Revitalizing U.S. Manufacturing: Reshoring & Restoration Initiatives

27 February 2024
Reshoring

In 2020, the global manufacturing landscape was severely impacted by the COVID-19 pandemic, leading to widespread disruptions. Suppliers faced closures, employees were urged to stay home, and the intricate global supply chain experienced significant interruptions. This resulted in delivery delays, increased costs, and uncertainty for manufacturers and logistics providers, causing a breakdown at various levels of the supply chain.

U.S. manufacturers heavily reliant on Chinese suppliers were caught off guard when China, the world’s major manufacturing hub, underwent a strict lockdown, halting production and supply orders. Forced to find alternative sources, American manufacturers incurred higher costs, passing them along the supply chain to consumers. The pandemic exposed the vulnerability of relying solely on global supply chains, highlighting the need for local or regional alternatives.

This challenge isn’t new, as manufacturing jobs had been moving out of the U.S. prior to COVID, driven by the pursuit of cost reduction and profit margin maintenance. American manufacturers are now confronted with the task of strengthening or reshoring their supply chains.

Successful companies tackling this challenge emphasize investing in automation and technology. Reshoring efforts hinge on embracing data analytics, machine learning, the Internet of Things (IoT), and artificial intelligence (AI). These technologies not only offer access to more affordable capital but also align with government incentives promoting capital investment. This strategic approach aims to revitalize the U.S. manufacturing sector, ensuring resilience in the face of global disruptions.

reshoring

Building a Resilient Manufacturing Sector: Strategies for Reshoring

 

Effectively managing intricate supply chains demands meticulous planning, seamless communication, collaborative efforts, and adept risk management – irrespective of supplier locations. For U.S. companies embarking on the journey to bring manufacturing back to their home turf, maintaining transparency and visibility across the supply chain is imperative. This ensures the ability to monitor component movements and promptly address potential bottlenecks or disruptions.

To achieve this goal, manufacturers should contemplate the implementation of a comprehensive set of strategies. These approaches aim to not only revive but also fortify the manufacturing sector in the U.S. Here are some key strategies to consider:

Automation, IoT, and AI

A crucial strategy for bolstering efficiency, cutting costs, and fostering economic viability in U.S. manufacturing involves leveraging both existing and emerging digital tools. These tools play a pivotal role in augmenting production capacity, accelerating production rates, minimizing labor costs, and mitigating the impact of labor availability fluctuations. In the U.S., telecommunications companies are at the forefront, providing businesses with automation solutions, heightened connectivity, and increased productivity.

For instance, the implementation of connectivity through the Industrial Internet of Things (IIoT) emerges as a powerful solution, enabling real-time monitoring and control of operations. This strategic utilization of digital tools not only positions U.S. manufacturing for success but also aligns with the ongoing advancements in technology and automation.

Advanced Manufacturing Technologies

To propel U.S. manufacturing forward, it is essential to wholeheartedly embrace advanced technologies such as additive manufacturing, advanced materials, augmented reality (AR), and digital twins. The integration of these cutting-edge technologies is poised to elevate efficiency, generate cost savings, and pave the way for the creation of innovative job categories. This strategic adoption not only ensures a competitive edge but also contributes to the ongoing evolution of the manufacturing landscape.

Analytics

Data Analytics and Connectivity

A pivotal strategy for manufacturers aiming to elevate their operations involves the implementation of robust data analytics and connectivity. Manufacturers can gain invaluable insights by collecting and analyzing data from various sources such as sensors and machines. This data-driven approach enables optimization of processes, prediction of maintenance needs, and reduction of downtime. The strategic integration of data analytics and connectivity not only enhances decision-making but also propels overall efficiency in manufacturing operations.

Workforce Education

In the pursuit of reshoring, it is vital to recognize that while technology plays a crucial role, the human element remains indispensable. Enhancing workforce skills and creating novel job categories are integral components of this strategy. The successful implementation of these approaches necessitates upskilling and reskilling the existing manufacturing workforce. 

Companies can proactively address this need by leveraging incentives and investing in comprehensive training programs. Forming strategic partnerships with educational institutions and initiating apprenticeship programs are additional avenues to cultivate a skilled and adaptable workforce. By prioritizing the development of human capital, manufacturers not only meet current demands but also position themselves for sustained success in an evolving industrial landscape.

Leveraging Government Incentives for Reshoring

 

The U.S. government is making substantial investments in incentivizing the return of manufacturing operations to the country. These initiatives encompass financing for domestic manufacturing, widening access to capital for small manufacturers, and maintaining technological leadership.

Encouraging targeted incentives that directly address core issues is crucial. For instance, electric vehicle tax credits can boost the assembly of cars in North America, fostering a robust lithium-ion battery supply chain within the U.S.

Despite their benefits, such incentives often favor large corporations over the vital small- and medium-sized enterprises (SMEs) that form the backbone of U.S. manufacturing. To address this, the government can extend similar tax credits to SMEs that allocate a specific percentage of revenue to employee upskilling. Moreover, revising investment regulations can streamline the availability of capital, making reshoring production more accessible and cost-effective for companies.

reshoring
Image: Rafael Juarez

What Does the Future Hold?

The current landscape presents a mix of both promising and challenging developments. While there is a recognized need for more substantial government incentives, it’s imperative for companies, particularly small- and medium-sized enterprises (SMEs), to capitalize on the existing incentives. Notably, major corporations like General Motors, GE Appliances, Intel, U.S. Steel, Lockheed Martin, Walmart, and General Electric are making noteworthy investments in new manufacturing facilities. Walmart, for instance, has committed $350 billion to enhance the affordability and feasibility of U.S. manufacturing, while General Electric plans a $450 million investment in its manufacturing facilities.

However, amidst these positive strides toward a domestic manufacturing future, there is a simultaneous increase in American imports from low-cost labor markets, with Vietnam taking the lead. The outlook for reshoring manufacturing to North America is nuanced. Despite the challenges brought about by the COVID-19 pandemic, it has spurred companies to reevaluate and fortify their supply chains, leading to some reshoring from China to North America for increased stability and sustainability in manufacturing inputs.

The path forward relies on coordinated efforts from federal and state governments and manufacturers. While challenges persist, there is potential for a brighter future. Rethinking government incentives is crucial, with a focus on supporting small- and medium-sized manufacturers aiming to produce in the U.S., especially when substantial investments in automation, AI, and other emerging technologies are required to revive a thriving manufacturing economy.

About AMFG

AMFG is a leading provider of MES software for manufacturing. Our software solutions empower manufacturers, allowing them to manage their workflows and achieve streamlined, automated processes.

With over 500 successful implementations in 35 countries and across a range of industries, we specialize in enabling companies to successfully integrate our software for AM and CNC production, into their wider manufacturing processes and scale their operations.

Report by Danny Weller

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