June 19, 2014
Guest post by Matt Coughlin from Manufacturing Business Overhaul.
During the beginning of the past decade, US manufacturing showed some troubling signs. The percent of US-made goods decreased from the decades-long levels of 22-25% to below 20% (right around even with China) due to many factors, most notably cheaper labor and increasing productivity abroad. Factories and jobs seemed to move steadily outside the US.
However, the last few years have seen a change in this trend, with a new set of buzzwords to go along with it. “Offshoring” and “outsourcing” have been replaced with “reshoring” and “local for local”, and companies are seeing lots of reasons to bring their manufacturing operations back from Asia.
Despite higher costs of labor and overhead, the US has managed to maintain a 15% lead in productivity (as of 2010) over our closest rivals Japan and Germany despite the increasingly competitive global landscape.
In this article I will discuss how US-based design and manufacturing companies are utilizing new tools and strategies to maintain this edge.
Robotics and Automation
Despite the leveling of labor wages across the world, US manufacturing workers are still expensive compared to similarly skilled workers abroad (compare the average US hourly manufacturing worker cost at $35/hour to one in Taiwan at $9.50/hour). However, companies are finding that they can bridge this gap with automation. This a large factor in the US’s massive productivity advantage over its global competitors (in 2012 the US was about 10 times more productive per hour worked compared to Taiwan).
How is this possible? One large factor is the rise of industrial robotics and automation. In many cases the ROI for a robot is much higher than that of a manufacturing worker overseas. The massive advantages in cycle time, production cost, quality and decreased waste, not to mention the lower overhead costs of maintaining a robot versus a human, are significant.
The expansion of a new generation of robotics and automation companies in every industry makes the investment in automation easy for most companies. The ROI is easy to calculate and carries little risk. There is an automation solution available for just about any niche, along with a company ready to set up, optimize, and maintain your automation equipment throughout its life cycle.
Local for Local
As global wages continue to even up and companies implement cost-saving automation in their factories, shipping costs are becoming a more significant factor in the overall costs of products. This is driving the “local for local” movement, where companies are manufacturing products in the markets where they plan to sell the products.
Instead of making everything in one large factory in China, a company may have a factory in Michigan for US-bound goods and one in Rio for goods that will be sold in Latin America.
As automation and other tools optimize the manufacturing processes themselves, the Local for Local strategy aims to optimize the logistics and shipping of products. Since the US is a large consumer of all types of manufactured goods, this means that more manufacturing facilities are coming back to the US to make goods bound for the local market. This makes sense for companies and is good news for workers, consumers, and other local businesses.
There has been a ton of buzz around the 3D printing movement, and not all of it is hype. Due to the drop in costs for a huge range of machines (from $400 make-it-yourself printers like the RepRap to more advanced industrial options), everyone from garage hobbyists to giant corporations are taking advantage of this developing technology.
The rise of cheap machines has created a new breed of micro-manufacturers sprouting up in garages and maker shops around the country, churning out innovative custom 3D printed products from iPhone cases to robots.
More sophisticated manufacturers have also gotten in on the action, using 3D printers to save big money and time on prototypes and product development. They are also finding ways to print production parts in more and more industries. Manufacturing giants like GE are already printing production parts using additive manufacturing methods.
As this technology develops, the cost of 3D-printable parts is dropping and a new class of highly customizable modular products is becoming available. The US is leading the field in investment in additive manufacturing technology, and the advantages are clear. For one-off prototypers and production shops alike, 3D printing is creating opportunities for big savings and big earnings.
Better Design Software
Ten years ago, it was nearly impossible for a lone engineer or small company to get set up with a decent 3D CAD program for less than $6000. Today, there are several options priced for individual users (Solidedge for example) and even some open-source and free CAD tools available (qscad and brlcad are some examples).
This is great news for entrepreneurs and engineers, as it allows them to design products and manufacture them at home, without having to shell out thousands for the more complex programs needed by the big companies.
This is also good news for businesses, because it means that there is a growing army of local designers and engineers available for hiring or outsourcing design and engineering work, as well as a range of less expensive, less restrictive software options available.
Innovative companies are making cumbersome areas of the design and manufacturing process easy. Take for example GrabCad’s online Workbench, an online PLM workbench which allows engineers on remote teams to share and collaborate on design files as easily as sharing a google doc. Ten years ago PLM systems were massive, restrictive, expensive systems maintained by a staff of IT professionals. Now even a tiny company can manage design and engineering files easily for a few dollars a month.
Another great example is ProtoMold, a US-based company that developed a completely new streamlined process for rapid production of molded parts. You upload a design file to their website, get an instantaneous quote for a range of manufacturing process, and then they then machine, mold or print and deliver your small batch (and even production quantity) order in incredibly short time, up to and including next day delivery for some processes.
These innovative tools bring down costs by allowing companies to take advantage of a more flexible work force, faster design and manufacturing cycles, and quick parts at competitive prices.
Flexible Work Force
Once upon a time, a normal company would have a staff of engineers. These engineers would be trained in the workings of the company, the software, the products, and a number of other areas, and eventually become useful employees, performing their engineering tasks in their assigned area of specialty for many years.
In the last few years, a few things have occurred that have changed that paradigm. First, a new generation of workers hit the scene that wasn’t content to stay at a company for many years. These younger workers prefer to move around, work from home, use technology to get things done quickly and then move onto the next challenge. The older generation lamented the impatience and entitlement of these youngsters, but many companies have found that there is a bright side.
There is a whole generation of well-trained, tech-savvy engineers and designers that can be hired as contractors for a fraction of the cost of a full-time employee. Often these contractors work from home, so there is little overhead for office space and equipment. US-based contracting companies manage these mobile workers and provide needed services on demand. These temporary workers can be brought on and let go easily and cheaply as business conditions change. They require little training, already have access to the necessary tools and software as mentioned earlier and are capable of adding immediate value.
Many companies are reducing their full-time engineering staff and instead are opting to work with contractors who can deliver results immediately, with little training, at a fraction of the cost of full-time staff. The result is that overhead costs for many manufacturers have gone down, allowing them to invest in growth and innovation.
The next decade will surely bring new changes and new challenges to US manufacturers, just as the last one did. One thing has remained the same, and doesn’t look to change anytime soon: America’s culture of innovation, continuous improvement, and excellence in manufacturing.
The companies that excelled in the last few years have been those that leveraged technology and looked outside the box for new strategies to compete and win. Automation, new technology, and a changing landscape of tools and innovative individuals will continue to bring new opportunities to the businesses that are looking for them.