient transportation, say government and industry officials. “Automated vehicles open up opportunities for saving time, saving lives and saving fuel,” U.S. Transportation Secretary Anthony Foxx said on Thursday at the North American International Auto Show, an annual auto industry get together in Detroit. In addition to improved safety, Mr. Foxx said driverless cars could ease the road-clogging effects of expected explosive population growth. “We are bullish on automated vehicles,” he said. Regulators at the National Highway Traffic Safety Administration plan to exempt some autonomous vehicles from existing rules if they deem them to provide significant safety benefits. Car makers could be allowed to put 2,500 driverless cars on the road for...

6 Benefits of Reshoring in 2016

6 Benefits of Reshoring in 2016

Jan 15, 2016

By Zachary Smith, ThomasNet After a year of everyone clamoring over their reshoring efforts, all of a sudden the bell tolls due to the annual U.S. Reshoring Index from A.T. Kearney. The report finds that there is a drastic decrease in announced reshoring cases due to increased cases of offshoring and nearshoring, fluctuating strength of the U.S. dollar and oil prices, and a tightening U.S. labor market in manufacturing. That said, this was an unexpected finding for the industry, and it has some manufacturers trying to strategize their next move. Here are some some facts about reshoring for you to consider when making decisions for your business. Research and Development There was a time when the U.S. was on the forefront of manufacturing exciting products in innovative ways. But to make exciting things, you need to do your research and be knee deep in the development process. Some of that magic and inspiration gets lost when manufacturing goes global, and even the government knows it. Did you know you could get a tax credit for R&D? You can, and you should. An American Workforce Here’s the thing. If you’re offshoring and utilizing a global supply chain, then you’re contributing to the skills gap. But if you start your R&D locally, interested workers will follow. Millennials will be attracted to innovation backed by a reliable industry. A new generation of workers will bring fresh new ideas. And with every new worker, manufacturing unemployment decreases and the skills gap closes. Increased Productivity If your employees and your ideas are local, then increased productivity follows suit. Output should increase from mass manufactured goods to custom projects. The more products completed, the more money comes into the business, and growth will follow. And up to this point, everything mentioned can be done in your own facilities, which additionally keep costs down. Simpler Logistics With all that increased output, you would have to spend a fortune on shipping in a global supply chain. With the exception of shipping products to a global customer base, shipping can become much simpler. Shorter distances to deliver products have plenty of benefits, ranging from less risk of damaged goods and shipment delays to avoiding confusion...

Robotics, reshoring, and American jobs

Robotics, reshoring, and American jobs

Jan 14, 2016

By Charles Orlowek, The Hill Good news?   Boston Consulting Group foresees more large manufacturers boosting production for the American market by adding capacity in the U.S. itself, compared with any other country.  It cites “decreasing costs and improved capabilities of advanced manufacturing technologies such as robotics.”  Under this optimistic scenario, how much value would American workers add?  When robotics and other automation gets built for, and installed in American workplaces, where are jobs created?    Increasingly, these jobs are being created and sustained outside the United States, even for domestic factories. The first industrial robots were developed and manufactured by Americans, and General Motors became the first user, in 1961.  Over recent decades, however, the domestic robot industry has declined.   A Commerce Department national security assessment from 1991 asserted that American robot manufacturers lost market share throughout the 1980s, with shipments of U.S.-manufactured robots falling by 33 percent between 1984 and 1989, despite robust domestic demand and a weak dollar. According to the 1991 report: The competitiveness of robotics firms in the United States has declined dramatically from a promising beginning.  America’s once largest robotics producer, Cincinnati Milacron… has now sold its patents and marketing rights to ABB Robotics….The U.S. robot industry was abandoned by the auto industry, and it is rapidly losing the initiative in many other markets as well, including…defense contractors. Today’s leading suppliers are multinationals based outside the United States.  Citing Commerce Department figures, a May 2014 briefing paper prepared by the U.S. International Trade Commission showed the previous year’s industrial robot trade deficit reaching more than $200 million. Robots are just one part of the machinery market.  During the first 11 months of 2015, the U.S. imported $347 billion dollars more in machinery than it exported to other countries.  The value created by American workers designing and manufacturing robots and other machines is in a tailspin. Trade figures in “General industrial machinery” show imports and exports roughly in balance in 2000, but $8 billion in deficit for 2010.  For the first 11 months of 2015, the deficit was almost $25 billion!  With other categories already running deficits in 2000, like electrical and office machinery, imbalances have since widened considerably. After...

IT Reshoring Helps Companies Regain Control and Flexibility

IT Reshoring Helps Companies Regain Control and Flexibility

Jan 13, 2016

“Repatriate Solutions Guest Blog – IT Reshoring Helps Companies Regain Control and Flexibility” By Mark Smith and Mark Michalik, Repatriate Solutions, Reshoring Institute Driven by promises of dramatically lower operational costs and reduced capital outlay, many companies sent their Information Technology work off shore as part of vendor provided outsourcing agreements. Most of these outsourcing agreements did deliver on their promises of lower direct operational costs. However, what customers found is that there were hidden costs that drove the overall financial picture through the roof. Also, the outsourcing agreements proved to be less that flexible when customers wanted to change how work is done or selectively move work back on shore to take advantage of new processing models and technologies like cloud and Software as a Service. A recent Deloitte outsourcing study states 16% of outsourced off shore work is reshored annually. This is potentially 16% of a $300B market. There are several highly publicized cases where IT work has recently been brought back in house with General Motors, GE Capital and Bell South. The Reshoring Challenge When outsourcing agreements are initially developed, maximum effort is expended by customers and providers defining in detail the ownership of Intellectual Property and how it is used in outsourcing solutions. In reality, things begin to change before the ink is dry on the agreements. In most cases over the course of a 3-5 year outsourcing agreement, these solution changes are not reflected in the contracts, operational documentation and the domain knowledge that a customer requires about how their work is being delivered. This causes a huge hurdle for customers when they build their reshoring plans. We recommend that customers use a structured diagnostic to define the gaps in their operational knowledge before they proceed with their reshoring initiatives. The scope of the diagnostic covers the following five key pillars of any outsourcing environment. These pillars are shown on the left hand axis of the following illustration. A Recent Case Study For a recent customer diagnostic we determined that they were currently in the “Worst Case” or “Typical Case” for all five pillars. Unfortunately, we see this situation quite often when we perform the diagnostic with clients. This...