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Manufacturing Challenges And Solutions Series: Outsourcing, Onshoring, Nearshoring, Oh My!

Manufacturing Challenges and Solutions Series: Outsourcing, Onshoring, Nearshoring, Oh My!

Manufacturing Challenges and Solutions Series: Outsourcing, Onshoring, Nearshoring, Oh My!

Association for Advancing Automation Logo Content Filed Under: Industry: N/A Application: N/A | By: Emmet Cole, A3 Contributing Editor Covid unraveled significant portions of the global supply chain. Today, the supply chain is re-assembling in new ways, reflecting widespread enthusiasm among manufacturers for onshoring and reshoring initiatives. There is certainly an appetite for onshoring and nearshoring, particularly among large manufacturing companies, says Bryan Bird, President of Americas at Universal Robots . “We speak with a broad mix of enterprise sizes and while every company is unique, we find that SMEs typically tend to be contained within one region of the world already. It’s a different conversation for large enterprise providers however, because they moved more of their supply chain to regions that are far flung away from their home base,” says Bird. One of the most important factors driving onshoring and nearshoring initiatives, especially for North American companies, is the changing dynamic around industrial wage differentials between the United States, China, and Mexico, explains Bird. Chicago-based RCM Industries successfully deployed two cobots from Universal Robots on high precision CNC machine tending tasks to gain a global competitive advantage and keep manufacturing jobs in the U.S. Credit: Universal Robots Chicago-based RCM Industries successfully deployed two cobots from Universal Robots on high precision CNC machine tending tasks to gain a global competitive advantage and keep manufacturing jobs in the U.S. Credit: Universal Robots In 1995, manufacturing wages in the United States were 30 times greater than those in China. Today they are just 3.5 times greater, Bird notes. Meanwhile, labor rates in Mexico are comparable to the current labor rates in China, making nearshoring production to Mexico an attractive proposition for many U.S. companies. “Mexican manufacturing is definitely benefiting from nearshoring, especially with the automotive sector looking to bolster the strength of their supply chain, shorten supply lines, and boost agility by having their supply chain shorter and closer at hand in Latin America. That’s definitely a trend that we’re seeing,” explains Bird. Demand for automation soared during the pandemic, but supply chain ripple effects within the automation sector itself saw delivery times for robots and other hardware extended by months and even years, says Natalie Adams, Product Marketing – Robotic Software, at Hypertherm Inc . Robotmaster is offline programming and simulation software that enables production lines to keep running even in high mix/low volume production environments, enabling manufacturers to onshore despite widespread labor shortages. Credit: Hypertherm Inc. Robotmaster is offline programming and simulation software that enables production lines to keep running even in high mix/low volume production environments, enabling manufacturers to onshore despite widespread labor shortages. Credit: Hypertherm Inc. “It was just this year that automation manufacturers have finally been able to catch up and return to their standard delivery times. We find that manufacturers are still a little wary of outsourcing and there’s still a lot of volatility in the world to contend with,” explains Adams, who also identifies Mexico as a major beneficiary of the nearshoring trend. “We’re finding that there’s a lot more happening in Mexico, which is part of that trend of U.S. and Canadian manufacturers staying closer to home.” According to a 2022 report from the Reshoring Institute, China is in the mid-range of global labor costs, with countries such as Vietnam, India, and Mexico benefitting from their competitive labor rates. But labor costs aren’t the only important factor when choosing between outsourcing and onshoring. Logistics, transportation, environmental concerns, customs duty, productivity rates, and industrial infrastructure all play a part in that decision. Automation is a key element of successful onshoring, but perceptions need to change, says Albert Nubiola, CEO, at RoboDK . “These days, automation is far easier and cheaper than people think. But the perception that getting started in automation will cost at least $500K or more still exists. Those days are over. The reality is that you can get started in automation for closer to $100K or less by adopting the right technologies.” As far as China is concerned, beyond the change in wage differentials, it’s important to consider the impact rising automation adoption within the country will have on global manufacturing, notes Nubiola. “China is buying robots at a rate that’s close to or exceeds the number purchased by the rest of the world combined. This is where things get interesting because automation provides a major competitive advantage. So, while we’re having this conversation about reshoring U.S. and European manufacturing, the Chinese manufacturing sector is also taking steps to be competitive,” […]

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Daisie Hobson

Daisie Hobson is a Director at the Reshoring Institute and an engineer with many years of experience in manufacturing and project management.

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