Recently I attended an International Asset Management Council (IAMC) conference in Austin, Texas. One interesting discussion was a presentation on ‘in-shoring’, the name given to jobs returning to the States from overseas. In the first blog I shared some comments regarding International manufacturing trends.
In this blog I would like to share some comments regarding:
Our current ability to in-shore manufacturing jobs (attract jobs from overseas).
1. 1. There are 600,000 unfilled manufacturing jobs in the US today!
The reason, companies are demanding deeper skills in manufacturing than ever before. Skills in reasoning, creativity and job ownership responsibility. It is no longer line work.
2. 2. Some base line decision assumptions for companies considering in-shoring:
- Cost of raw materials the same with in-shoring.
- Cost of automation the same with in-shoring.
- Cost of finance, a variable.
- Logistics, favors in-shoring.
- Labor cost still an issue but the range is lessening.
- Increased local market demand favors in-shoring.
- Intellectual property risks are becoming a real issue off-shore.
- Corruption is an added off-shore expense.
- China is reducing tax incentives to foreign countries.
- Fuel pricing volatility is adding to the supply chain cost.
This represents a favorable shift from five years ago.
Additional needs in our manufacturing sector to attract in-shoring:
1. 1. We must re-address our education focus, starting in high school, to refocus on math and science to prepare a labor force for manufacturing. Today’s manufacturing jobs require a high degree of basic technology knowledge, requiring us to develop trade academy’s to prepare the labor force.
Parents don’t want their children to be in manufacturing! We need to change this attitude.
2. 2. We need to retain our foreign educated student pool here. This has always been a key source of our innovative brain trust. We are educating them, and then losing them to emerging countries. We must recreate opportunities for them to use their skills here.
3. We must reduce the corporate tax rate, currently the highest in developed countries.
4. We must increase Research and Development. Other countries such as India and Brazil have moved right past us.
5. Energy costs are a major factor for companies considering re-shoring. The greening of our energy system comes at a price.
6. Robotics is an innovative part of manufacturing, in which we are still very competitive, but we need to rethink our approach.
- GM created robots to assemble standard products.
- Toyota created products to fit robotic assembly, the entire system works.
7. Much of the in-shoring is expected to locate to cities that headquarter global companies.
- Example: Minneapolis
8. One final thought presented; ‘the jobs we have lost will not return. Our manufacturing job growth will come from within our existing manufacturing sector’.
At the end of the day as long as Corporations are driven by their obligation to shareholders, manufacturing siteing will remain fluid and be a challenge to bring existing off-shore manufacturing back on-shore.
Our best hope is that innovation, something the US has traditionally been strong in, will lead to more robotic development in larger product manufacturing, creating more on-shore manufacturing and the support jobs it provides. One example would be appliances. It will be a while before we are truly competitive in labor intensive manufacturing such as electronics.
However robotic manufacturing requires a higher technology skill set than is traditionally presumed for manufacturing jobs. So as important as in-shoring jobs or expanding our current manufacturing to create jobs are, it is the preparation of the workforce to meet those jobs that we need to focus on.