Evolution of US Manufacturing
Perspective on how leading US manufactures internalize and react to true costs of off-shoring, lack of skilled workers in the US, need to increase speed-to-market and accelerate competitive response.
Published in Finer Points Superabrasives Industry Review Summer, 2014
Updated Topic Discussion
With economic indicators painting an ambiguous near-term outlook, many US manufacturers question the timing and feasibility of new capital investment and hiring. Key takeaways from projects we completed in the last six months suggest the pressure to reduce expenses and find new efficiencies cannot be ignored, but US manufacturers who rely solely on unit cost and doing more with less may be left behind. In order to spur growth/productivity, findings indicate that leading US manufacturers are moving beyond the process standards of Deming, Six Sigma and LEAN manufacturing.
There is no agreed upon list of all causes, however, the following three reasons are most often cited as triggers for redefining how and where works gets done:
Recalculating the true cost of off-shoring
TCO (Total Cost of Ownership) calculations have led US manufacturers to question the belief that off-shoring production--particularly to Asia—is the most effective response to global competition.
When the true cost of offshoring (delays due to miscommunication, thousand mile freight runs and slow reaction times to fast changing market conditions) are added to scrap and rework costs, the actual cost advantage of offshoring is significantly reduced.
A study released by MIT (US Re-shoring: A Turning Point, January, 2014) reports 33.6% of respondents are “considering” bringing manufacturing back to the US, 15.3 % of U.S. companies are “definitively” planning to re-shore activities.
Lack of skilled workers in the US
Returning manufacturing capacity to the US has its own set of problems. With skilled tradesmen already in short supply, added to the projection of a record number of retiring workers, one of the top priorities for manufacturers will be to explore new avenues of automated production.
Speed to market/Accelerated competitive response
The ability to commercialize ideas quickly is critical to defending market share as products continue to see shortened life cycles. Process innovation is pursued to compress time-to-market, react to market/competitive change, and wring profitability from short life cycles.
Leading manufacturers’ internalize and respond to these three factors, redesigning processes to be progressively:
When leading manufacturers redesign processes to be “SMART”, they integrate robotics with automation.
Although Leaders incorporate robotic automation selectively, it is emerging as the new normal how works get done in the following applications:
A. Consumer Packaged Goods
Robot manufacturers and equipment integrators expect the use of robots to grow significantly in the consumer packaged goods sector over the next five years. Trends in Robotics-Market Assessment published by PMMI February, 2014 supports this projection.
Demand for robots is driven by growth of flexible packaging (for pouches, resealable bags, and stand up containers) and increasing use of light-weighted glass and PET bottles (for wine, beer, and water). These material change-outs make obsolete mechanical drop/side loaders and reduce the efficiency of manual packaging. They prompt investment in top-loaded robotic pick n place systems that are better suited for case packing flexible/light-weighted packaging formats.
A. Medium/Low Volume Manufacturing
Historically, robot automation has not been an option for short-runs or high-mix lines. Robot automation in these applications has been either too costly or complex to consider.
Two recent technical developments may create a game-changing environment for medium and low volume runs.
1. “ROBOT IN A BOX/COLLABORATIVE ROBOTS”
A new class of robots has emerged (2012-2013). They work directly alongside employees with no safety caging and are designed to bridge the gap between manual assembly and hard automation. Co-robots in Figures 1 and 2 are easily moved and reprogrammed to solve new tasks, meeting short-run production challenges.
2. PLUG AND PLAY CAPABILITY
Robots with re-designed interfaces eliminate the need for in-depth programming and extensive engineering line support. Robot Manufacturer Yaskawa Motoman, for example, introduced Kinetiq Teaching (Q3 2013) a control box for programming the motions of a robot that makes setup of robotic welding robots “as easy as playing candy crush”.
Kinetiq Teaching simplifies setup so machinists and welders can adjust welding parameters on-the- fly; it becomes as fast to weld 6 brackets with a robot as it is to weld them by hand.
Leading manufacturers redefine not only how, but where work gets done.
For leading US manufacturers, regional operations are the strategic response to creating value on a global basis. Leaders embrace a regional manufacturing strategy to drive delivery of quality products, on time, at a global price.
“Next-Shoring: A CEO’s Guide” by Katy George, Sree Ramaswamy and Lou Rassey published in the McKinsey Quarterly January, 2014 defines this shift to strategic regional manufacturing as “next shoring”.
Next-shoring isn’t about the shift of manufacturing from one place to another but about adapting to, and preparing for, the changing nature of manufacturing everywhere.
McKinsey discussions with leading manufacturers highlight:
A. In order to capture demand in both mature and emerging markets, it is important to manufacture in facilities that are close to both.
B. The ability to respond to individual market needs is critical– not the ability to produce where labor cost is lowest.
Leading manufacturers have found running a company to create profit and to simultaneously address its environmental impact, saves hundreds of millions of dollars and grows market share.
To drive profitability and sustainability, leading manufacturers embed Sustainability into the fabric of the organization, not bolt it on. Leaders create a plan, put programs in place to achieve it, rigorously measure it, and publicize results. Experienced change-makers within the organization champion the process.
Leaders describe the path to sustainability as a 3 phase process:
Phase 1: Tie Sustainability to Tangibles
Energy Efficiency is the galvanizing low hanging fruit of Sustainability. In Phase 1, fundamental programs to reduce energy/water consumption, recycle, and minimize waste drive a Sustainability mentality. Performance is visible, widely reported, ranked, and rated.
Phase 2: Gain Traction, Scale up
Leaders commit to energy efficiency in Phase 1; when goals are met they declare victory and announce bolder goals and broaden the reach of Sustainability. In Phase 2, the supply chain is integrated into the organization’s sustainability program (Tier 1 suppliers are an extensions of ourselves). External advisory boards are formed to challenge the initiative beyond fundamentals-- outreach priorities are agreed upon and results measured.
Phase 3: Lead and Influence
In Phase 3 the mindset shifts from “doing less bad” to building a differentiation.
Sustainability directs what leaders think and do– how they:
- Collaborate within and outside the organization
- Build competitive advantage
Sustainability has momentum. It’s in the products we make and how we make them, in every plant and supplier relationship around the world. CSR Hub®, the world’s largest corporate social responsibility (CSR) ratings and sustainability information database, indicates less than 1% of 8900 global manufacturers monitored have achieved all three levels, to net positive environmental and social impact.
Leaders in US manufacturing must move beyond the process standards of Deming, Six Sigma, and LEAN manufacturing.
Driving SMART, GLOBAL and SUSTAINABLE initiatives, visionary leaders recognize the need for continuous innovation.